All about EPCG Scheme

EPCG Scheme was launched in the 1990s to facilitate the import of capital goods with the aim to enhance the production quality of goods and services, thereby, increasing India’s international manufacturing competitiveness. This is a scheme relating to import of capital goods at Zero duty. The benefit of zero duty is subject to fulfillment of export obligations and other conditions.

THE OBJECTIVE

To facilitate import of capital goods for producing quality goods and services to enlarge India’s Export competitiveness.

SCHEMES

  1. Import capital goods by enjoying the zero duty benefit first and then fulfil the export obligation conditions within the stipulated period. This is called Pre-Export EPCG
  2. Post Export EPCG: Under this, capital goods are imported first by paying import duty, then remission (refund)of import duties is claimed after fulfilling export obligation.
  3. EPCG Scheme for capital goods purchased in India.

ELIGIBILITIES

  • Capital goods’ has been defined under FTP.
  • Such capital goods eligible must be used as per the eligibility conditions.

CONDITIONS

  • The scheme is subject to actual user condition and a certificate of installation in own premises shall be produced from Excise Dept./ other authorities.
  • Import must be made within 18 months of date of issue of authorization and no extension is granted.
  • Even the capital goods under the scheme are not transferable till the Export obligation is fulfilled.
  • The importer has to achieve the export turnover of 6 times the amount of import duty saved within 6 years of authorization.

Capital Goods defined: ‘ Means any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services,including those required for replacement, modernization, technological upgradation or expansion. It includes packaging machinery and equipment , refrigeration equipment, power generating sets, machine tools, equipments and instruments for testing, research and development, quality and pollution control Capital goods may be for use in Manufacturing, Mining, Agriculture, Aqua culture, Animal husbandry, Floriculture, Horticulture, Pisciculture, poultry, sericulture and viticulture as well as for use in services sector.

BENEFITS FROM EPCG SCHEME

  • EPCG is intended for promoting exports and the Indian Government with the help of this scheme offers incentives and financial support to the exporters.
  • Heavy exporters could benefit from this provision. However, it is not advisable to go ahead with this scheme for those who don’t expect to manufacture in quantity or expect to sell the produce entirely within the country, as it could become almost impossible to fulfil the obligations set under this scheme.

What are other Schemes to Promote Export?

Merchandise Exports from India Scheme

MEIS was introduced in the Foreign Trade Policy (FTP) 2015-20, under MEIS, the government provides duty benefits depending on product and country.

Service Exports from India Scheme

It was introduced in April 2015 for 5 Years under the Foreign Trade Policy of India 2015-2020. Earlier, this Scheme was named as Served from India Scheme (SFIS Scheme) for Financial Year 2009-2014.

DOCUMENTS REQUIRED FOR EPCG LICENSE

Director General of Foreign Trade (DGFT), The licensing authority is the issuing authority. The following documents must be self-certified and attached to the DGFT portal:

  • GST Registration
  • Chartered Accountant Self-Certified Copy and Original Certificate of CA needs to be attached.
  • IEC (Import Export Code)
  • Brochure
  • Digital Signature
  • Excise Registration
  • Proforma Invoice
  • Chartered Engineer Self-Certified Copy and Original Certificate
  • PAN Card
  • Registration Cum Membership Card
  • Registration certificate from Tourism Department

How to apply for an EPCG License online?

The Applicant should submit an online application to DGFT to get EPCG License.

Please find steps below:

  • Visit the DGFT Official Website- www.dgft.gov.in
  • Login with DSC -> Select Services -> Online E-com Application
  • Click on EPCG (0%)
  • Fill all the details and upload the necessary documents.

Kindly note that the following important points to be noted to make sure the documents are prepared error-free:

  • IEC/RCMC should show the applicant as a manufacturer exporter.
  • IEC/RCMC should have the address where the machine is proposed to be installed.
  • MSME/SSI/Manufacturing proof should have the export products listed in the EPCG License.
  • After filling all the details, submit the application.
  • After a successful application, DGFT will issue the EPCG License

CAPITAL GOODS NOT ELIGIBLE UNDER THE SCHEME 

1. Second-hand goods

2. Capital goods including captive power plants and generator sets

For

(i) Export of electrical energy
(ii) Supply of electrical energy under deemed export
(iii) Use of energy in own unit
(iv) Supply/ export of electricity transmission services

What are the export turnovers included to count Export obligation?

  1. Goods exported under AA, DFIA, DBK/ Reward schemes.
  2. Turnover of physical exports and supplies under specified deemed exports (say EOU/STP/EHTP etc.)
  3. Forex received for R&D services and royalty payments
  4. INR (Rupees) received for specified services.

The authorisation holders under the EPCG scheme need to file a bond with or without bank guarantee with the customs before the import of capital goods. The bank guarantee should be equivalent to 100% of the differential duty (for merchant exporters) and 25% (for manufacturer exporters) to fulfil the specified export obligation. The bank guarantee will also secure the interest of the revenue.

VALIDITY PERIODS OF AUTHORIZATION

i) Export Authorization
ii) Advance Authorization
iii) DFIA and replenishment authorization for gems and jewellery
12 months
Export of SCOMET items24 months
Import authorization for restricted items18 months
EPCG18 months
Deemed exports12 months or coterminous with contracted duration of project authorization whichever is more

PENALTY IN CASE OF NON-COMPLIANCE

In cases where the licence holder under the EPCG scheme fails to fulfill the stipulated export obligation then the licensee shall be liable to pay the customs dues along with 15% interest per annum to the customs authority.

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