Selling to a merchant exporter at 0.1% GST? If the goods miss day 90, the extra tax is yours

A supplier can charge a registered exporter 0.1% GST instead of the normal rate. The catch: if the goods are not exported within 90 days of the supplier's invoice, it is the supplier, not the exporter, who loses the concession.

By Rahul, Director30 October 202612 min read

On this page

What is the GST rate on supplies to a merchant exporter?
What are the conditions for supplying at 0.1% GST?
How does a 0.1% GST sale to an exporter work, step by step?
What happens if the goods are not exported within 90 days?
How much tax does the 0.1% rate move, and what can a failure cost?
Can the goods go to a packer, factory or warehouse before the port?
Does the exporter need an RCMC for the 0.1% GST rate?
Can the supplier and the exporter claim input tax credit and refunds?
Should a supplier agree to the 0.1% rate or charge the normal rate?
What paperwork should a supplier keep for each 0.1% GST invoice?
Questions exporters ask
Sources

At a glance

GST on goods sold to a registered exporter, if every condition is met: 0.1%
From the supplier's tax invoice to export, with no extension clause: 90 days
Conditions in the notification; eight are for the exporter to meet: 9
Interest on tax paid late if the concession fails (s.50(1) CGST Act): 18% a year

Bottom line: The 0.1% rate is the supplier's to lose. The exporter performs eight of the nine conditions, but if the goods are not exported within 90 days of the supplier's invoice, the supplier, not the exporter, loses the concession.

In short

Notifications 40/2017-Central Tax (Rate) and 41/2017-Integrated Tax (Rate) let a registered supplier charge 0.1% GST on goods sold to a registered recipient for export.
If the exporter does not export the goods within 90 days of the supplier's tax invoice, the supplier loses the concession, and the text has no extension clause.
Eight of the nine conditions are the exporter's: an RCMC, an order copied to the supplier's tax officer, direct movement to the port and the supplier's details on the shipping bill among them.
In 2022 the Karnataka appellate authority refused the rate where drums went to a third party's factory for filling before export, because they did not move directly to the port. The High Court is reported to have upheld that in March 2026.
The concession is optional, covers goods but not services, and leaves the supplier's input tax credit intact, with a possible inverted-duty refund.
From 1 December 2026 a supplier's inverted-duty refund claim on these sales must list the exporter's shipping bill and EGM details, so that paperwork has to come back to you.

What is the GST rate on supplies to a merchant exporter?

A registered supplier can charge 0.1% GST on goods it sells to a registered exporter, instead of the normal rate, if every condition is met. Within one State that is 0.05% central tax plus a matching 0.05% State tax. Between States it is 0.1% integrated tax. CBIC's Circular 125/44/2019 says the two central notifications "provide for supplies for exports at a concessional rate of 0.05% and 0.1% respectively".

Central tax on a sale to an exporter within one State (40/2017-CT(Rate)): 0.05%
Matching State tax, under the State's own notification: 0.05%
Integrated tax on a sale to an exporter in another State (41/2017-IT(Rate)): 0.1%

Both central notifications are dated 23 October 2017 (G.S.R. 1320(E) and 1321(E)), and their conditions are worded the same. Take care with the bare numbers: 41/2017-Central Tax (Rate) and 40/2017-Integrated Tax (Rate) are different notifications on other subjects. They never use the words merchant exporter. They speak of a "registered supplier" selling to a "registered recipient for export", which in practice is usually a merchant exporter: in the Foreign Trade Policy, "a person engaged in trading activity and exporting or intending to export goods".

Two limits apply from the start. The concession covers "taxable goods" only, so services are outside it. And CBIC says the benefit "is optional": either side can decline it and trade at the normal rate.

As at 30 October 2026, CBIC's lists of Central Tax (Rate) and Integrated Tax (Rate) notifications show nothing amending or rescinding 40/2017-Central Tax (Rate) or 41/2017-Integrated Tax (Rate). The September 2025 rate overhaul (09/2025 to 17/2025) and the newest batch (02/2026 to 10/2026, dated 28 October 2026) change other notifications. Check CBIC's tax information portal for anything issued since.

What are the conditions for supplying at 0.1% GST?

Each notification lists nine conditions. Only the first is the supplier's own act. The other eight are the exporter's, yet the exemption is on the supplier's sale: it applies only "subject to fulfilment of" all nine conditions, and paragraph 2 says outright that the supplier loses it if the goods are not exported within 90 days. The table puts each condition in plain words, with the evidence a supplier should hold.

