Merchant Exporter GST (2026): The 0.1% Concessional Rate Explained

A merchant exporter can procure goods domestically at a concessional 0.1% GST instead of the full rate — if every condition is met. Here's how the scheme works for both the supplier and the merchant exporter.

Part of: The Complete GST Guide for Small Business in India (2026)

A merchant exporter buys goods from a domestic manufacturer/supplier and exports them (rather than manufacturing themselves). To avoid blocking their capital in full GST that they'd only reclaim later, the law lets a registered supplier sell to a registered merchant exporter at a concessional 0.1% GST — under Notifications 40/2017-Central Tax (Rate) and 41/2017-Integrated Tax (Rate), both dated 23 October 2017. This guide explains the rate and, crucially, the conditions.

Quick answer: supplies to a merchant exporter can be taxed at 0.1% — that's 0.05% CGST + 0.05% SGST for intra-state, or 0.1% IGST for inter-state — instead of the normal rate, if all conditions are met.

The concessional rate

The conditions (all must be met)

• Both parties registered: the supplier issues a tax invoice to a GST-registered merchant exporter.
• The merchant exporter must hold an RCMC from an Export Promotion Council recognised by the Department of Commerce.
• The goods must be exported within 90 days of the supplier's tax invoice.
• The merchant exporter must mention the supplier's GSTIN and tax invoice number in the shipping bill / bill of export.
• Goods move directly from the supplier to the port, ICD, airport or a registered warehouse (or to an aggregation warehouse, then port).
• The merchant exporter must export ONLY under LUT/bond — it cannot export these goods on payment of IGST.

If any condition fails, the concessional rate is not available and the supplier is liable for the full GST. This is a facility with a strict paper trail — not a blanket exemption.

For the supplier vs the merchant exporter

• Supplier: you charge just 0.1%, but you remain responsible for proving the conditions — keep the merchant exporter's RCMC, the export proof and the shipping bill on file.
• Merchant exporter: you buy cheap on tax, but you're locked into the LUT export route; you can claim a refund of the accumulated 0.1% input credit.

General information only, not tax advice. The scheme's conditions are strict and rules change — verify with the CBIC notifications or a professional before relying on the concessional rate. Last reviewed: September 2026.