OBJECTIVE

Export Promotion Capital Goods Scheme for the period AM 2015-2020 (updated as on 01/04/2015) has been announced in the Foreign Trade Policy.

This Scheme allows the import of New Capital Goods including CKD / SKD condition as well as computer software systems for Pre-Production, Production or Post-Production at concessional rate of (Zero percent) Custom Duty by undertaking export obligation by the Exporters.

APPLICATION STAGE

Manufacturer Exporter with or without Supporting Manufacturer, Merchant Exporter tied up with the supporting manufacturer and Service Providers are also eligible for EPCG Scheme.

New Capital Goods including Tools, Jigs, Spares, Fixtures, Dies, Mouldsand Refractories for initial lining and spare refractories and catalysts for initial charge plus one subsequent charge can be imported.

The Export Obligation shall be over and above the average level of exports of the same and similar products in the preceding 3 years (except for categories like handicraft, handloom, cottage & tiny sector, agriculture, aqua-culture, animal husbandry, floriculture, horticulture, pisciculture, viticulture, poultry and sericulture), Carpets, Coir and Jute i.e. Average Export Obligation is not applicable.

Give correct description of Export product and its ITC (HS) code. Kindly correlate with your Advance Authorization and MEIS Scheme. Also while exporting under EPCG same points to be taken, so there will not be any problem for Advance Authorization & benefits under MEIS Scheme.

ZERO DUTY EPCG Scheme

The block-wise export obligation to be undertaken is as under:

IMPORT OF RESTRICTED CAPITAL GOODS

Import of Restricted Items mentioned under ITC (HS) can be imported under the scheme after approval from the DGFT, New Delhi.

BENEFITS OF PROJECT IMPORT-CUM-EPCG

An EPCG Authorisation can also be issued for import of Capital Goods under scheme for Project Import. Export Obligation would be 6 times of duty saved. Duty saved would be calculated by calculating in difference between effective duty under aforesaid customs notification and conces-sional duty under the EPCG.

IMPORT OF SPARES

There is a provision for import of Spares required for maintenance of existing plant and machinery imported earlier under EPCG or otherwise. The manufacturer can import Spares, tools, refractories, catalysts.

POLICY

• The period for fulfillment of the Export Obligation shall be reckoned from the date of issue of authorisation
• The E.O. will be accepted against Physical Exports (including export to SEZ) / Deemed Exports. The Deemed export categories are covered under para 7.2 (a), (b), (e), (f), &(h) of Policy Book
• Third Party Export(s) is also permitted provided your name & EPCG License number indicating your name as supporting manufacturer is mentioned
• Against the 3rd party exports, the government has introduced certain supporting documents to be submitted at the time of redemption. In other words, if the 3rd party exports, the licence holder must get various documents from the 3rd party such as agreement with the 3rd party exports, proof of dispatch i.e. ARE 1, Lorry Receipt, Custom attested invoice, disclaimer certificate and declaration on stamp paper declaring that the product exported are manufactured by the exporter and payment received evidence as per normal banking process
• If Merchant Exporter is the exporter, the name of the Supp. Mfg. shall also be indicated on the S/Bill
• In all S/Bills (including export under ADVANCE AUTHORIZATION, DFIA& DRAW BACK SCHEME) EPCG AUTHORISATION Number and date must be mentioned otherwise it won't be accepted towards discharge of Export Obligation under EPCG
  Note – Suggestion : As soon as you start export under EPCG for each licence kindly get few proforma invoices approved by us, then hand over the documents to your CHA
• If authorization issued prior to 1.4.2008, E.O. may also be fulfilled by export of other goods manufactured or service provided by the same firm/company or Group Company or managed hotel
• For EPCG Authorisation issued during 01.04.2008 to 18.04.2013 this facility is restricted upto 50% only.
• For Authorisation issued after 18/04/2013, other goods manufacturer / Group Company E.O. fulfillment facility has been discontinued
• The EPCG Authorisation holder has to maintain the average level of exports equivalent of the preceding 3 years for the same and similar products
• Royalty payments received in freely convertible currency and foreign exchange received for R & D services can also be counted towards fulfillment of Export Obligation
• Payment received in rupees terms for such service as notified in Appendix 3 E is counted towards discharge of E.O.
• The EPCG Authorisation holder can now supply to SEZ, developer and co-developer, SEZ unit of irrespective of currency of realization including Indian Rupees
• Realization in case of supply to SEZ unit shall be from Foreign Currency account of the SEZ unit, the fulfillment of Export Obligation will be considered.
• Under EPCG Scheme the authorisation holder can simultaneously obtain Advance Authorisation, Chapter 3 benefits, DFIA & Draw Back Scheme Exports under the above Scheme can be counted towards the discharge of the Export Obligation.

