What is EPCG?
-Export Promotion Capital Goods.
Where is it required?
–Under Import Export in India.
EPCG Scheme is regulated by the Ministry of Commerce under the Directorate.General of Foreign Trade which allows for the import of goods for pre-production, production and post-production at 0 % duty which is subject to an export obligation of six times of the duty which is saved on an import of capital goods under the EPCG Scheme, which is to be fulfilled within six years. Import of capital goods shall be subject to the Actual User condition till the export obligation is discharged. Manufacturer exporters who are with or without supporting manufacturer(s)/ vendor(s), merchant exporters which are tied to the supporting manufacturer(s) and service providers are thus eligible under this scheme.
It is an incentive to the exporters who deal in heavy capital goods. Manufacturing units are the biggest beneficiaries under this scheme. Indian government provides financial assistance to them in order to encourage exports. Machinery, machinery parts and similar goods come under this scheme. Under the EPCG Scheme, Capital Goods in Semi knocked down/Completely knocked down conditions are required to be assembled into capital goods by the importers. Second-hand goods without any restriction to age bar are also eligible for import under this scheme.
On completing of the export obligation, a form ANF 5B is to be filled on the official website of the Directorate General of Foreign Trade. Afterwards , the government issues a certificate of discharge of obligation and then the Customs Department generates Bank Guarantee. If the obligation period is not fulfilled, then customs duty with interest at the rate of 15 % is payable. In order to avail the benefit under this scheme, EPCG Authorization holder needs to file a bond with or without bank guarantee with the Customs Department before the beginning of import of capital goods. Bank guarantee is 25 % in case of manufacturers and 100 % of differential duty in case of merchant exporters. EPCG License shall be valid for imports for 18 months from the date of issue of authorization.
EPCG License, like the Importer Exporter Code, is of interest and concern for the indigenous businesses that either import from or export heavily to the companies abroad. It is a scheme which is introduced by the government to incentize exports and it can also serve to benefit industries and the companies of all sorts in all the sectors. It consists of the waiving of import duty on the products that are imported in return for performance or discharge of an export requirement or the obligation in order to tune several times the import duty is saved within a present time. Specifically, the government grants Import Duty at a mere 3% of the stipulated charge that would otherwise have to be paid and it is subject to the condition that within a period of 8 years an export obligation which is of 8 times the Duty Saved has been satisfactorily discharged. In some exceptional cases, the time for fullfilment of this duty can however be extended up to 12 years, but this provision is not easy even for the Medium or some Large Scale Enterprises in order to easily avail, as it applies only to the export obligations which are exceeding 100 Crore.
Documents required for EPCG License
The issuing authority is Directorate General of Foreign Trade. ANF 5B is to be filled along with following documents:-
- Self-certified Copy of Import Export Code (IEC)
- Self-Certified copy of Registration Cum Membership Certificate (RCMC)
- Digital Signature
- Self-Certified Copy of Registration Certificate from Tourism Department.
- Self-Certified Copy of GST Registration
- Self-Certified Copy of Pan Card
- Self-Certified Copy of Excise Registration (if registered)
- Self-Certified Copy of VAT Certificate (if registered)
- Self-Certified Copy of Proforma Invoice
- Self-Certified Copy of Brochure
- Self-Certified Copy + Original of Certificate of Chartered Accountant as per appendix 26
- Self-Certified Copy + Original of Certificate of Chartered Engineer as per appendix.
Who can benefit from the EPCG Scheme ?
EPCG is however intended to promote exports and the Government through this scheme provides incentives and other financial assistance to the Exporters. Heavy exporters can also take advantage of this provision but it is ill-advised for those who do not expect to manufacture the very much or even intend to sell their produce almost entirely in the domestic market in order to go ahead for this scheme, as that could lead to extreme pressure and it would almost become impossible-to-fulfill the obligations later on. Each business should thus take this call carefully and also not without a detailed written analysis of the expected export amount.
What sort of goods and services does EPCG Scheme apply to ?
EPCG is a scheme which is primarily related to machinery, machinery parts and also similar goods. Any company which is involved either in the manufacturing sector or in heavy production which intends to import machinery for its factories from a foreign country can be considered under this scheme. It is not, however, limited only to such companies as the government even wishes to include the service providers under this scheme, “Alternatively, export obligation may also be fulfilled by the exports of other good(s) which are manufactured or the service(s) that are provided by the same firm/company or the group company/ managed hotel which has the EPCG licence … The incremental exports are required to be fulfilled by the license holder for fulfilling the remaining export obligation which can include any combination of the exports of the original product/ service and the substitute product (s)/ service (s). The exporter of goods can also opt to get the export obligation refixed for the export of services and also vice versa.” In this case, the bills that documents the services that are charged to the companies or the clients abroad are sufficient for satisfying the export obligation.
