What are Merchant Exports?
Merchant exports are goods that an exporter doesn’t manufacture but purchases from a local supplier to export to the buyer. These exports typically pertain to the export of goods and not services.
Who is a Merchant Exporter?
A merchant exporter is an individual or a company that procures mass-produced goods from a supplier, finds a buyer, and then exports those products to the buyer.
How do Merchant Exporters Work?
Merchant exporters work just how manufacturer exporter works, except they do not produce the goods. This means the merchant exporters do not have to set up manufacturing units. Instead, these exporters identify suppliers who manufacture the goods and then sell them to 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, and running pay-per-click campaigns on the internet. 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 Exporters in India
Several merchant exporters operate in India and contribute richly to the country’s exports. Governments have, time and again, introduced multiple schemes and incentives to promote this kind of export. A merchant exporter has to register at the GST portal to avail of the benefits of all the incentives.
Merchant Exports under GST
With the Goods and Services Tax (GST), all the processes of merchant exports have been made more straightforward, and the redundancies have been ironed out. In the pre-GST era, it was mandatory to obtain the C.T. 1 bond as well as the ARE-1 form. The government has removed both of these conditions under the new GST regime. There is no intervention from the departmental officer in this regard, and all the goods for export are now self-certified and self-sealed.
The shipping bill filed with the customs office is considered the de-facto application to obtain a refund on the Integrated Goods and Services Tax (IGST). Prior, the merchant exporter had to submit the Export General Manifest (EGM) and provide a valid return in form GSTR-3B. This makes the process seamless.
Under GST, a merchant exporter can export goods with or without paying IGST, as is the case with a manufacturer exporter. The exporter has to only register on the GST portal.
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