EXPORT PROMOTION CAPITAL GOODS SCHEME

Definition:

“EPCG refers to the Export Promotion Capital Goods (EPCG) Scheme, which gives the
manufacturer facility for import of capital goods for export production at concessional rate of
duty (generally 5 per cent) against certain level of export obligation over a period of time.”

 Capital Goods

o Any Plant, Machinery, Equipment, Accessory Required for Manufacturing or

Production directly or indirectly, Rendering of Service and For Replacement,
Modernization, Technological Up gradation, Expansion.”

 Zero Duty EPCG Scheme

o The Zero duty EPCG Scheme is available for the Exporters of Engineering
and electronic Products, basic chemicals and Pharmaceuticals, apparels and
Textiles ,Plastics, Handicrafts, Chemicals and allied products, etc

o Capital goods imported under EPCG scheme, to be fulfilled in 6 years

reckoned from Authorization issue-date.
o EPCG Scheme allows Import of Capital Goods for pre-production,
production at 3 % customs duty.

o Zero duty EPCG Scheme not be available for import of capital goods relating
to export of Scheme products covered under following chapters/headings of
TC(HS) classification:
 o Chapters 1 to 24, 25 to 27, 31, 40, 43, 44, 45 , 47 to 49, 68 to 70, 71, 81, 89,
93, 97, 98

o The zero duty EPCG scheme will be in operation till 31.3.2012.

 Concessional 3% Duty EPCG Scheme

o Allows import of capital goods for pre-production, production and post

production at 3% Customs duty.

o Subject to an export obligation equivalent to 8 times of duty saved on capital

goods imported under EPCG scheme, to be fulfilled in 8 years reckoned from
Authorization issue-date.

 For units in cottage or tiny sector,

o import of capital goods at 3% Customs duty shall be allowed subject to

fulfilment of export obligation equivalent to 6 times of duty saved on capital
goods imported in 12 years from Authorization issue date.

 For SSI units,

 o import of Capital goods at 3% Customs Duty shall be allowed, subject to
fulfilment of export obligation equivalent to 6 times of duty saved on capital
goods, in 8 years from Authorization issue date, provided the landed CIF
value of such imported capital goods under the scheme does not exceed Rs.
50 lakhs and total investment in plant and machinery after such imports does
not exceed SSI limit.

o However, in respect of EPCG Authorization with a duty saved amount of Rs.

100 crores or more, export obligation shall be fulfilled in 12 years.

 import of motor cars,

o Sports utility vehicles/all purpose vehicles shall be allowed only to hotels,
travel agents, tour operators or tour transport operators and companies
owning/operating golf resorts.

EPCG FOR PROJECTS

 An EPCG licence can also be issued for import of capital goods under the Scheme for
Project Imports notified by the Central Board of Excise and Customs under S.No 441 of
Customs Exemption Notification No 21/2002 dated 01.03.2002 wherein the basic
customs duty on imports is 10% with a CVD of 16%.

 The export obligation for such EPCG licences would be eight times the duty saved. The
duty saved would be the difference between the effective duty under the aforesaid
Customs Notification and the concessional duty under the EPCG Scheme.
 Conditions and obligations

o The import of capital goods for creating storage and distribution facilities for
products manufactured or services rendered for export by the EPCG license
holder would be permitted under the EPCG Scheme

o The export obligation under the scheme shall be, over and above, the average
level of exports achieved by him in the preceding three licensing years for
same and similar products within the overall export obligation period
including extended period

o The export obligation under the scheme shall be, over and above, the average
level of exports achieved by him in the preceding three licensing years for
same and similar products within the overall export obligation period
including extended period

o Royalty payments received in freely convertible currency and foreign

exchange received for R& D services shall also be counted for discharge
under the EPCG scheme

 EPCG Authorization for Annual /Requirement

o EPCG Authorization can also be issued for annual requirement to Status

o Certificate Holders and all other categories of exporters having past export
performance (in preceding two years), both under zero duty and 3% duty
Schemes.
o The annual entitlement in terms of duty saved amount shall be upto 50% of
FOB value of Physical Export and / or FOR value of Deemed Export, in
preceding licensing year.
 Eligibility

o EPCG scheme covers manufacturer exporters with or without supporting

manufacturers/ vendors, merchant exporters tied to supporting manufacturers
and service providers.
o Export Promotion Capital Goods (EPCG) Scheme also covers a service
provider who is designated / certified as a Common Service Provider (CSP)
by the DGFT, Department of Commerce or State Industrial Infrastructural
Corporation in a Town of Export Excellence subject to provisions of
Foreign Trade Policy/Handbook of Procedures.

 EPCG for Retail Sector

o To create modern infrastructure in retail sector, concessional duty benefits

under EPCG scheme shall be extended for import of capital goods required
by retailers having minimum area of 1000 sq. meters. Such retailer shall fulfil
export obligation i.e. 8 times of duty saved, in 8 years.
 Provision for BIFR units

o Any firm/ company registered with BIFR or any firm/ company acquiring a
unit, which is under BIFR, may be allowed EO extension, as per
rehabilitation package prepared by operating agency and approved by
BIFR/Rehabilitation Department of State Government, up to 12 years if not
specified.

o Above provisions apply also to SSI units as per rehabilitation scheme of

concerned State government.
  Technological Upgradation of existing EPCG machinery

o EPCG Authorization holders can opt for Technological Up gradation of

existing capital good imported under EPCG Authorization.

o Conditions :

 (1) Minimum time period for applying for Technological Up gradation

of existing capital goods imported under EPCG is 5 years from
Authorization issue-date.

 (2) Minimum exports made under old capital goods must be 40% of
total export obligation imposed on first EPCG Authorization.

 (3) Facility for technological up-gradation shall be available only once

and the minimum imports to be made shall be at least 10% of the
existing investment in plant and machinery by applicant.

 (4) Capital Goods to be imported must be new and technologically

superior to earlier.

Incentives to Fast Track Companies

o To incentivize fast track companies with a view to accelerate exports under

the Scheme, in cases where the license holder has fulfilled 75% or more of
the export obligation under the Scheme (including average level of exports)
in half or less than half the original export obligation period specified in the
License, the remaining export obligation shall be condoned and the License
redeemed by the licensing authority concerned.

By: Krushnakant Bhalodia

Roll No:14