Condition	What it requires	Who acts	Evidence to keep
(i)	Supply on a tax invoice	Supplier	Tax invoice at 0.05% + 0.05%, or 0.1% IGST
(ii)	Export within 90 days of the invoice date	Exporter	Shipping bill and export manifest dates
(iii)	Supplier's GSTIN and invoice number on the shipping bill or bill of export	Exporter	Copy of the shipping bill showing both
(iv)	Exporter registered with an Export Promotion Council or Commodity Board	Exporter	Copy of a valid RCMC
(v)	Order at the concessional rate, copied to the supplier's jurisdictional tax officer	Exporter	Purchase order; proof the officer's copy was delivered
(vi)	Goods moved directly to the port, ICD, airport or land customs station, or to a registered warehouse	Exporter	E-way bill and transport document showing the destination
(vii), (viii)	If combining several suppliers' goods: registered warehouse, receipt endorsed on the invoice, operator's acknowledgement sent to supplier and officer	Exporter, warehouse operator	Endorsed invoice; operator's acknowledgement
(ix)	After export: shipping bill copy and proof of the export general manifest (EGM) or export report, to supplier and officer	Exporter	Shipping bill copy; EGM proof

Three conditions depend on paperwork the supplier does not file itself:

The officer copy. Condition (v) says a copy of the order "shall also be provided to the jurisdictional tax officer of the registered supplier", but not how. Written delivery with an acknowledgement is the safer course; confirm the method with your CA.
The shipping bill details. Condition (iii) needs your GSTIN and invoice number on the exporter's shipping bill. Ask the exporter's customs broker where they are entered.
Proof back. Condition (ix) sets no deadline for sending you the shipping bill and EGM proof, so agree one in the purchase terms.

Eight of the nine conditions are for the exporter to perform, but the notification puts the loss on the supplier. Treat the exporter's compliance as your own risk, and agree in writing who pays if a condition fails.

How does a 0.1% GST sale to an exporter work, step by step?

Some conditions must be met before you invoice, so the order of events matters. This is the sequence the notification sets up.

1
Check the exporter
Ask for the exporter's GSTIN and a copy of its valid RCMC (condition iv). You can check that the GSTIN is active on the GST portal's public taxpayer search.
2
Receive the order
The exporter orders at the concessional rate and sends a copy to your jurisdictional tax officer (condition v). Ask for proof the copy was delivered.
3
Issue the tax invoice
Issue a tax invoice, not a bill of supply, showing 0.05% central plus 0.05% State tax within the State, or 0.1% integrated tax between States (condition i). If e-invoicing applies to your business, generate the invoice reference number (IRN) before the goods move (rule 48). The invoice date is day 0.
4
Dispatch directly
The exporter must move the goods straight from your premises to the port, inland container depot, airport or land customs station, or to a registered warehouse (condition vi). Agree who books the transport. The e-way bill should show that destination.
5
Aggregate only through a warehouse
If the exporter combines several suppliers' goods, each consignment goes to a registered warehouse. You and your officer get the endorsed invoice and the operator's acknowledgement (conditions vii and viii).
6
File the shipping bill
The exporter's customs broker files the shipping bill quoting your GSTIN and tax invoice number (condition iii).
7
Export by day 90
The goods must be exported within 90 days of your invoice (condition ii). The text does not say whether the let export order, departure or manifest filing counts, so plan for all three well inside the window.
8
Collect the proof
The exporter sends you and your tax officer the shipping bill copy and proof that the EGM or export report was filed (condition ix). The notification sets no deadline for this, so agree one in the purchase terms.
9
Consider a refund
Credit that builds up because your output tax is only 0.1% may be refundable. From 1 December 2026 the claim must list the exporter's shipping bill and EGM details, so keep them. Check the conditions with your CA.

A January 2026 practitioner guide on TaxGuru suggests tracking each 0.1% invoice against its own day-90 date and escalating internally around day 75 to 80 if proof of export has not arrived.

What happens if the goods are not exported within 90 days?

Paragraph 2 of the notification reads: "The registered supplier shall not be eligible for the above mentioned exemption if the registered recipient fails to export the said goods within a period of ninety days from the date of issue of tax invoice." No officer is given power to extend that period.

The notification does not spell out the recovery. Practitioner guides, such as the January 2026 TaxGuru article, say the supplier can face a demand for the gap between the normal rate and the 0.1% paid. Interest and possibly a penalty can follow. Interest on GST paid late under section 50(1) of the CGST Act is 18% a year; ask your CA when it would start to run.

If the goods miss day 90: the supplier, not the exporter, loses the 0.1% rate. Expect to pay the gap up to the normal rate, with interest, and to recover it only if your contract allows. There is no extension to apply for.

