EPCG SCHEME
DEFINITION
The EPCG is scheme that was launched by DGFT in the Foreign Trade Policy 2015-2020. The objective of the EPCG Scheme is to facilitate the import of capital goods for producing quality goods/services which enhance India’s manufacturing competitiveness. The EPCG Scheme permits the import of capital goods for pre-production/production/and post-production at 0% customs duty. Both, post exports and pre export units can avail of this scheme. The export obligation discharged would need the fulfilment of specific export obligation, in addition to the existing average export performance for a period of three years.
ZERO DUTY EPCG SCHEME
The Zero duty EPCG Scheme is available to exporters of electronic products. It allows the import of capital goods for pre-production/production/and post-production. This includes CKD and SKD as well as computer software systems at zero% customs duty. All this is subject to an export obligation equivalent to 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from authorization issue-date (para 5.1 a of FTP). The period of import would be 9 months. Any exporter who avails benefit under the Technology Upgradation Fund Scheme (“TUFS”) can also avail benefit of Zero duty EPCG Scheme. The export obligation for domestic sourcing of capital goods under EPCG schemes has been reduced by 10% to encourage import substitution. The EPCG Scheme also allows indigenous sourcing of capital goods with 25% less export obligation.
POST EXPORT EPCG DUTY CREDIT SCRIP SCHEME
A Post Export EPCG Duty Credit Scrip Scheme is available for an exporter who intends to import capital goods on full payment of applicable duties/taxes/and cess in cash. As with the other export benefits, the aim of this scheme is to incentivize exporters, so that they increase the inflow of foreign exchange to India. The basic custom duty paid on capital goods will be remitted in the form of freely transferrable duty credit Scrip. The specific EO shall be 85% of the applicable specific EO under the EPCG scheme. The validity of a DCS is 24 months from the date of issue.
SCHEME BENEFITS & HIGHLIGHTS
The concessional 3% duty EPCG Scheme allows import of capital goods for pre-production/production and post-production. This includes CKD/SKD as well as computer software systems at 3% customs duty. All this is subject to an export obligation equivalent to 8 times of duty saved on capital goods, imported under EPCG scheme, to be fulfilled in 8 years reckoned from authorization issue-date. The capital goods must include refurbished/reconditioned spares/tools/jigs/fixtures/dies and moulds. Any kind of second hand capital goods, without any restriction on age, can also be imported under the EPCG Scheme. The export obligation must be fulfilled by the supply of ITA-1 items to the DTA, provided the realization is in free foreign exchange. To incentivize fast track companies to increase exports, there is a provision for early redemption. In cases where the 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 specified, the remaining export obligation shall be condoned.
ELIGIBILITY CRITERIA
They should be exporters of electronic products. An EPCG authorization holder can also source capital goods from a domestic manufacturer. Such a domestic manufacturer may also be eligible for deemed export benefit under FTP. An EPCG Authorization holder can also opt for Technological Upgradation of existing capital goods imported under EPCG Authorization. The import of second hand capital goods is not permitted under the EPCG scheme.