Merchant Exporter GST: Buy Goods at 0.1% Tax for Export
Merchant exporter GST lets a trader who buys goods and exports them pay only 0.1% GST on those purchases, instead of the full rate. The supplier invoices at 0.05% CGST plus 0.05% SGST, or 0.1% IGST, and the goods must leave India within 90 days. We help with the registrations, the paperwork and the GST filings around it.
What it is
A merchant exporter is a person who trades in goods and exports them, or intends to export them, without manufacturing. Under Notification 40/2017-Central Tax (Rate) and 41/2017-Integrated Tax (Rate), both dated 23 October 2017, a registered supplier can sell such goods to a registered merchant exporter at a concessional rate. That rate is 0.05% CGST plus 0.05% SGST (or UTGST) for a local sale, and 0.1% IGST for an inter-state sale.
You do not pay full GST on goods that are leaving the country and then wait for a refund. Your working capital stays free. The concession comes with conditions, and a missed condition falls on your supplier first and on you after that. Most merchant exporters also hold a GST registration, an IEC and an RCMC from an export promotion council.
Who it applies to
Traders who export goods
You buy finished goods from manufacturers or wholesalers and ship them to overseas buyers. A garment trader in Delhi sourcing from Panipat mills, or a Faridabad firm exporting auto parts it does not make, fits this model.
Suppliers selling to exporters
If you make or sell goods and your buyer is a merchant exporter, you can invoice at 0.1%. You need proof that the buyer is eligible and that the export happened in time.
Not for service exporters
This concession covers supplies of goods. Exporters of services follow a different route, usually under a Letter of Undertaking (LUT) with refund of unused credit.
Why it matters
Lower cash outlay
On the purchase side you pay 0.1% instead of the full rate. For a trader buying in volume, that frees up working capital.
Fewer refund claims
Because less GST is paid at purchase, there is less tax stuck waiting for a refund. Refund of credit on other inputs and input services still applies under rule 89(4B) of the CGST Rules.
Cleaner supplier relations
Suppliers are far more willing to invoice at 0.1% when your paperwork is tidy. A due-date tracker for each invoice protects both sides.
Documents required
Registrations
- PAN and GST registration of the exporter
- Importer Exporter Code (IEC)
- RCMC from an Export Promotion Council or recognised Commodity Board
- Authorised dealer bank code registered with Customs
For each purchase
- Purchase order stating that goods are for export
- Copy of that order for the supplier’s jurisdictional tax officer
- Tax invoice from the supplier at the concessional rate
- Details of the port, ICD or registered warehouse
After the export
- Shipping bill or bill of export with the supplier’s GSTIN and invoice number
- Proof that the Export General Manifest is filed
- Copy of the proof sent to the supplier and tax officer
- Letter of Undertaking (LUT) for exports without IGST
How it works
Get your registrations in place
Keep GST registration, IEC, RCMC and the authorised dealer bank code ready before you place the first order. We coordinate each of them.
Place the order and inform the officer
Issue a purchase order to the supplier stating the goods are for export. The supplier’s jurisdictional tax officer should receive a copy.
Collect the 0.1% tax invoice
The supplier issues a tax invoice at the concessional rate. Check the rate, your GSTIN and the invoice number, since all three get quoted again later.
Export within 90 days and send proof
Ship the goods directly to the port, ICD, airport or land station, or to a registered warehouse. Quote the supplier’s GSTIN and invoice number on the shipping bill, and send the export proof back.
Timelines
Day 0: invoice date
The 90-day window starts on the date of the supplier’s tax invoice, not the date of the order or the delivery.
Within 90 days: export
The goods must be exported within 90 days of that invoice. Miss it, and the supplier loses the concession on that invoice.
After export: proof and refund
Send the shipping bill details and Export General Manifest proof to the supplier and tax officer. Claim any refund of credit within the time limit under section 54 of the CGST Act.
