Export Promotion Capital Goods (EPCG) scheme allows import of capital goods including spares for pre production, production and post production at zero duty subject to an export obligation of 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from Authorization issue
The scheme covers manufacturer exporters with or without supporting manufacturer(s) / vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers.
Features of the scheme:
- Authorization holders will have export obligation of 6 times the duty saved amount.
- The export obligation has to be completed in a period of 6 years. The period for import under the scheme would be 18 months.
- Export obligation discharge by export of alternate products as well as accounting of exports of group companies will not be allowed.
- The exporters who have availed benefits under Technology Up-gradation Fund Scheme (TUFS) administered by ministry of textiles, can also avail the benefit of Zero duty EPCG scheme.
- The import of motor cars, SUVs, all purpose vehicles for hotels, travel agents, or tour transport operators and companies owing/operating golf resorts will not be allowed under the new Zero Duty EPCG Scheme.
About the EPCG scheme in FTP 2015-2020:
- The objective of the EPCG Scheme is to facilitate import of capital goods for producing quality goods and services to enhance India’s export competitiveness.
- EPCG scheme allows the import of capital goods for pre-production, production
- and post -production at Zero custom duty.
- Import under EPCG scheme shall be subject to an export obligation (EO) which shall be equivalent to the amount of duty saved and the time reckoned from the date of authorization.
Capital Goods – Inclusions and Exclusions:
There are certain capital goods which are to be included in the calculation of the EO and certain capital which are to be excluded in the calculation of the EO. The list provided herewith is an illustrative list and not an exhaustive one:
- Any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering
- It includes those required for replacement, modernization, technological up- gradation or
- It includes packaging machinery and equipment, refrigeration equipment, power generating sets, machine tools, equipment and instruments for testing, research and development, quality and pollution
- Computer software systems
- Spares, moulds, dies, jigs, fixtures, tools & refractories for initial lining and spare refractories; and
- Catalysts for initial charge plus one subsequent
- Capital goods for project imports notified by CBEC are also permitted under the EPCG
- Second hand capital goods
- The capital goods required for production of following goods shall not be covered under EPCG:
- Electrical energy (power) – Export + Deemed exports + Captive use
- Electricity transmission services
Conditions required to be fulfilled:
The authorization holder is required to fulfill certain conditions in order to avail the benefits of this scheme. The conditions are as under:
- The authorization holder is basically required to fulfill the export (EO)
- EO shall be fulfilled by export of goods/services. Export should be physical export of
- EO shall be over and above the average level of exports achieved by the applicant in the preceding 3 licensing
- In case if the capital goods are sourced locally then the EO shall be 25% less than the EO stipulated i.e. it shall be 5 times the duty saved on capital goods.
- In case where the authorization holder wants to export through a third party, the export documents shipping bills, bill of lading shall contain the names of the authorization holder and the supporting manufacturer along with the EPCG
- 50% of the EO must be fulfilled within 4 years from the date of issue of 50% of the remaining EO must be fulfilled in the 5th year and 6th.
Upon Non-Fulfillment of Conditions:
- The authorization holder needs to maintain the average export
- The authorization holder needs to achieve the EO over and above the average export
- The FTP 2015-2020 has prescribed the block of period within which the EO needs to be
|Period from issue of authorization||Minimum export obligation to be fulfilled|
|Block of 1st year – 4th year||50%|
|Block of 5th and 6th year||Balance EO|
4. If the minimum EO of the first block is not fulfilled then the authorization holder needs to do the following:
- Pay the duties of customs within 3 months from the date of expiry of the block. Such duties of customs shall be calculated proportionately by taking the duty saved amount on total unfulfilled EO of the first block.
- Interest as applicable under Customs Law shall be payable by the authorization holder.
- In case where the EO fulfillment is extended by the regional authority, the authorization holder shall be required to pay a composition fee of 2% of duty saved amount proportionate to unfulfilled portion of EO pertaining to the block