Merchant exporter supplies at 0.1 percent and the refund consequence
A concessional rate that helps the merchant exporter and strands credit with the manufacturer.
A registered supplier may supply goods to a registered recipient for export at a concessional rate of 0.1 percent, subject to the conditions in the notifications, which include an export order, registration of the recipient with an export promotion council or commodity board, export within ninety days, mention of the supplier's GSTIN and invoice number in the shipping bill, and lodging of a copy of the shipping bill with the supplier's jurisdictional officer. The supplier's credit accumulates, and the refund route for that accumulation is restricted.
The conditions, all of which are mandatory
The recipient must be registered with an export promotion council or a commodity board, and must place an order on the supplier for a supply at the concessional rate, with a copy to the supplier's jurisdictional officer.
The goods must be exported within ninety days from the date of the tax invoice.
The recipient must indicate the supplier's GSTIN and the tax invoice number in the shipping bill or bill of export.
The recipient must be registered with the relevant council, must export the goods without processing beyond what is permitted, and must provide the proof of export.
Where any condition fails, the supplier's liability at the full rate revives, with interest, which is why the conditions should be secured contractually.
The credit consequence for the supplier
The supplier pays tax on its inputs at the full rate and collects 0.1 percent on the output. Credit accumulates immediately and structurally.
The refund of that accumulation is restricted, and the notifications and the rules limit the supplier's ability to claim a refund of unutilised credit on such supplies. The precise scope must be verified against the current text before advising.
This is a commercial cost that must be priced. A manufacturer supplying at the concessional rate without pricing the stranded credit is subsidising the export.
Where volumes are large, model the alternative of a normal taxable supply with the merchant exporter claiming a refund of the tax paid.
Protecting the supplier
Take an indemnity from the merchant exporter for the tax, interest and penalty consequence if the conditions fail.
Make the delivery of the proof of export and the shipping bill copy a contractual obligation with a date.
Track the ninety day date for every invoice and follow up before it expires, because after it the liability is yours.
Keep the export order, the council registration and the shipping bill copies in a file indexed to invoices.
What to do on Monday
Price the stranded credit into the concessional supply, or decline the concession.
Take a written indemnity for the tax, interest and penalty consequence of a condition failure.
Track the ninety day export date per invoice and escalate before it expires.
Maintain the export order, council registration and shipping bill file indexed to invoices.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
What happens if the goods are not exported in ninety days?
The concession fails and the supplier's liability at the full rate revives with interest. That is why the tracking and the indemnity matter.
Can the supplier claim a refund of accumulated credit?
The refund of unutilised credit on such supplies is restricted. Verify the current text of the notification and the rules before assuming a claim is available.
Does the merchant exporter get a refund?
The merchant exporter exports and claims the refund on the export, subject to the conditions applicable to it.
Is the concession optional?
Yes. A normal taxable supply is available, and for a supplier with structural accumulation it is often better.
Can the goods be processed before export?
Only within the limits the notifications permit. Substantial processing defeats the concession.
In this cluster
- GST refunds: every category, every form, every deadline
- Export refunds: the LUT route versus the IGST route
- VKC Footsteps: why input service tax stays stuck in an inverted duty structure
- Provisional refund of ninety percent: the mechanism and how to keep it
- Replying to RFD-08: the refund rejection notice
- Deficiency memos in RFD-03 and the limitation reset problem
- Interest on delayed refunds under Section 56
- Unjust enrichment in GST refunds: when it applies, and when it does not
- Section 77: refund where tax was paid under the wrong head
- SEZ supplies and refund: endorsement, authorised operations and the disputes
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.