This is stricter than the exporter's own position. An exporter shipping under a Letter of Undertaking has three months from its export invoice, and the Commissioner can allow more time, even after the event (Circular 197/09/2023).

Point	0.1% concession (40/2017-CT(Rate), 41/2017-IT(Rate))	Exporter's LUT (rule 96A)
Clock starts	Date of the supplier's tax invoice	Date of the exporter's export invoice
Time allowed	90 days	Three months, with tax due 15 days later if not exported
Extension	None in the text	Further period allowed by the Commissioner, including after the event
Who bears failure	The supplier	The exporter, with interest

Nothing in the two notifications carries that relief across to the 0.1% concession. The text is also silent on an invoice that is only partly exported in time.

How much tax does the 0.1% rate move, and what can a failure cost?

Take an illustrative ₹10,00,000 (₹10 lakh) invoice for goods that would otherwise carry 18% or 5% GST. The last column assumes, purely for illustration, that the concession fails and the shortfall is paid with interest at 18% a year for 120 days; when interest actually starts to run is a question for your CA. These are worked examples, not quotes or advice.

Normal rate	GST at normal rate	Tax not charged at 0.1%	Interest if it fails (120 days)
18%	₹1,80,000	₹1,79,000	About ₹10,593
5%	₹50,000	₹49,000	About ₹2,900

At 0.1%, GST on the same invoice is ₹1,000 (₹500 central and ₹500 State tax within one State). The exporter holds on to the rest of the cash at the invoice stage; the supplier carries the risk if the goods do not leave in time.

Can the goods go to a packer, factory or warehouse before the port?

Only to a registered warehouse. Condition (vi) requires the goods to move from the supplier "directly" to the port, inland container depot, airport or land customs station of export, or "directly to a registered warehouse" and then to the port.

The Karnataka Appellate Authority for Advance Ruling applied this strictly on 4 March 2022 (order KAR/AAAR/02/2022, Time Technoplast). The supplier invoiced HDPE drums to a merchant exporter but shipped them, on the exporter's instructions, to a sugar factory to be filled with ethyl alcohol. The alcohol was exported in time, yet the rate was refused.

The drums did not move directly from the supplier to the port, so condition (vi) failed on a bill-to, ship-to arrangement.
"Warehouse" is not defined in GST, and a factory and a warehouse "cannot be fictionally merged into one".
Aggregation in condition (vii) means combining several suppliers' goods in a warehouse, not sending one supplier's goods away for filling.
A conditional exemption cannot be extended when its conditions or procedure are not met.

This no longer rests on the advance ruling alone, which generally binds only the business that sought it. Legal reports say the Karnataka High Court dismissed Time Technoplast's writ petition on 11 March 2026 (W.P. 5460/2023), and that the Supreme Court declined to interfere on 7 August 2026 (SLP (C) 25801/2026). We have read those reports, not the court copies, so ask your CA for the judgment. If your goods will stop for packing, labelling or finishing before the port, settle it with your CA first.

Does the exporter need an RCMC for the 0.1% GST rate?

Yes. Condition (iv) says the recipient "shall be registered with an Export Promotion Council or a Commodity Board recognised by the Department of Commerce". That registration is shown by a Registration-cum-Membership Certificate (RCMC).

Under the DGFT Handbook of Procedures, the RCMC comes from the council for the exporter's main line of business (para 2.80(a)). Where no council covers the product, or a multi-product exporter's main line is not settled, FIEO can register it (para 2.80(b)). An RCMC lasts five years, ending on 31 March (para 2.81). See our guide to RCMC registration.

Ask for a copy of the RCMC before you quote 0.1% and check it is in date. DGFT lists the bodies that issue RCMCs as Registering Authorities (Handbook of Procedures para 2.77 and Appendix 2T). The notification names only an Export Promotion Council or a Commodity Board, so if the exporter's RCMC comes from FIEO or another body that is not a council or board by name, confirm with your CA that it qualifies.

Can the supplier and the exporter claim input tax credit and refunds?

Yes, by different routes. CBIC's Circular 125/44/2019 says the exporter "will be eligible to take credit of the tax @ 0.05% / 0.1% paid by him", and the supplier "is also eligible for refund on account of inverted tax structure" under section 54(3) of the CGST Act.

