Export Promotion Capital Goods (EPCG)

Author: Mr. Nitin Shah

  • What is EPCG?

    Export Promotion Capital Goods are capital merchandise utilized in the production of goods that are exported to different nations. It includes machinery as well as spares. Subsequently, to qualify as Export Promotion Capital Goods, the commodity manufactured in India must be exported outside India.

    This is a Scheme that enables an importer (being an export-oriented business) to import capital goods at no pace of customs duty. However, the scheme is subject to an export value equivalent to 6 times of duty saved on the importation of such capital goods within 6 years from the date of issuance of the authorization.

  • Capital Goods allowed under EPCG Scheme?

    The capital goods allowed under Export Promotion Capital Goods Scheme shall include spares (including reconditioned/ refurbished), fixtures, jigs, tool, moulds and dies. Further, second-hand capital goods may also be imported without any restriction on age under the EPCG Scheme. Under this scheme of Foreign Trade Policy (FTP), importation of capital goods required for the manufacturing of export-oriented product specified in the Export Promotion Capital Goods Authorization is permitted at concessional/nil rate of duty. This scheme under Foreign Trade Policy allows technological up-gradation of the indigenous industry.

    Export Promotion Capital Goods (EPCG) Authorizations are issued by licensing authority – Director General of Foreign Trade (DGFT) based on the certificate issued by an Independent chartered engineer.

  • The types of capital goods can be imported into India at zero customs duty under the EPCG scheme

    - 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, modernisation, technological upgradation or expansion.

    - Packaging machinery and equipment

    - Refractories for initial lining

    - Refrigeration equipmentPower generating sets

    - Machine tools

    - Catalysts for initial charge

    - Equipment and instruments for testing, research and development, quality and pollution control

    - Capital goods used in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture and viticulture as well as those used in services sector

    - Computer software systems

    - Spares, moulds, dies, jigs, fixtures

    - Catalysts for initial charge plus one subsequent charge.

  • Documents required for EPCG License

    The issuing authority is the licensing authority – Director General of Foreign Trade (DGFT). ANF 5B is to be filled along with Self-certified copies of the followings:

    - Import Export Code (IEC)

    - Registration cum Membership Certificate (RCMC)

    - Digital signatureRegistration certificate from Tourism Department

    - Pan CardExcise Registration (if registered)

    - GST Registration Certificate

    - Proforma Invoice

    - Brochure

    - Self-Certified Copy + Original of Certificate of Chartered Accountant

    - Self-Certified Copy + Original of Certificate of Chartered Engineer

  • Benefits from EPCG Scheme

    - EPCG Scheme can be applied by any Exporter irrespective of his turnover

    - The Exporter can also indigenously procure capital goods from a domestic manufacturer

    - EPCG scheme enables the import of capital goods that are used in the pre-production, production, and post-production without the payment of customs duty

    - EPCG is intended for promoting exports and the Indian Government with the help of this scheme offers incentives and financial support to the exporters.

  • Capital Goods that are not permitted under EPCG scheme

    Under the EPCG scheme, licence will not be issued for the import of the below-mentioned capital goods:

    - Captive Plants

    - Power Generation sets of any kindSupply of Electrical Energy (Power) under deemed exports

    - Export of Electrical Energy (Power)Export/Supply of Electricity Transmission Service

    - Use of Power (Energy) in their own unit

  • Procedure to avail benefit under the post-export EPCG duty credit scheme

    The process of submission of the application to apply for the post-export EPCG Duty Credit Scrip is digital, and facilitated via the DGFT portal.
    To avail of benefits under the scheme, exporters should typically follow the following steps:

     

    - Exporters should first get themselves registered on the DGFT website. This is a simple process, and requires the basic details, email ID and the OTP received on the email/phone

    - Subsequently, they should go to a section named Services, select EPCG and Apply for EPCG/Post Export EPCG authorisation

    - Now they can apply for the issuance of a post-export EPCG authorisation by choosing “Post Export EPCG” under the application

    - After the issuance of the authorisation, exporters can go ahead with their export orders against the authorisation number issued to them

    - After completion of exports, exporters can apply for the issuance of the duty credit scheme

    The key documents required by the DGFT to process applications for the post-export EPCG duty credit scrip scheme include a copy of the foreign inward remittance certificate, copy of import/export code, CA certificate, copy of registration-cum-membership certificate, copy of invoice and copy of foreign exchange earned.

  • Penalty in case of Non-Compliance

    In cases where the license holder under the EPCG scheme fails to fulfil 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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FAQ's

Who all are covered under the EPCG Scheme?

- Manufacturer exporters with or without supporting manufacturer(s),

- Merchant exporters tied to supporting manufacturer(s) and

- Service Providers including Common Service Provider (CSP).

What is the time limit for issuance of EPCG authorization?

As per the Foreign Trade Policy, an application, which is complete in all respect, should be processed by DGFT in 3 days.

What are the conditions to be fulfilled under EPCG Scheme?

There are two types of export obligation that are mandatory:

Average export obligation for preceding 3 years exports.Specific exports 6 times of the duty saved amount in six years.

What is EPCG license?

The duty-free authorization issued by DGFT RA is called EPCG License. It is Non-transferable license. It is used to import duty free capital goods.

What are the compliances to be followed after obtaining an EPCG License from DGFT?

After obtaining an EPCG license from DGFT, it has to be registered at Customs. Once capital goods is cleared duty-free from Customs, it has to be installed at the said factory premises. An Installation Certificate has to be obtained from the Independent Chartered Engineer or Customs authority as a proof of Installation & commissioning. Once production starts, applicant should complete the export obligation in given time frame and submit all the export documents to DGFT office to close the EPCG license.

Can the Export Obligation period of 6 years under the EPCG Scheme be extended?

Provisions for extension in the EO Period shall be governed as per the EPCG license issue date. As per Current Policy in place – Yes, We can extend the Export Obligation period by two years after completion of 6 Years (6+2=8 Years). We can extend by paying a composition of 5% for the first year and 10% for the second year on the proportionate Duty saved value on pending / unfulfilled Export Obligation. But the minimum composition fee to be paid is Rs. 10,000/-. Alternatively, if the Exporter doesn’t want to pay the composition fees and has procured new export orders. He can enhance the EO by 10%/20% for the first/second-year respectively. In such cases, no composition fees will be required.

Can we surrender/cancel EPCG license if not used for duty-free import?

We can surrender the EPCG License, if the holder does not want to import capital goods by submitting the relevant documents. We can help you in preparing and submitting the documents for surrender at DGFT.