Merchant exporters work just like manufacturer exporters, except that they do not produce the goods. This means that the merchant exporters do not have to set up manufacturing units. Instead, these exporters identify suppliers who manufacture the goods and then sell the same to their potential overseas buyers.
After building a network of suppliers, merchant exporters look for buyers by adopting various marketing gimmicks like email and social media campaigns, developing an informative website, running pay-per-click campaigns on the internet, etc. The merchant exporter acquires leads and subsequently more business through these efforts.
Once the sales order is received, the merchant exporter asks his supplier to supply the necessary quantity of goods, which then the exporter ships to the client. The goods bear the name of the merchant exporter and not the original supplier.
Merchant Exports under GST
A merchant exporter has to register at the GST portal to avail of the benefits of all the incentives. With the Goods and Services Tax (GST), all the processes of merchant exports have been made simpler and the redundancies have been ironed out. To obtain a refund on the Integrated Goods and Services Tax (IGST), the shipping bill filed with the customs office is considered as the de-facto application for the same. Merchant Exporters have two alternatives to claim a refund under the GST regime. They can either file a Letter of Undertaking (LUT) or a bond before exporting the goods or then claim a refund on the unused Input Tax Credits (ITC) or they can pay the IGST on the export and then claim a refund on the same.
Benefits to the Merchant Exporter
Remission of Duties and Taxes on Exported Products (RoDTEP) scheme – Under the RoDTEP scheme, merchant exporters can also claim the benefit at 3% if the exported goods fall under the 416 tariff lines.
Input Tax Credit – Section 54(3) of the Central Goods and Services Tax (CGST) Act allows merchant exporters to claim a refund on the unused ITC if the exported goods fall in the category of zero-rated goods. It also applies to the goods taxed through an inverted tax structure. This claim has to be made at the end of the tax period.
Duty Drawback – The exporter must submit concrete proof to show that they have not availed of the benefits under Modified Value Added Tax (MODVAT). The exporter has to submit the manufacturer’s details in the shipping bill along with the declaration by the manufacturer in front of the relevant officials.
