GST Refund for Merchant Exporters

GST refund for merchant exporters is the mechanism by which a registered trader who exports goods recovers the indirect-tax cost embedded in domestic procurement. Two parallel routes exist under the CGST Act 2017: the 0.1 percent concessional supply route under Notification 40/2017-Central Tax (Rate) and Notification 41/2017-Integrated Tax (Rate), and the deemed-export route under Section 147 CGST Act read with Notification 48/2017-Central Tax. Choosing correctly between the two affects working-capital lock-in by 6 to 9 months and refund quantum by up to 18 percent of procurement value.

Patron Accounting LLP has filed merchant-exporter refund claims for trading houses across textiles, engineering goods, chemicals, and agro-exports since the rollout of these notifications on 23 October 2017. With Rule 96(10) omitted from 8 October 2024 by Notification 20/2024-Central Tax and the Gujarat High Court ruling in Addwrap Packaging Pvt Ltd (June 2025) extending relief to pending proceedings, the IGST-paid export route is now fully available alongside the concessional-rate and deemed-export routes. RoDTEP and GST refund stack as non-overlapping benefits.

Content is reviewed quarterly for accuracy.

Any business that buys finished goods domestically and exports them out of India qualifies as a merchant exporter and can claim GST refund under one of the two notification routes. Entities supplying to Advance Authorisation holders, EPCG holders, or Export Oriented Units also qualify under the deemed-export framework.

• Trading houses - buying from Indian manufacturers and shipping abroad under their own IEC; primary users of Notification 40/2017 concessional rate
• Merchant exporters supplying to SEZ units - where the dual-path question commonly arises (Notification 40/2017 vs Section 16 zero-rated route)
• Manufacturers selling to AA/EPCG holders - operating under the deemed-export route under Section 147 and Notification 48/2017
• Sectoral exporters - textiles, garments, engineering goods, chemicals, and agro-products with FOB turnover above Rs 50 lakh per year
• Suppliers caught by historical Rule 96(10) demands - now eligible for relief post the 8 October 2024 omission and Addwrap Packaging Gujarat HC ruling

Threshold and pre-condition: GSTIN registration is mandatory. If you do not yet hold a GSTIN, complete GST registration before applying for any refund. The merchant exporter must export the goods within 90 days from the date of the supplier's tax invoice as required by Notification 40/2017; failure makes the supplier liable for the differential GST plus interest under Section 50 CGST Act. RCMC from an Export Promotion Council or Commodity Board recognised by the Department of Commerce is a hard pre-condition for the concessional-rate route.

• GSTIN certificate of the merchant exporter
• RCMC from Export Promotion Council or Commodity Board recognised by Department of Commerce
• Importer-Exporter Code certificate from DGFT (new applicants can complete IEC registration before the first export)
• Supplier tax invoice with 0.1 percent concessional rate clearly mentioned (CGST 0.05 percent + SGST 0.05 percent or IGST 0.1 percent)
• Shipping bill or bill of export carrying supplier GSTIN and supplier invoice number per Notification 40/2017 condition (c)
• Export General Manifest (EGM) or export report from customs confirming physical export
• GSTR-1 return showing export in Table 6A and GSTR-3B in Table 3.1(b) for the refund period
• BRC (Bank Realisation Certificate) where export proceeds have been received within FEMA 9-month window
• LUT acknowledgement number where export is without payment of IGST under Rule 96A
• CA certificate in Annexure 2 of RFD-01 where refund exceeds Rs 2 lakh
• Order copy intimation to supplier's jurisdictional officer (concessional-rate evidence per condition (d))
• For deemed-export route - Notification 49/2017-CT undertaking from non-claiming party (supplier or recipient)

Worked Example - Surat Textile Merchant Exporter

All fees and charges listed are indicative only and do not constitute a binding offer. Final amounts may vary depending on the volume of work and the complexity involved.

Professional service charges for drafting, filing, and representation are separate from the statutory fees. The exact fee depends on the complexity of the case, disputed amount, and number of hearings required. Contact us for a detailed quote.

Get a free Merchant Exporter Refund consultation - Call +91 945 945 6700 or WhatsApp us. No-obligation assessment.

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Hyundai, Asian Paints, Bridgestone, and 200+ Indian merchant exporters across textiles (Surat, Tirupur, Bhilwara), engineering goods (Ludhiana, Rajkot, Coimbatore), chemicals (Vapi, Ankleshwar, Vadodara), agro-products (Kochi, Tuticorin, Vijayawada), pharmaceuticals (Hyderabad, Ahmedabad), and gems and jewellery (Mumbai, Jaipur, Surat).

