You do not need a factory to export. Many successful exporters buy from manufacturers and focus on finding buyers, managing quality and shipping. Others make their own products and sell abroad directly. Both are recognised under Indian trade rules, and each has its own advantages.
A manufacturer exporter makes the goods it exports. A merchant exporter buys goods from manufacturers or suppliers and exports them under its own name. Both need an IEC and GST registration, and both can claim export incentives such as RoDTEP. Merchant exporters can buy from domestic suppliers at a concessional GST rate of 0.1%, provided they meet conditions such as exporting the goods within 90 days.
The key differences
| Merchant exporter | Manufacturer exporter | |
|---|---|---|
| Production | Buys from suppliers | Makes the goods |
| Investment | Low, no factory needed | High, factory and machinery |
| Product range | Wide, can source many products | Usually focused on what it makes |
| Quality control | Depends on suppliers | Direct control |
| Margin | Trading margin | Manufacturing and trading margin |
GST: the 0.1% concessional rate
Normally a merchant exporter pays full GST to its supplier and then claims a refund after export, which ties up cash. To ease this, GST rules allow a registered supplier to sell to a merchant exporter at a concessional rate of 0.1%. The main conditions are that the merchant exporter exports the goods within 90 days of the supplier's tax invoice, is registered with an export promotion council or commodity board, and shares the shipping bill and other proof with the supplier. Check the full conditions with your tax adviser before using the scheme.
Merchant exporters can also export under LUT without paying IGST. See our LUT guide.
Export incentives
Both types of exporter can generally claim RoDTEP and duty drawback on eligible shipments. Schemes that relate to production, such as Advance Authorisation and EPCG, are aimed at manufacturers, although merchant exporters can use some of them together with a supporting manufacturer. See our guide to RoDTEP, duty drawback and EPCG.
Registrations for each model
- Both: IEC, GST, AD code, and an RCMC from the relevant council, where you choose merchant or manufacturer status
- Manufacturers: factory licences, Udyam (MSME) registration, and product registrations such as BIS where they apply
- Merchants: clear supply agreements with manufacturers, covering quality, packing and delivery dates
Which model suits you?
Start as a merchant exporter if you have strong buyer contacts and want to test markets with little investment. Choose manufacturing if you already produce goods, want control over quality and cost, or plan to build a brand. Many businesses start as merchants and add manufacturing once demand is proven. Our step-by-step guide to starting an export business covers the full setup.
Frequently asked questions
Can a merchant exporter get an IEC?
Yes. IEC is issued to the business, whether or not it manufactures. Merchant exporters use their IEC on every shipment.
What is the 0.1% GST for merchant exporters?
A concessional GST rate that suppliers can charge on goods sold to a merchant exporter, provided conditions are met, including export within 90 days of the supplier's invoice.
Can merchant exporters claim RoDTEP?
Yes, RoDTEP is generally available to eligible exports whether the exporter is a merchant or a manufacturer.
Set up as an exporter
BuyGenix handles IEC, GST, LUT, MSME and RCMC registration for merchant and manufacturer exporters.
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