EXPORT PROMOTION CAPTIAL GOODS SCHEME (EPCG) :

EXPORT PROMOTION CAPTIAL GOODS SCHEME (EPCG)

Introduction The scheme was introduced by Sh. P. Chidambaram – Ministry of commerce in 1990 to allow
import of capital goods at low Custom duty. This scheme has helped in boosting exports in the initial years
of introduction when the customs duty on capital goods were very high. This scheme has primarily helped
exporters to become more competitive as it reduces the initial cost on capital goods .

EPCG scheme :
EPCG scheme EPCG scheme allows import of capital goods for pre production, production and post
production (including CKD / SKD thereof as well as computer software systems) at 5% Customs duty
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 Authorisation issue date In case of agro unit, units in cottage
or tiny sector, SSI unit - to be completed EO period in 6 years. It is subject to actual user condition till export
obligation is completed

Items which can import under EPCG scheme :

Items which can import under EPCG scheme The scheme allows following items which are freely importable
as per ITC (HS) classification. Capital goods (Plant, machinery, equipment, accessories) Second hand
capital goods (without any restriction on age) Catalyst for initial charge Refractories for initial lining
Refrigeration equipments Power generating sets Machine Tools Equipment & instrument for testing,
research and development, quality & pollution control. Spares for existing plant & machinery ( imported
earlier) Catalyst for replacement

Eligibility :
Eligibility Manufacture, Mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture,
pisciculture, poultry, sericulture & viticulture Merchant exporter with mentioning details of supporting
manufacture Service Provider

Procedure for applying EPCG Licence :

Procedure for applying EPCG Licence Along with digital application, the importer shall approach their RLA
with following details :- Source of material with specification and catalogue. Nexus certificate from an
independent chartered Engineer (CEC). In case of second hand capital goods : - Inspection certificate from
an independent chartered Engineer from listed agencies as per Appendix – 5. In case of initial charge
catalyst :- supplier’s confirmation letter In case of spares :- List of plant & machinery (for which spares are
required) duly certified from Chartered engineer or jurisdictional CE authorities. If the duty saved amount of
Rs. 50 Cr and more, the applicant may apply to DGFT HQ directly with a copy endorsed to RLA.

Condition for fulfillment of export obligation :

Condition for fulfillment of export obligation The licence specifies the value of resultant export product to be
exported. The licence is valid for 36 months and further extention is not applicable. EO shall be fulfilled by
export of goods , manufactured / services rendered by the EPCG holder. Manufacture / merchant exporter
can be fulfilled EO with the help of importing CG. Service Provider to fulfill EO by earning FFE thru rendering
services.

Duty saved amount :

Duty saved amount Duty saved amount calculation = Merit duty (inclusive of Basic duty + CVD + cess on
CVD + SAD+ Edu.cess etc) Less :- EPCG duty

Export obligation :
Export obligation 8 times duty saved amount over a period of 8 years (i.e.duty saved amount X 8 times = EO
fulfilled ) Average Exports :- Average level exports to be calculated simple arithmetic mean of past 3 years
export performance.

Discharge of Exports obligation :

Discharge of Exports obligation EO may also be fulfilled by exports of good produced by group company
Shipment under Advance Licence, DEPB, DBK & DFIA would also counted with mentioning EPCG licence
no. & date Supplies to indigenous customer (Deemed exports) counted towards discharge of EO. Exports
proceeds shall be realised in FFE except for deemed exports.

Indigenous sourcing of capital goods :

Indigenous sourcing of capital goods EPCG holder intending to source CG indigenously, shall request RLA
to grant invalidation either alongwith application or after issuance of EPCG licence.

Automatic Pro-rata enhancement & reduction :

Automatic Pro-rata enhancement & reduction Up to 10% of CIF value / duty saved amount of EPCG licence
is allowed Customs shall automatically allow clearance of goods in excess up to 10% of CIF value / duty
saved amount without endorsement of concerned RLA.

Redemption of EPCG Licence :

Redemption of EPCG Licence Alongwith Application form of “Aayat Niryat” the following to be submitted :-
Import utilisation statement duly certified from CA Copy of BRC, Shipping bill & Bill of Entry Original EPCG
Licence Consolidated statement of EO completed duly certified by CA & Bankers Bank certificates
Statement of average EO completed duly certified by CA & Bankers. Installation certificate (In case of CG /
spares) / consumption certificate (in case of spares tools) duly certified by CE / Jurisdictional C.E.

Installation certificate :
Installation certificate Installation certificate to be submitted to RLA from jurisdictional C.E authorities or an
independent chartered engineer confirming installation of CG at factory premises with in six months from the
date of import whereas in case of spares the certificate to be submitted with in 3 years time from the date of
import.

Clubbing of EPCG licences :

Clubbing of EPCG licences Two or more EPCG licence of same holder would be permitted Clubbing shall
not be permitted in case of licence issued by different RLA. No clubbing would be permitted after expiry of
EOP.

Miscellaneous :
Miscellaneous EPCG holder shall submit to RLA by 30th April of every year, report of EO. RLA may issue
partial EO fulfillment certificate proportionate adequate to fulfillment of export obligation. Every EPCG holder
should maintain record up to 3 years from the date of redemption. CG imported under EPCG scheme, which
are found defective, may be re-exported is permitted within three years from the date of payment of duty
with permission of RLA/ Customs. Accordingly EO would be refixed.