Outcome Proof

A Surat-based textile merchant exporter recovered Rs 1.42 crore in accumulated ITC across 18 monthly cycles between FY 2023-24 and FY 2024-25 through the 0.1 percent concessional route under Notification 40/2017 with Rule 89(4B) refund - zero rejection rate, average RFD-04 provisional 90 percent in 6 days from RFD-02, average RFD-06 final within 54 days (within Section 54(7) 60-day ceiling).

With offices in Pune, Mumbai, Delhi, and Gurugram, Patron Accounting serves merchant exporters across India - both in-person and remotely.

Merchant exporter refund work rarely sits in isolation. Most trading houses need adjacent compliance running in parallel:

• GST Refund - parent practice covering all Section 54 refund categories beyond merchant exports such as inverted duty structure, excess balance, or appeal-related refunds
• GST Returns - monthly GSTR-1 (Table 6A for exports) and GSTR-3B (Table 3.1(b)) that anchor every merchant-exporter refund claim under Rule 89(2)(g)
• GST Annual Returns - GSTR-9 and GSTR-9C reconciliation that must precede any refund audit in a financial year
• GST Audit - for merchant exporters above the prescribed turnover threshold; departmental GSTR-9C reconciliation
• GST Registration - mandatory under Section 22 CGST Act for any merchant exporter; pre-condition for RCMC and IEC
• GSTAT Appeal - Exporters - escalation route when Section 107 appeal on merchant-exporter refund rejection is adverse; pre-deposit and grounds preparation

Section 16 of IGST Act 2017

Defines zero-rated supply (exports + SEZ). Section 16(3) provides two refund routes for merchant exports: LUT/bond without IGST payment with refund of accumulated ITC under Rule 89(4), or IGST-paid with refund of IGST under Rule 96. Post Rule 96(10) omission (08.10.2024), both routes are fully available without earlier concessional-supply restriction.

Section 54 of CGST Act 2017

Section 54(1) - 2-year limitation from relevant date. Section 54(3) - refund of unutilised ITC. Section 54(6) - provisional 90 percent refund for zero-rated supplies within 7 days of RFD-02. Section 54(7) - final refund within 60 days. Section 56 - 6 percent interest if delayed beyond 60 days; 9 percent for appellate orders.

Section 147 of CGST Act 2017

Empowers the Central Government to notify deemed exports. Operationalised by Notification 48/2017-Central Tax dated 18 October 2017 listing four categories: supply against Advance Authorisation, supply of capital goods against EPCG Authorisation, supply to Export Oriented Units, and supply of gold by notified bank or PSU against Advance Authorisation.

Rule 89(4B) of CGST Rules 2017

Specifies how a merchant exporter who has procured goods at the 0.1 percent concessional rate under Notification 40/2017 or 41/2017 may claim refund of input tax credit blocked due to rate inversion. Filed in Form GST RFD-01 under category any other. Procedure laid down in CBIC Circular 94/13/2019-GST dated 28 March 2019.

Rule 96(10) of CGST Rules 2017 - OMITTED 08.10.2024

Between 23 October 2017 and 8 October 2024, exporters who used concessional supplies could not also claim IGST refund on payment of tax. Notification 20/2024-Central Tax dated 8 October 2024 omitted this rule prospectively. The Gujarat High Court in Addwrap Packaging Pvt Ltd v Union of India (decided 13 June 2025) held that the omission applies to all proceedings pending as on 8 October 2024 where final adjudication had not taken place - effectively granting retrospective relief.

Notification 40/2017-Central Tax (Rate) and 41/2017-Integrated Tax (Rate)

Both dated 23 October 2017. Concessional rate of 0.05 percent CGST plus 0.05 percent SGST or 0.1 percent IGST on supplies to merchant exporters. Conditions: (a) supplier registered with EPC/Commodity Board; (b) recipient registered with EPC/Commodity Board; (c) export within 90 days with supplier GSTIN and invoice number on shipping bill; (d) order copy intimated to supplier's jurisdictional officer.

Notifications 48/2017-CT and 49/2017-CT (18 October 2017)

Notification 48/2017-CT lists 4 categories of deemed exports under Section 147. Notification 49/2017-CT prescribes evidence requirements - undertaking from the non-claiming party that they will not claim refund on the same invoice (supplier or recipient option).

CBIC Circulars 37/11/2018-GST, 94/13/2019-GST, and 233/27/2024-GST

Circular 37/11/2018-GST dated 15 March 2018 - concessional rate is optional for the supplier. Circular 94/13/2019-GST dated 28 March 2019 - procedure for merchant exporter ITC refund under Rule 89(4B), filed in RFD-01 under category any other. Circular 233/27/2024-GST dated 10 September 2024 - relaxation for AA holders and 100 percent EOUs against past Rule 96(10) recovery proceedings.

