EPCG Scheme: Conditions and Requirements

Last Updated at: May 19, 2020
1409
The EPCG Scheme (Export Promotion Capital Goods) is a foreign trade policy that allows an import-export business to import capital goods
As per the notification, the validity of various import-linked export schemes such as Duty Free Import Authorisation (DFIA) and Export Promotion Capital Goods (EPCG) have been extended by one year. Under EPCG, exporters can import certain amount of capital goods at zero duty for upgrading technology related with exports while DFIA allows them to import certain goods like sugar at zero duty.

What is the EPCG scheme?

The EPCG Scheme (Export Promotion Capital Goods) is a foreign trade policy that allows an import-export business to import capital goods from foreign countries without any kind of custom duty charges imposed on them. Under the EPCG Scheme, the respective import-export business uses the goods imported to manufacture products. Export of these products generate revenue worth six times the amount saved on customs duty, in the form of foreign currency. This is achieved within a period of six years from the issuance of the EPCG authorization.

What are the capital goods, as defined under the EPCG scheme

Capital goods imported for the production of export goods. Hence, the EPCG scheme applies to;

  • Goods in SKD (Semi-Knocked down) state and CKD (Completely Knocked down) state
  • Imported capital goods that include computer hardware and software.
  • Spareparts, fixtures, molds, dies, etc
  • An initiative for introductory charges, with subsequent charges.

What is Export Obligation (EO) 

Export obligation refers to the generation of foreign revenue worth six times the customs duty saved. If the authorized holder cannot generate the revenue within the allotted time, the EO will remain unfulfilled. In which case the respective import-export business owner will have to pay the respective charges of customs duty and interest for the last 6 years.

What are the conditions of Export Obligation (EO) under the EPCG scheme 

    • EO to be met is achieved by the EPCG authorized holder via the export of manufactured goods under the EPCG scheme.
    • The EO to be met is more than the total exports by the EPCG authorized holder for the last three licensing years, and similar products within the EO period as well.
    • For capital goods imported from originating sources, EO will be 25% less than the stipulated condition of six times the custom duty saved, by the authorized holder of the EPCG scheme.
    • Imports via Duty-Free Import Authorization (DFIA), Advance Authorisation, or Reward or Drawback schemes.
    • Payments received in foreign currencies for royalties and R&D services.

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Who are all eligible for the EPCG scheme?

The following are eligible to avail the EPCG scheme;

  • Manufacturer exporters who do not have other similar supporting exporters.
  • Merchant exporters with supporting manufacturers and/or service providers.
  • Service providers certified or assigned as ‘Common Service Providers’ (CSP) by the Directorate General of Foreign Trade (DGFT), Department of Commerce or State Industrial Infrastructural Corporation, in a Town of Export Excellence, as per the conditions of Foreign Trade Policy with the following conditions:-
  1. The CSP shall meet the conditions of EO, while its respective EPCG authorization details will appear in its shipping bills. The import export entity informs the concerned regulatory body about the CSP before exporting its respective goods.
  2. Exports that do not meet the specific conditions of export obligations, as per the other EPCG authorizations of the concerned CSP.
  3. CSPs who provide Bank Guarantee (BG), in exchange for exporting goods, which will act as the amount equal to customs duty saved.

How to apply for an EPCG License?

In order to be eligible for the EPCG scheme, an import-export business files an application with the EPCG license issuing authority in India – The Director-General of Foreign Trade. 

What are the documents required to apply for the EPCG License

Submission of the application form, the Ayat Niryat Form 5B (ANF 5B), and self-certified copies of;

  • Permanent Account Number (PAN) card
  • Digital Signature Certificate (DSC)
  • Import Export Code (IEC)
  • GST registration certificate
  • Registration cum Membership Certificate (RCMC)
  • Tourism department issued registration-certificate
  • Proforma invoice
  • Company brochure
  • Excise registration (if registered)
  • Chartered accountant certificate (along with original for verification)
  • Chartered engineer certificate (along with original for verification)

 

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EPCG Scheme: Conditions and Requirements

1409
As per the notification, the validity of various import-linked export schemes such as Duty Free Import Authorisation (DFIA) and Export Promotion Capital Goods (EPCG) have been extended by one year. Under EPCG, exporters can import certain amount of capital goods at zero duty for upgrading technology related with exports while DFIA allows them to import certain goods like sugar at zero duty.

