Given the massive target to touch USD 2 trillion in export of goods and services by 2030, amongst other measures to expand India’s business capacities, the Government has also given impetus to Merchanting Trade Transactions (MTT) under the new Foreign Trade Policy 2023.
In an MTT, also known as ‘intermediary trade’, a merchant trader (consignor) in India generally procures goods from a supplier outside India, without physically importing the goods into India, and supplies the same to another person (consignee) outside India, under a “Bill to-Ship-to” arrangement.
Since this arrangement is a form of external exchange of goods, few compliances are relaxed for a merchant trader:
👉 Unlike import and export, which need Bill of Entry and Export Declaration Forms as evidence, MTT requires transport documents as evidence of merchant trade.
👉 No levy of customs duty and no applications required to be made for refunds of any duty drawbacks.
👉 Exemption to obtain form 15CB certificates for MTT
👉 Experts are also taking the view that GST should not apply to MTT transactions.
Subject to adherence to RBI guidelines, the Foreign Trade Policy 2023, has now permitted a merchant trader to even trade in restricted and prohibited items as per export policy without touching Indian shores. The policymakers believe that locations like the Gujarat International Finance Tec-City (GIFT City) etc. would largely benefit if Indian traders and entrepreneurs set up trading facilities and transformed them into Merchanting hubs as seen in Dubai, Singapore, and Hong Kong.