Clarification on Eligibility of EOU to Claim Export Benefits under Para 6.19 of HBP 2023 When Goods Are Supplied to Merchant Exporter’s Premises.

[Dashrath Walkoli]

As per Para 6.09 of FTP, 2023 read with Para 6.19 of the Handbook of Procedures, 2023, an EOU is permitted to export goods through other exporters, including merchant exporters, subject to fulfillment of conditions. In our case where an EOU has manufactured goods and supplied them to a merchant exporter,who wants us to charge him 0.1% IGST under the notificat­ion 41/2017-IT (Rate) dated 23rd October 2017 and the goods have first entered the premises of the merchant exporter before being exported by the latter and money is received in INR from merchant exporter.

 Can the EOU still claim the benefit of “export through other exporters” under Para 6.19 for the purpose of Net Foreign Exchange (NFE) calculations?

Specifically, will such a supply to a merchant exporter (where the goods physically move to the merchant exporter’s premises before export) be treated as a valid export by the EOU under Para 6.19 of HBP 2023, or would it amount to a DTA sale necessitating reversal of Customs duty foregone?

AI Summary

EOU Export Through Merchant Exporter: Direct Port Shipment Required for 0.1% IGST Rate Under Notification 41/2017-IT An Export Oriented Unit (EOU) manufactured goods and supplied them to a merchant exporter who charged 0.1% IGST under notification 41/2017-IT. The goods physically moved to the merchant exporter's premises before export, with payment received in INR. The EOU questioned whether this arrangement qualifies as 'export through other exporters' under Para 6.19 of HBP 2023 for Net Foreign Exchange calculations, or if it constitutes a domestic tariff area sale requiring customs duty reversal. The response clarified that goods must be shipped directly to the port under FTP and GST regulations to qualify for the 0.1% rate. If shipped directly to port, the transaction would count toward EOU obligation fulfillment, though export incentives would go to the party realizing foreign exchange. The key issue centers on whether physical movement to merchant exporter premises before export affects the EOU's eligibility for export benefits under current trade policy provisions.