RoDTEP and MEIS Framework

MEIS was discontinued and RoDTEP replaced it from 1 January 2021. RoDTEP administered by DGFT separately from GST refund - remits embedded central, state, and local levies not refunded under GST. Rates under Appendix 4R range from 0.3 to 4.3 percent of FOB value; e-scrips on ICEGATE. DGFT Notification 66/2025-26 dated 23 March 2026 restored RoDTEP rates and value caps to full notified levels. RoDTEP and GST refund are non-overlapping benefits.

Addwrap Packaging Pvt Ltd v Union of India (Gujarat HC, June 2025)

The Gujarat High Court held that the Notification 20/2024-Central Tax omission of Rule 96(10) applies to all proceedings pending as on 8 October 2024 where final adjudication had not taken place. The judgment provides framework for retroactive refund recovery for past periods where rejection was based on Rule 96(10) restriction.

Four statutory clocks run together for a merchant exporter. Miss any one and the consequences differ but each is material:

• 90-day export window - from supplier tax invoice date under Notification 40/2017 condition (c); failure makes supplier liable for differential GST plus 18 percent interest under Section 50 CGST Act
• 9-month FEMA realisation window - RBI Master Direction on Export of Goods and Services; without timely realisation or RBI extension, refund eligibility lapses
• 2-year refund limitation under Section 54(1) - counted from relevant date (date of export proceeds realisation); statutory bar; no condonation under Section 54
• LUT FY 2026-27 renewal - before 31 March 2026 (or first export of FY 2026-27); every export from 1 April 2026 attracts IGST upfront if LUT not on record under Rule 96A
• RFD-02 acknowledgement window - within 15 days of ARN under Rule 90(2); escalate via grievance under Rule 90 if officer fails
• RFD-04 provisional 90 percent - within 7 days of RFD-02 under Section 54(6) + Rule 91(2)
• RFD-06 final sanction - within 60 days of RFD-01 under Section 54(7); 6 percent Section 56 interest if delayed; 9 percent for appellate orders
• RCMC validity - typically 5-year validity from Export Promotion Council; renewal before expiry to maintain Notification 40/2017 eligibility
• Section 107 appeal - within 3 months of RFD-06 rejection; 10 percent pre-deposit; condonable +1 month under Section 107(4)
• Section 112 GSTAT appeal - within 3 months of Appellate Authority order; additional 10 percent pre-deposit

Engage Patron Accounting for merchant exporter compliance retainer - share GSTIN, RCMC details, IEC, sector, supplier mix, and last 12 months export turnover. Call +91 945 945 6700 or WhatsApp us now.

GST refund for merchant exporters is the difference between recovering 18 percent of procurement cost and watching it sit in the Electronic Credit Ledger indefinitely. Notification 40/2017-CT (Rate), Notification 41/2017-IT (Rate), Notification 48/2017-CT, and Notification 49/2017-CT give exporters two distinct but specific paths - the 0.1 percent concessional rate route with Rule 89(4B) refund of accumulated ITC, and the deemed-export route under Section 147 CGST Act with supplier-or-recipient option.

Each route has its own evidence trail and deadlines. With Rule 96(10) omitted from 8 October 2024 by Notification 20/2024-Central Tax and the Gujarat High Court ruling in Addwrap Packaging Pvt Ltd v UOI (June 2025) extending relief to all proceedings pending as on the omission date, the IGST-paid export route is now fully available without the historical concessional-supply restriction. MEIS has been replaced by RoDTEP from 1 January 2021; DGFT Notification 66/2025-26 (23 March 2026) restored RoDTEP rates and value caps to full notified levels under Appendix 4R and 4RE - RoDTEP and GST refund stack as non-overlapping benefits.

Patron Accounting LLP's CA and CS team handles these filings end-to-end - from RCMC verification and order intimation through to Rule 89(4B) Statement 4 computation, GSTR-1 Table 6A and GSTR-3B Table 3.1(b) reconciliation, shipping bill amendment coordination under Section 149 Customs Act, RFD-06 final-order tracking, and Rule 96(10) legacy SCN representation. With offices in Pune, Mumbai, Delhi, and Gurugram and a national client base of 10,000-plus businesses including 200+ active merchant exporters across textiles, engineering goods, chemicals, agro-products, pharmaceuticals, and gems and jewellery, we are equipped to manage refund cycles for trading houses of any volume.