Three ways to export goods under GST
The 0.1% route is optional. A merchant exporter has three options for the same shipment, and each suits a different cash position.
| Route | What you pay on purchase | What you do after export |
|---|---|---|
| Buy at 0.1% under Notification 40/2017 | 0.1% GST | Send export proof to the supplier and claim refund of credit on other inputs, if any |
| Buy at full rate, export under LUT | Full GST, which you claim as input tax credit | Apply for refund of unutilised credit on the GST portal |
| Buy at full rate, export on payment of IGST | Full GST, then IGST on export | Refund of the IGST paid, processed on the shipping bill details |
The refund route for merchant exporters follows CBIC Circular 94/13/2019-GST dated 28 March 2019. We help you pick the route that fits your margins.
What happens if the export misses the window
Supplier loses the concession
The supplier becomes liable to pay GST at the normal rate on that invoice, with interest. That cost will come back to you through the contract.
Documents do not match
If the shipping bill does not carry the supplier’s GSTIN and invoice number, the supplier cannot prove the export took place. The concession is then at risk.
Refund claims get delayed
Mismatched invoices or missing export proofs slow down refund processing. Matching records before filing the refund application saves weeks.
Frequently asked questions
What is merchant exporter GST?
It is the concessional GST rate of 0.1% that a registered supplier can charge when selling goods to a registered merchant exporter who will export them. The rate is 0.05% CGST plus 0.05% SGST for local sales, or 0.1% IGST for inter-state sales. The goods must be exported within 90 days of the invoice. We check every condition before your first order.
Who is a merchant exporter?
A merchant exporter is a person engaged in trading activity who exports, or intends to export, goods. He or she buys from others and does not need to manufacture them. To claim the concession, the person must be GST-registered and hold registration with an Export Promotion Council or a Commodity Board recognised by the Department of Commerce.
Is an IEC enough, or do I need an RCMC too?
You need both. IEC is the code for importing and exporting. The concession in Notification 40/2017 also requires registration with an Export Promotion Council or Commodity Board, which is evidenced by the RCMC. We can handle both applications together so your first purchase is not delayed.
What is the 90-day rule?
The goods must be exported within 90 days from the date of the supplier’s tax invoice. If they are not, the supplier loses the 0.1% benefit and must pay tax at the normal rate with interest. We suggest tracking every invoice with a simple due-date sheet so that nothing slips.
Can goods go to a warehouse before export?
Yes. Goods can move directly to the port, ICD, airport or land customs station, or to a registered warehouse from which they are exported. When goods from several suppliers are collected in one warehouse, the invoices are endorsed and the warehouse acknowledges receipt. We help set up this paper trail.
What must the shipping bill show?
The shipping bill or bill of export must indicate the supplier’s GSTIN and the tax invoice number. After export, the merchant exporter sends a copy, with proof that the Export General Manifest was filed, to the supplier and the supplier’s tax officer. Getting this right protects both parties.
Can I still claim a refund as a merchant exporter?
Yes. If you buy at 0.1%, you can claim refund of credit on other inputs and input services under rule 89(4B) of the CGST Rules. If you buy at full rate, you can export under LUT and claim refund of unutilised credit, or pay IGST and claim its refund. We prepare and file the refund claim.
Does the concession apply to service exports?
No. Notification 40/2017 deals with supplies of goods to a merchant exporter. Service exporters normally export under a Letter of Undertaking and claim refund of unused credit. If you export both goods and services, we can set up separate processes for each so your returns stay clean.
What does Taxhint do for merchant exporters?
We coordinate your GST registration, IEC and RCMC applications, prepare the LUT, set up an invoice-wise tracker and file your returns and refund claims on the GST portal. We do not handle customs clearance itself, which your customs broker does. Where a certificate needs a practising CA, a qualified professional signs it.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Ready to begin?
Tell us what you plan to export and from whom you buy. We will map the right route for your shipments.