Supplier. You keep the input tax credit on your purchases. Credit that builds up because output tax is below input tax can be claimed as an inverted-duty refund, unless your goods are excluded from such refunds.
New refund paperwork. From 1 December 2026, under rule 89(2)(ha) and the new FORM GST RFD-01 (Notification 05/2026-Central Tax), a claim on these sales needs a statement of your invoices with the exporter's GSTIN, IEC, shipping bill and EGM details, and whether the goods left within 90 days. Credit that also builds up from ordinary inverted rates goes in a separate application.
Provisional refund. Changes to section 54 of the CGST Act in the Finance Act 2026, in force from 1 November 2026 (Notification 03/2026-Central Tax), extend provisional refunds to inverted-duty claims. Ask your CA whether your claim will qualify.
Traders reselling the same goods. Circular 173/05/2022 (6 July 2022) allows the refund where inputs and outputs are the same goods but a concessional notification lowers the output tax.
Exporter. The exporter takes credit of the 0.1% it paid. Shipping under a Letter of Undertaking, it can claim back unused credit as a refund; whether exporting on payment of integrated tax suits it better is one to check with a CA.
Small claims. Refunds below ₹1,000 are not paid, and CBIC applies that limit to each tax head separately. From 1 November 2026 the limit no longer applies to refunds on goods exported on payment of tax.

Older guides may still describe rule 89(4B), the special refund route for exporters who bought at 0.1%, and the rule 96(10) bar on exporting on payment of integrated tax. Notification 20/2024-Central Tax omitted both on 8 October 2024.

Should a supplier agree to the 0.1% rate or charge the normal rate?

The choice is commercial as well as legal, and optional for both sides. It is also not a deemed export: Notification 48/2017-Central Tax lists only four, namely supplies against Advance Authorisation, capital goods against EPCG Authorisation, supplies to an Export Oriented Unit, and gold from a bank or PSU against Advance Authorisation.

Point	Charge 0.1%	Charge the normal rate
Paperwork	Order, RCMC copy, 90-day tracking, proof of export	Normal tax invoice
Your risk	Rate lost if the goods miss 90 days or a condition fails	None from the exporter's performance
Your credit	Kept, with a possible inverted-duty refund	Kept as normal
Exporter's cash	Pays 0.1% now and takes credit for it	Pays full GST now and recovers it by refund

If you agree, write the conditions into the purchase terms. Say who sends the officer copy, who arranges direct transport and when proof of export comes back. Add a clause that the exporter reimburses tax and interest if the concession fails; that is a contract point, not something the notification gives you. If the goods are going to the UK, expect the exporter to ask for production details too: under the UK-India trade agreement a merchant exporter can complete the origin declaration relying on the producer's information (Article 3.16.3). That is separate from GST; see what UK-India origin rules ask of Indian exporters.

Questions exporters ask

Which notification allows 0.1% GST on supplies to a merchant exporter?

Notification 40/2017-Central Tax (Rate) covers supplies within a State (0.05% central tax, with a matching 0.05% under the State's own notification), and Notification 41/2017-Integrated Tax (Rate) covers supplies between States (0.1% integrated tax). Both are dated 23 October 2017, and CBIC's lists showed no amendment to either as at 30 October 2026.

Is the 0.1% GST rate on supplies to exporters compulsory?

No. CBIC's Circular 125/44/2019 says the benefit "is optional" for the supplier and the recipient. The goods can be bought at the normal rate instead, with the exporter recovering that GST through its own refund route.

Does the 0.1% rate apply to services?

No. Notifications 40/2017-Central Tax (Rate) and 41/2017-Integrated Tax (Rate) cover the supply of "taxable goods" only. They also require the exporter to export "the said goods", moved directly from the supplier, so goods processed or packed into another product before export are unlikely to qualify; the Karnataka AAAR refused the rate in one such case in 2022, and the High Court is reported to have upheld that in March 2026.

Can a trader who resells the same goods supply an exporter at 0.1%?

Yes. The notifications refer to any "registered supplier", not only manufacturers. Circular 173/05/2022 says credit that builds up because a concessional notification lowers the output tax is refundable even where input and output goods are the same. Goods excluded from such refunds are the exception, so check yours with your CA.

When does the 90-day period start and end?

It starts on the date the supplier issues the tax invoice. The notification does not define the moment of export: the let export order, the departure or the filing of the export general manifest. Plan for all of them well inside 90 days, and ask the exporter for each date as soon as it is known.

Rahul

Director, BRITBASKET PRIVATE LIMITED

Britbasket exports from India to UK wholesale, retail and foodservice buyers, and has cleared shipments into the UK by air and by sea. Registered in India: CIN U47220HR2025PTC128831, GSTIN 06AANCB2770Q1Z2, IEC AANCB2770Q. About the company

Sources

Last reviewed 30 October 2026. Border, tariff and plant-health rules change. Check the sources above before relying on this guide for a specific consignment.

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