GST UPDATE ON STATUS OF MERCHANT EXPORTERS IN GST REGIME

GST UPDATE ON STATUS OF MERCHANT EXPORTERS IN GST REGIME

Notification no. 40/2017-CT(Rate) dated 23.10.2017 have been issued to prescribe the tax rate at 0.05% for supply of goods by a registered supplier to registered recipient (Merchant exporter). Similarly, Notification No. 41/2017-Integrated Tax (Rate) dated 23rd October 2017 have been issued to exempt the inter-state supply in same case. These notifications allow the benefit of this tax rate if the conditions prescribed therein are satisfied. This update seeks to give an insight of these conditions and their implication on the merchant exporters and their status in GST regime.

• These notifications state that Merchant exporter shall export the said goods within a period of 90 days from the date of tax invoice issued by the registered supplier. Although no clarity is provided as how the merchant exporter will export the goods. But as per understanding, he will either export the goods under bond/LUT or on payment of IGST.

• Further, it is mentioned therein that the Merchant exporter shall place a purchase order on registered supplier for procuring goods at concessional rate and a copy of the same shall also be provided to the jurisdictional tax officer of the registered supplier. This is additional condition and we think that no online utility will be provided for the same. Hence, it is to be done manually and to be filed in the department. But the jurisdiction is not decided yet, then how to comply with this condition is not clear as of now. In simple words, whether it is to be filed in state GST department or Centre GST department.

One more condition in these notifications state that Merchant exporter shall move the said goods from place of registered supplier –
(a) directly to the Port, ICD, Airport or Land Custom station from where the said goods are to be exported; or
(b) directly to a registered warehouse from where the said goods shall be moving to the Port, Inland Container Deport, Airport or Land Customs Station for export.

This is again impractical condition. Normally, the merchant exporter takes the goods to his premises. There he ensures that the quality of goods is up to the mark, thereafter does the repacking and then said goods are exported. But as per procedure prescribed in these notifications, it is not possible.

• Further, if the merchant exporter intends to purchase from more than one registered supplier and then export, the goods purchased from each registered supplier shall move to a registered warehouse and after aggregation, such goods shall move to the Port, ICD, Airport or Land Customs Station from where they shall be exported. Further, it is prescribed that the registered recipient shall endorse receipt of goods on the tax invoice and also obtain acknowledgement of receipt of goods in the registered warehouse from the warehouse operator and the endorsed tax invoice and the acknowledgment of the warehouse operator shall be provided to the registered supplier as well as to the jurisdictional tax officer of such supplier. There is no clarity about the registered warehouse. It seems that it will be public or private bonded warehouse.

• There is condition that when goods have been exported, the registered recipient shall provide copy of shipping bill or bill of export containing details of GSTIN and tax invoice of the registered supplier along with proof of export general manifest or export report having been filed to the registered supplier as well as jurisdictional tax officer of such supplier. This seems to be very difficult condition as it will reveal the complete secret of business to supplier which will dump the business of the merchant exporters. They will not reveal the same to the supplier. Therefore, they will not follow this scheme.

Earlier, under the Central Excise, the CT-1 procedure required the merchant exporter to file proof of export with his jurisdictional authorities and there was no requirement to file the proof of export with the manufacturer exporter. This scheme will be successful if the same type of system is developed.

In view of above, it seems that this scheme will not bring the expected outcome and will demotivate the merchant exporters due to above mentioned reasons.

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