EPCG

EPCG (Export Promotion Capital Goods)

Introduction

Export Promotion Capital Goods Scheme (EPCG Scheme) can be explained as “Duty-Free (Zero Customs Duty) Import of Capital Goods/Machinery for the manufacture of products meant for Export.” The Capital Goods may be used for production, pre-production & post-production stages of goods.

We all are aware of the heavy custom duties companies have to pay on the Capital goods imported for the production requirements, due to which businessmen usually do not import them and compromise with the quality of the goods. Higher the price of the machinery to be used, higher the custom duty was, and this subsequently started affecting the competitiveness and quality of manufacturing industries.

For improving this situation, Government of India came up with a scheme called EPCG where it was allowed to import capital goods at zero customs duty. It facilitates the Import of Capital Goods/Machinery for producing high-quality goods and services.

The main aim of the EPCG Scheme is to improve India’s competitiveness in the manufacturing sector.



Eligibility Criteria for applying under EPCG Scheme

  • Manufacturer Exporter.
  • Merchant Exporter with a supporting manufacturer.
  • Service Provider (who is exporting services) For Example. Hotel Industry.


Duties Exempted under EPCG Scheme

Capital Goods under EPCG Scheme can be imported at zero customs duty. Further, IGST and Compensation cess on the imports are exempted without any time restriction.

Capital Goods under EPCG Scheme can also be procured from indigenous sources (i.e., from domestic suppliers). In such cases, applicable GST for the supply would be exempted.



EPCG Scheme works

Import of Capital Goods must be completed within 18 months of obtaining the EPCG License. The revalidation of EPCG Authorization will not be permitted.

At the time of Import, a bond or bank guarantee has to be executed with customs authorities, as per applicable provisions.

After the Installation of the Capital Goods, it is mandatory to obtain the installation Certificate of the imported Machinery by an independent Chartered Engineer, and the same has to be submitted to DGFT

To incentivize fast-track exporters, if 75% of Specific Export obligation; 100% average export obligation is fulfilled in half or less than half of the export obligation period, than the remaining obligation shall be condoned and the EPCG License shall be closed by the concerned authorities.

After completion of export obligation, a redemption letter has to be obtained from the concerned regional authority of DGFT.