EXPORT PROMOTION CAPITAL GOODS SCHEME (EPCG) :
Export Promotion Capital Goods Scheme (EPCG) permits exporters to import capital goods for pre-production, production and post-production at zero customs duty or procure them indigenously without paying duty in the prescribed manner. In return, exporter is under an obligation to fulfill the export obligation.
Import under EPCG scheme shall be subject to an export obligation equivalent to 6 times of duty saved on capital goods to be fulfilled in 6 years reckoned from the date of issue of authorization. Authorisation shall be valid for 18 months from the date of issue of Authorisation. Import of capital goods shall be subject to “Actual User‟ condition till export obligation is completed. After export obligation is completed, capital goods can be sold or transferred.
(i) Eligible exporters: Following are eligible for EPCG scheme:
- Manufacturer exporters with or without supporting manufacturer(s),
- Merchant exporters tied to supporting manufacturer(s), and
- Service providers including service providers designated as Common Service Provider (CSP) subject to prescribed conditions.
(ii) Eligible and ineligible capital goods:
|Eligible capital goods include||Ineligible capital goods include|
|Capital Goods including capital goods in CKD/SKD condition||Second hand capital goods|
|Computer software systems||Any capital goods (including captive plants and Power Generator Sets of any kind) for:
· Export of electrical energy (power)
· Supply of electrical energy (power) under deemed exports
· Use of power (energy) in their own unit, and
· Supply/export of electricity transmission services
|Spares, moulds, dies, jigs, fixtures, tools & refractories for initial lining and spare refractories|
|Catalysts for initial charge plus one subsequent charge|
|Capital goods for Project Imports notified by CBEC|
(iii) Export Obligation: Export obligation means obligation to export product(s) covered by Authorisation/permission in terms of quantity or value or both, as may be prescribed/specified by Regional or competent authority. Export obligation consists of average export obligation and specific export obligation.
|Specific export obligation (Specific EO) under EPCG scheme is 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. Specific EO is over and above the Average EO.
Note: In case countervailing duty (CVD) is paid in cash on imports under EPCG, incidence of CVD would not be taken for computation of net duty saved, provided CENVAT is not availed.
Average export obligation (Average EO) under EPCG scheme is the average level of exports made by the applicant in the preceding 3 licensing years for the same and similar products. It has to be achieved within the overall EO period (including extended period unless otherwise specified).
Conditions applicable to the fulfilment of the Export Obligation (EO):
(a) EO shall be fulfilled by the authorisation holder through export of goods which are manufactured by him or his supporting manufacturer / services rendered by him, for which the EPCG authorisation has been granted.
(b) In case of indigeneous sourcing of capital goods, specific EO shall be 25% less than the EO mentioned above, i.e. EO will be 4.5 times (75% of 6 times) of duty saved on such goods procured.
(c) Shipments under Advance Authorisation, DFIA, Drawback scheme, or reward schemes; would also be counted for fulfilment of EO under EPCG Scheme.
(d) EO can also be fulfilled by the supply of Information Technology Agreement (ITA-1) items to DTA, provided realization is in free foreign exchange.
(e) Both physical exports as well as specified deemed exports shall also be counted towards fulfilment of export obligation.
(iv) Incentives for early fulfillment of export obligation
In cases where 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, remaining export obligation shall be condoned and the Authorization redeemed.
(v) Post Export EPCG Duty Credit Scrip(s)
Under this scheme, capital goods are imported on full payment of applicable duties in cash. Later, basic customs duty paid on Capital Goods is remitted in the form of freely transferable duty credit scrip(s) [similar to the Reward schemes discussed earlier].
Salient features of the schemes are as follows:-
- Specific EO shall be 85% of the applicable specific EO stipulated under EPCG scheme. Average EO remains unchanged.
- Duty remission shall be in proportion to the EO fulfilled.
- These Duty Credit Scrip(s) can be utilized in the similar manner as the scrips issued under reward schemes can be utilised.