What is the EPCG scheme?

The EPCG Scheme (Export Promotion Capital Goods) is a foreign trade policy that allows an import-export business to import capital goods from foreign countries without any kind of custom duty charges imposed on them. Under the EPCG Scheme, the respective import-export business uses the goods imported to manufacture products. Export of these products generate revenue worth six times the amount saved on customs duty, in the form of foreign currency. This is achieved within a period of six years from the issuance of the EPCG authorization.

What are the capital goods, as defined under the EPCG scheme

Capital goods imported for the production of export goods. Hence, the EPCG scheme applies to;

  • Goods in SKD (Semi-Knocked down) state and CKD (Completely Knocked down) state
  • Imported capital goods that include computer hardware and software.
  • Spareparts, fixtures, molds, dies, etc
  • An initiative for introductory charges, with subsequent charges.

What is Export Obligation (EO) 

Export obligation refers to the generation of foreign revenue worth six times the customs duty saved. If the authorized holder cannot generate the revenue within the allotted time, the EO will remain unfulfilled. In which case the respective import-export business owner will have to pay the respective charges of customs duty and interest for the last 6 years.

What are the conditions of Export Obligation (EO) under the EPCG scheme 

    • EO to be met is achieved by the EPCG authorized holder via the export of manufactured goods under the EPCG scheme.
    • The EO to be met is more than the total exports by the EPCG authorized holder for the last three licensing years, and similar products within the EO period as well.
    • For capital goods imported from originating sources, EO will be 25% less than the stipulated condition of six times the custom duty saved, by the authorized holder of the EPCG scheme.
    • Imports via Duty-Free Import Authorization (DFIA), Advance Authorisation, or Reward or Drawback schemes.
    • Payments received in foreign currencies for royalties and R&D services.

Get a FREE legal advice

Who are all eligible for the EPCG scheme?

The following are eligible to avail the EPCG scheme;

  • Manufacturer exporters who do not have other similar supporting exporters.
  • Merchant exporters with supporting manufacturers and/or service providers.
  • Service providers certified or assigned as ‘Common Service Providers’ (CSP) by the Directorate General of Foreign Trade (DGFT), Department of Commerce or State Industrial Infrastructural Corporation, in a Town of Export Excellence, as per the conditions of Foreign Trade Policy with the following conditions:-
  1. The CSP shall meet the conditions of EO, while its respective EPCG authorization details will appear in its shipping bills. The import export entity informs the concerned regulatory body about the CSP before exporting its respective goods.
  2. Exports that do not meet the specific conditions of export obligations, as per the other EPCG authorizations of the concerned CSP.
  3. CSPs who provide Bank Guarantee (BG), in exchange for exporting goods, which will act as the amount equal to customs duty saved.

How to apply for an EPCG License?

In order to be eligible for the EPCG scheme, an import-export business files an application with the EPCG license issuing authority in India – The Director-General of Foreign Trade. 

What are the documents required to apply for the EPCG License

Submission of the application form, the Ayat Niryat Form 5B (ANF 5B), and self-certified copies of;

  • Permanent Account Number (PAN) card
  • Digital Signature Certificate (DSC)
  • Import Export Code (IEC)
  • GST registration certificate
  • Registration cum Membership Certificate (RCMC)
  • Tourism department issued registration-certificate
  • Proforma invoice
  • Company brochure
  • Excise registration (if registered)
  • Chartered accountant certificate (along with original for verification)
  • Chartered engineer certificate (along with original for verification)

 

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