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Export Promotion Capital Goods (EPCG) Scheme

Export Promotion Capital Goods (EPCG) Scheme

ABOUT (EPCG) EXPORT PROMOTION CAPITAL GOODS

EPCG Scheme is regulated by the provisions of the Foreign Trade Policy 2015-20. The objective of the EPCG Scheme is to facilitate import of capital goods for producing quality goods and services and enhance India’s manufacturing competitiveness. EPCG Authorisation holder may also procure Capital Goods from a domestic manufacturer.

TYPE OF EPCG SCHEME AUTHORISATION:

  1. Pre-import of capital goods- EPCG Scheme allows import of capital goods for pre-production, production and post-production at zero customs duty except those capital goods which are specifically excluded.
  2. Post-import of capital goods- EPCG in the form of duty credit scrips can be obtained from the department and such scrips either can be utilised for payment of custom duty on import of goods or can be sold in the open market.

ELIGIBILITY FOR EPCG SCHEME

  • Followings are eligible for EPCG scheme:
    1. Manufacturer exporters with or without supporting manufacturers;
    2. Merchant exporters tied to supporting manufacturers;
    3. Service providers; and
    4. Common Service Providers as designated by Directorate General of Foreign Trade (“DGFT”).
  • Name of supporting manufacturers shall be endorsed on the EPCG Authorisation before installation of the capital goods in the factory / premises of the supporting manufacturers.

Capital goods for the purpose of the EPCG

  • Plant, machinery, equipment or accessories required for manufacture or production or rendering of services in CKD/SKD* condition
  • Spares, moulds, dies, jigs, fixtures, tools & refractories
  • Computer systems and software which are a part of the Capital Goods being imported
  • Catalysts for initial charge plus one subsequent charge

Kindly note that the aforementioned is not an exhaustive list of capital goods.

*CKD/SKD is Completely Knocked Down /Semi Knocked Down 

Capital goods not eligible for EPCG

  • DGFT has notified list of capital goods which are not eligible for EPCG Scheme vide Public Notice No. 47/2015-20 dated 6th December 2017.
  • List of capital goods include:
  1. All Second-hand capital goods
  2. Computer and printers
  3. Tractors
  4. Motor Cars, Sports Utility Vehicle/ All purpose vehicles
  5. Airport Ground Handling Equipment
  6. Furniture, carpets, crockery, marble chandelier, tiles, flooring, doors for rooms but permitted only to hotel industry. 

CONDITIONS FOR EPCG

  • Export Obligation:
    1. Export Obligation shall be fulfilled by the authorisation holder through export of goods which are manufactured by him or his supporting manufacturer / services rendered by him.
    2. Import under EPCG Scheme shall be subject to an export obligation equivalent to 6 times of duties, taxes and cess saved on capital goods, to be fulfilled in 6 years reckoned from date of issue of Authorisation.
    3. Export obligation should be fulfilled in the following manner:
Period from the date of issue of Authorisation Minimum export to be fulfilled obligation
Block of 1st to 4th year 50%
Block of 5th and 6th year Balance EO

 

4. Incentive for early Export Obligation fulfilment

If Authorisation holder fulfils 75% or more export obligation and 100% average export obligation before the specified timeline, then, the remaining export obligation can be waived off.

5. Non-fulfilment of Export Obligation

In case Authorisation Holder is not able to meet the export obligation during the first block, then, period may be extended by DGFT subject to payment of 2% of the duty saved.

6. Extension of 6 years Export Obligation Period

Subject to payment of certain percentage of duty saved which can vary between 5%-20%, DGFT can extend the export obligation period.

7. Validity

Authorisation shall be valid for import for 18 months from the date of issue of Authorisation which means capital goods should be imported within 18 months from such date. Revalidation of EPCG Authorisation shall not be permitted.

8. Actual User Condition

Imported capital goods shall be subject to Actual User condition till export obligation is completed.

Redemption of EPCG Authorisation

  • On fulfilment of Export Obligation, Authorisation holder should apply for redemption with the DGFT Authority.
  • Holder shall apply redemption by filing the prescribed documents long with the proof of Export Obligation fulfilment.
  • On being satisfied, RA concerned shall issue a certificate of discharge of export obligation to the EPCG authorisation holder and forward a copy to Customs Authorities with whom BG/LUT has been executed.

Post Import Capital Goods- EPCG

  • On EPCG in the form of duty credit scrips can be obtained from the department and such scrips either can be utilised for payment of custom duty on import of goods or can be sold in the open market.
  • Exporter can file request in the requisite form for obtaining duty credit scrip in proportion to export obligation completed within the specified time.
  • In this case, following shall be the primary documentation:
    1. Proof of actual duty payments on Capital Goods
    2. Nexus and installation certificate(s) of Capital Goods
    3. Proof of fulfilment of Export Obligation
    4. Proof of maintenance of Average Export Obligation

How ASC will help you?

  • Evaluation of capital goods’ eligibility for EPCG Scheme
  • Preparation & filing of application along with requisite certificate & documents
  • Representation & liaising with Department to provide clarification & obtain EPCG Authorisation
  • Redemption of EPCG Authorisation on completion of Export Obligation

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