IMPORT STAGE

• Machinery already arrived / shipped but not cleared from customs can be cleared under EPCG
• EPCG Authorization's Validity period IS 18 Months from the date of issue
  NB: Authorization validity period upto 18 month is from the date of issue of authorisation and now this authorisation date should be shipment within this period and no automatically at the end of the month.
• There is a flexibility to utilize the import authorisation value in excess upto 10% or less than 10% of the duty saved amount of the Authorisation without any endorsement. Export Obligation shall be amended pro-rata basis as per the actual utilization of the authorisation. Such request can be made after utilization of EPCG Authorisation
• If excess Duty Save more than 10% enhancement in EPCG Authorization, request to be made before clearance
• Import of Capital Goods under lease arrangement is permitted under the scheme
• Before clearance the Capital Goods, the EPCG Authorisation holder should give Bank Guarantee / LUT as per Customs Notifications / Circulars by the Custom Authority
• While sourcing capital goods from Indigenous Manufacturer, Bank Guarantee / LUT have to be furnished to Regional Authority. (if not furnished to Custom)

INSTALLATION CERTIFICATE FOR CAPITAL GOODS

• Authorization issued upto 31/03/2015, Installation Certificate to be obtained as per Policy provision as mentioned in the Hand Book of Procedures 2009-2014.
• Now the D.G.F.T has allowed for submitting the Installation Certificate from independent Chartered Engineers even the unit is under excise and send a copy of the installation certificate to Jurisdictional Central Excise Authority as intimation / record.
• If unit is not registered with Central Excise Authority, Independent Chartered Engineer Certificate confirming Installation of Capital Goods to be obtained.

INSTALLATION CERTIFICATE FOR SPARES

In case of import of spares, the installation certificate to be submitted within a period of 3 years.

EXPORT STAGE

We suggest that as soon as you start the exports kindly consult us in preparation of export documents showing correct description / HS ITC mentioned in EPCG licence. E.O. EXTENSION

• There is a provision for Extension of Export Obligation Period Block-wise Extention
• If Export Obligation is not fulfilled during 1st Block, then you have to approach the licensing authority before 90 days for extension of E.O.P. If so you have to pay 2% compensation fee. Otherwise compensation fee will be 3%. (Apply in time and save Penalty)
• One or Two years extension can be considered by the Regional Authority on payment of 2% composition fee each year of the proportionate duty saved on unfulfilled Export Obligation, or 10% enhancement for each year in total export obligation imposed under the scheme
• Request for extension in E.O. Period to be made within 75 days from the date of original exports
• Earlier Provision applicable for previous licences issued prior to 01/04/2015
• Further 2 years extension may be considered by the RA subject to payment of 50% Custom Duty to the Customs Authority in proportionate of the unfulfilled Export Obligation. Thereafter the authorisation holder must complete the E. O. within 2 years extended EO period without composition fee. If the exporter fail to complete the balance E. O. then he has to pay the duty and interest but the 50% payment of duty already paid will be deducted from the total duty and interest payable.
  (This is not applicable for after 8/04/2013 zero duty EPCG Issued)
• In case you have already fulfilled the balance E. O. you don't have to pay any amount. However, the amount deposited by you is not refundable
• Any firm / company registered with BIFR or any firm / company acquiring a unit, which is under BIFR shall be allowed E.O. extension as per the rehabilitation package prepared by the operating agency subject to subsequent approval of BIFR. However, in cases where the rehabilitation package does not specify the E.O. extension period, a time period up to 3 years reckoned from the date of expirtyof E.O. period and similar provision for sick SSI units is also available

E. O. MONITORING

• The Authorisation holder is required to submit yearly progress report compulsorily in the prescribed form along with Appendix —5 C on or before 30th April of every year. This will avoid unnecessary problems with the Regional Authority / Customs Authority (Kindly consult with Tiktok)
• Every EPCG Authorisation holder shall maintain the record, for a period of 2 years from the date of redemption
• If you have given Bank Guarantee with certain specific period, we suggest you to approach your banker at least 3 months in advance and get the further renewal and inform the Regional Authority as well as custom authority. Otherwise the customs authorities will forfeit the Bank Guarantee any time if Export Obligation is not fulfilled
• In case you are not in a position to complete the E. O. for the product mentioned in the authorisation within the prescribed period please contact us to explore possibility of alternative export product to be included / exported. (In authorisation issued upto 18.4.2013)
• Please note there is no provision for REVALIDATION of EPCG Licence

GENERAL NOTE

• Exporter holding an EPCG Authorisation may source Capital Goods from domestic manufacturers. There is aprovision for refund of Excise
• The E.O. will be reduced upto 25%. This will boost to all the indigenous machinery manufacturers
• Indigenous Manufacturer supplying under the scheme can import components/raw materials required for the manufacture of the capital goods without payment of any duty under DES Scheme
• Indigenous Manufacturer supplying under the scheme can import components/raw materials required for the manufacture of the capital goods without payment of any duty under DES Scheme
• If the Capital Goods imported under the EPCG Scheme are found defective or otherwise unfit for use they can be re-exported to the foreign buyer within 3 years from the date of payment of duty with the permission of the Regional Authority / Customs Authority. In this situation the E. O. would be re-fixed
• For Replacement of C.G. the permission of Regional Authority is not required. The Customs will credit the duty benefit availed at the time of import and will be debited again at the time of import of such replaced C.G.

FAST TRACK EXPORTER

Authorisations issued on or after 01.04.2001 and in cases where the exporter has fulfilled 75% or more of Export Obligation (including 100% average level of exports) in half or less than half the original Export Obligation period, the remaining Export Obligation shall be condoned and the case will be redeemed.