Table of Contents
Definition of EPCG Who can avail EPCG scheme Rules of EPCG for manufacturing, service providers, projects, others Conditions and Obligations under EPCG Who and how to obtain Import license under EPCG scheme What are the conditions for import of capital goods under EPCG scheme? Can second hand goods be imported under this scheme? Is the Import of components and goods in SKD/CKD condition allowed under this Scheme Import duty Structure Duty draw back and Import duty Calculation Payment for Import and Export Penal Action Benefits to domestic supplier
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 duties 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.
Definition:
EPCG (Export Promotion Capital Goods Scheme) is a scheme in which one can import the capital goods at concessional rate, which may be used for pre-production, production or post production as well as computer software systems, spares parts, fixtures, dies, moulds. Thus this scheme saved at least 20% of the duty value on the import. This scheme is subject to the export obligation equivalent to 6 times or 8 times (sector wise) of duty saved in the time frame of 6/8 years. This scheme is for manufactures as well as vendors, service providers as well.
Eligibility of EPCG:
All the manufacturers, exporters and merchant exporters are eligible to avail this Scheme.
can be fulfilled by Forex Earnings through providing services, like that of Foreign Guests staying in the hotel, medical tourism etc. d) For Others Certain other sectors like Retail Sector in the country, Port Projects etc. can also utilize EPCG scheme to their advantage.
components of such capital goods and may assemble or manufacture, as the case may be the capital goods. This facility shall not be available for replacement of parts. The EPCG scheme allows import /domestic sourcing of capital goods (including CKD/SKD thereof as well as computer software systems and spares, jigs, fixtures, dies and moulds) at 0% (for certain sectors) & at 3.09%. Customs duty for all sectors as against the normal total of 23.895%, thus providing a duty saved value of more than 20% of the import value. This is subject to an Export Obligation (EO) equivalent to 6/8 times of duty saved, to be fulfilled over a period of 6/8 years reckoned from the date of issuance of license. For large projects, SSI etc. there are more relaxed norms of EO. The scheme covers manufacturer exporters with or without supporting manufacturer(s) / vendor(s), merchant exporters tied to supporting manufacturer(s) and Service Providers.
Custom duty
Custom Duty 10% Export Obligation FOB Basis NFE Basis 4 times CIF value Not applicable of CG Period 5 years
Nil duty (in case CIF value is Rs.20 crore or more) (a) Nil duty in case CIF Value is Rs.1 crore or more for electronics, food processing, textiles, plastics, leather, sports goods, gem & jewellery sectors and produce and products of agriculture, aquaculture, animal husbandry, floriculture horticulture, piscculture, viticulture, poultry and sericulture, bio-technology sector, the following subsectors of Engineering sectors: Machine tools, parts and accessories; thereof automotive components and accessories, bicycle parts and accessories, handtools, cutting and small tools; castings and forgings (ferrous and non-ferrous) all sorts;
8 years
6 years 6 times CIF value of CG 6 times CIF value of CG 5 times CIF value of CG
6 years
pumps, electric motors and parts thereof; fasteners all types (ferrous and nonferrous) bright bars and shafting; scientific and surgical instruments and the following sub-sectors of chemicals; organic chemicals; Hotels, Travel agents tour operators or tourist transport operators who are recognized as Export House, Trading House, Star Trading House and Super Star Trading House or Service Export House, International Service Export House, International Star Service Export House, International Super Star Services Export House. (b) Nil duty incase CIF value is Rs.10 lakh or more for software sector
Capital Goods, machinery, equipments mostly covered under chapter 84 and 85 normally attract duty of 7.5% + CVD and ACVD. This works out to a total of 23.895%. Duties are lesser for computers & and computer parts and telecom related products under IT agreement. The duties are further reduced by exemption notifications based on the usage of goods for specified purposes and for specified industries. c) Project Imports Project Imports enjoy duties of 5% plus CVD, ACVD. Please see Project Imports section for more details.
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Penal Action
In case of failure to fulfill the export obligation or any other condition of the licence, thelicence holder shall be liable for action under the Foreign Trade (Development & Regulation) Act, 1992, the Orders and Rules made there under, the provisions of the Policy and theCustoms Act, 1962
A person holding an EPCG Authorisation may source the capital goods from a domestic manufacturer instead of importing them. The domestic manufacturer supplying capital goods to EPCG Authorisation holders shall be eligible for following deemed export benefits (a) Advance Authorisation (b) Deemed Export Drawback. (c) Exemption from terminal excise duty where supplies are made against International competitive Bidding. In other cases, refund of terminal excise duty will be given. To incentivize fast track companies with a view to accelerate exports under the Scheme, in cases where the Authorization holder has fulfilled 75% or more of the export obligation under the Scheme (including average level of exports) in half or less than half the original export obligation period specified in the Authorization, the remaining export obligation shall be condoned and the Authorization redeemed by the regional authority concerned.
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