India’s export sector is a dynamic landscape and constantly evolving. Merchant exporters play a pivotal role in connecting local suppliers with global markets. If you are considering entering the world of export businesses or want to understand the tax structure and GST regime for merchant exporters, this guide will help you navigate the essentials.
Who is a Merchant Exporter?
A merchant exporter is an individual or business entity that procures goods from domestic suppliers and exports them outside India without manufacturing the goods themselves. This model allows entrepreneurs to participate in international trade with relatively low investment, as they do not need to own production facilities. Instead, they focus on sourcing, compliance, and logistics.
Key Facts About Merchant Exporters
1. Registration and Compliance
To operate as a merchant exporter in India, you must have:
- A valid Import Export Code (IEC)
- GST registration under the current GST regime
With these registrations, anyone can start a merchant export business, making it accessible for new entrepreneurs.
2. GST Rate and Tax Structure
Merchant exporters benefit from a concessional GST rate of 0.1% when procuring goods from domestic suppliers, provided certain conditions are met. This is designed to encourage merchant exporters and make Indian goods more competitive in global markets.
Following Conditions for Concessional GST:
- The exporter must provide a copy of the purchase order to the supplier and jurisdictional tax office.
- The goods must be exported within 90 days from the date of the tax invoice.
- The supplier must mention the GST rate of 0.1% on the tax invoice.
- The merchant exporter must be registered with an export promotional council.
3. Procurement and Export Process
Merchant exporters procure goods from registered suppliers and export the goods outside India. The process involves:
- Placing an order with a supplier
- Ensuring the supplier issues a tax invoice with the concessional GST rate
- Completing export documentation and shipping the goods
4. Refund Process and Export Report
After exporting, merchant exporters can claim a refund of the input tax credit (ITC) on the GST paid. The refund process requires submitting an export report and relevant documents to the jurisdictional tax office. This ensures that the tax burden does not remain with the exporter, supporting the government’s aim to encourage merchant exports.
5. Role of Export Promotional Councils
Merchant exporters are often required to register with an export promotional council relevant to their product category. These councils provide guidance, market intelligence, and support for exporters to expand their reach.
Why Buyers Prefer Merchant Exporters
International buyers often prefer merchant exporters due to their ability to source a wide range of products, ensure compliance with export regulations, and offer competitive pricing. Merchant exporters act as a bridge between Indian suppliers and global demand.
Often, merchant exporters are dealing with various products under the same umbrella and have a good product knowledge, what works and how to manage supply chains globally. This helps the buyers to mitigate the risk of goods getting stuck under custom process for their export goods.
Often times, export promotional councils also support exporters with trade shows and buyer meetups to make the business easy for both the parties. Language and communication is often a point that makes people choose merchant exporters over manufacturing exporters.
Conclusion
Merchant exporters are vital to India’s export ecosystem, offering flexibility and efficiency in connecting domestic suppliers with international buyers. Understanding the GST regime, tax structure, and compliance requirements is essential for success in this field. By leveraging the concessional GST rate and following the correct procedures, merchant exporters can maximize profitability and contribute to India’s global trade growth.
Can anyone become a merchant exporter in India?
Yes, with a valid IEC and GST registration, anyone can start a merchant export business.
What is the GST rate for merchant exporters?
Merchant exporters can procure goods at a concessional GST rate of 0.1%, subject to specific conditions.
How do merchant exporters claim GST refunds?
After exporting the goods, merchant exporters can claim a refund of the input tax credit by submitting the required documents to the jurisdictional tax office.
What is the role of export promotional councils?
Export promotional councils help merchant exporters with registration, compliance, and market access.