Supreme Court Refuses to Relax the 0.1% Merchant-Export Rate: Conditions Must Be Met to the Letter

The Supreme Court has declined to interfere with a Karnataka High Court ruling denying the 0.1% concessional rate under Notification 41/2017-Integrated Tax (Rate) where goods moved through a third-party manufacturer instead of directly to the merchant exporter.

The Supreme Court has reportedly dismissed Time Technoplast Ltd's challenge to a Karnataka High Court judgment on the 0.1% concessional GST rate for supplies to merchant exporters, leaving the High Court's strict reading intact. The dismissal is reported as dated 7 August 2026.

The dispute goes back years. Time Technoplast supplied HDPE drums at the concessional rate under Notification No. 41/2017-Integrated Tax (Rate) dated 23 October 2017. But the drums went to a chemical manufacturer, who filled them with ethyl alcohol; a registered merchant exporter then exported the filled drums. The Karnataka Authority for Advance Ruling held in 2021 that this broke the notification's condition that goods move directly from the supplier to the merchant exporter (or straight to the port, warehouse or ICD). The Karnataka High Court agreed in March 2026 (W.P. No. 5460 of 2023, judgment dated 11 March 2026), holding that concessional notifications must be construed strictly, with no purposive relaxation.

What this means for you: if you supply goods at 0.1% to merchant exporters from Chennai or anywhere in Tamil Nadu, the goods must physically move exactly as the notification prescribes — direct to the exporter, or direct to the port, ICD or registered warehouse. A commercially sensible detour through a job worker or another manufacturer costs you the concession, and the courts will not read flexibility into the wording.

The original advance ruling in the same matter is on the GST Council's official record at https://www.gstcouncil.gov.in/ms-time-technoplast-limited, and the notification text can be traced through the CBIC tax information portal at https://taxinformation.cbic.gov.in.

Topics:merchant exporter GST0.1% concessional ratenotification 41/2017Supreme Court GSTKarnataka High Courtexport supply chainChennai exportersTamil Nadu GSTstrict complianceHDPE drums case

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