Objective:

It is to facilitate import of capital goods for producing quality goods & service to enhance India’s export competitiveness.

EPCG Scheme:

  • It allows import of capital goods for pre-production, production & post-production at zero customs duty.
  • EPCG authorized holder can also procure the capital goods from an indigenous (within India) sources in accordance with the provision of Chapter 5 of FTP.
  • Generally, capital goods are imported in CKD / SKC condition (Completely / Semi Knock Down)
  • If goods imported under EPCG scheme shall be subject to an export obligation equivalent to 6 times of duty saved on capital goods, to be fulfilled in 6 years reckoned from the date of issue of authorization.
  • Once an authorization to import under EPCG is obtained then it is supposed to be imported within 18 months from the date of issue of authorization.
  • Revalidation of EPCG authorization is not permitted.
  • Second-hand capital goods are not permitted to be imported under EPCG scheme.
  • Restricted import items shall be permitted under EPCG scheme only after approval from Exim facilitation committee at DGFT head-quarter.

Coverage of EPCG Scheme:

  • Manufacturer Exporters
  • Supporting Manufacturers
  • Merchant Exporters tied to supporting manufacturers
  • Service provider (s/w)

Export Obligation (EO):

The following condition shall apply to the fulfillment of EO:

  • EO shall be fulfilled by the authorization holder through export of goods which are manufactured by him/service rendered by him.
  • In a case of indigenous sourcing of capital goods, specific EO shall be 25% less than the EO.

LUT/Bond/BG in case of Agro Units:

15% BG or LUT is required for EPCG authorization for export of primary agricultural products.

Indigenous sourcing of Capital Goods & benefits to Domestic suppliers:

  • An EPCG authorized person may source capital goods from a domestic manufacturer
  • Such domestic manufacturer shall be eligible for deemed export benefits under chapter 7 of FTP.
  • Companies under EOU can also source such capital goods.

Calculation of Export Obligation:

  • In case of direct import, EO shall be calculated with reference to actual duty saved amount.
  • In case of domestic sourcing, EO shall be calculated with reference to customs duty saved on FOR value.

Incentive For Early EO Fulfillment:

In order to boost export, the GOI is giving incentives for exporter who fulfill their EO well before the time.

In cases where authorization holder has fulfilled 75% or more of specific export obligation and 100% of Average Export Obligation till date, if any, in half or less than half the original export obligation period specifed, remaining export obligation shall be condoned or ignore.

 

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