EPCG SCHEME

(Export Promotion Capital Goods (EPCG))

EXEMPTION
As per para 5.01 of foreign trade policy, EPCG scheme allows import of
capital goods (except those specified in negative list in Appendix 5F)
for pre-production, production and post-production at zero customs
duty.

Capital goods imported under EPCG Authorization for physical exports

are also exempt from IGST and Compensation Cess up to 30.09.2021
only, leviable thereon under the sub section (7) and subsection (9)
respectively , of section 3 of the Customs Tariff Act, 1975 (51 of 1975),
as provided in the notification issued by department of revenue.
(Notification no. 60/2015-2020 dated 31-03-2021)
 EXEMPTION

 Exemption from whole of Basic Customs Duty (BCD)

 Exemption from Additional Customs Duty/CVD and SAD/CVD
 VAT/local taxes on Non-GST goods
 Exemption from IGST and Compensation Cess on GST goods up to a
date notified by CBIC.
PROJECT IMPORTS

 Import of capital goods for project imports notified by Central Board of Excise
and Customs is also permitted under EPCG scheme.
 Concessional benefits under project import regulations and exemption under EPCG
can be availed simultaneously and export obligation will be calculated with
respect to the concessional tax saving as prescribed under project import
regulation.
 CONCESSIONAL DUTY : Effective duties under project imports are lower than the normal
and depends on the kind of project. For industrial projects/ non mega power projects
etc., All items covered under the project imports now attracts only 5% Basic Customs
Duty. In addition CVD + ACVD + CESS is leviable which makes the total duty to approx.
20.941%. As against a normal total of 23.895% payable on the capital goods alone. The
scheme thus offers a saving of approx. 3%.
 EPCG can also be availed of along with the project imports. This simultaneous availment
of two schemes can lower the export obligations under EPCG scheme.
 EXPORT OBLIGATION (EO)

◉ Import under EPCG scheme shall be subject to a specific export obligation

equivalent to 6 times of duties, taxes and cess saved on capital goods, to be
fulfilled in 6 years reckoned from date of issue of authorization.
◉ In case of indigenous sourcing of capital goods, specific EO shall be 25% less
than the stipulated EO (i.e., 5.4 times of notional duties, taxes and cess saved).
◉ EO under the scheme shall be, over and above, the average level of exports
achieved by the applicant in the preceding three licensing years for the same
and similar products within the overall EO period. Such average would be the
arithmetic mean of export performance in the preceding three licensing
years for same and similar products
DOMESTIC PROCUREMENT OF CAPITAL GOODS
PARA 5.07 OF FTP
◉ A person holding an EPCG authorization may source capital goods from a
domestic manufacturer. Such domestic manufacturer shall be eligible for
deemed export benefits under paragraph 7.03 of FTP and as may be provided
under GST rules under the category of deemed exports.
◉ Such domestic sourcing shall also be permitted from EoU’s and these
supplies shall be counted for the purpose of fulfilment of positive NFE (net
foreign exchange) by said EoU as provided in para 6.09 (a) of FTP.
◉ The domestic supplier to EPCG Authorization holder has to collect and pay GST
and then claim such GST paid as deemed export refund.
BLOCK WISE EXPORT OBLIGATION (EO)

The authorization holder under the EPCG scheme shall, while maintaining the
average export obligation, fulfill the specific export obligation over the prescribed
block period in the following proportions:

Period from the date of issue Minimum export obligation to

of Authorization be fulfilled
Block of 1st to 4th year 50%

Block of 5th and 6th year Balance EO

INCENTIVE FOR EARLY EO FULFILLMENT

◉ In cases where the authorization holder has fulfilled 75% or more of specific
export obligation and 100% of average export obligation during 3 years or less
than 3 years reckoned from the date of issue of authorization, remaining export
obligation shall be condoned.
◉ Reduced EO for green technology products :- for exporters of ‘Green
Technology products’, specific EO shall be 75% of EO.
◉ Reduced EO for North East region and Jammu & Kashmir :- for unitslocated in
Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim,
Tripura and Jammu & Kashmir, specific EO shall be 25% of the EO.
ADDITIONAL ITEMS FOR IMPORT UNDER
EPCG SCHEME FOR SERVICE PROVIDERS
Additional benefits to service providers under EPCG scheme:

Import of Capital Goods namely Permissible for imports

Furniture, carpets, crockery, marble, Permitted only for hotel industry
chandelier, tiles, flooring, doors for
rooms, fixing panels.
Furniture and fixtures, flooring Permitted for hospitals
material and furnishing material
Construction equipements viz. Permitted only for Services Providers
cranes etc
EXPORT OBLIGATION (EO) CONDITIONS

◉ Authorization holder shall fulfill the EO by export of goods or services which are
manufactured or rendered by him or his supporting manufacturer.
◉ Shipments under advance authorization, DFIA, drawback scheme or reward
schemes under chapter 3 of FTP would also be counted for fulfillment of EO
under EPCG scheme.
◉ Exports shall be physical exports. However, deemed exports as specified in
chapter 7 of FTP shall also be counted towards fulfillment of export obligation,
along with usual benefits available under FTP.
EPCG-MISCELLANEOUS PROVISION

◉ Import of restricted items is permitted under EPCG scheme only after approval
from EXIM facilitation committee (EFC) at DGFT headquarters.
◉ Export of restricted items is permitted under EPCG scheme only after approval
from EXIM facilitation committee (EFC) at DGFT headquarters.
◉ Imported capital goods shall be subject to actual user condition till export
obligation is completed and EODC is granted, means imported capital goods is
non-transferable till export obligation is completed.
 CERTIFICATE OF INSTALLATION OF
CAPITAL GOODS

The authorization holder shall submit to the concerned RA, within six months from
date of completion of import, a certificate from the jurisdictional customs authority
or an independent chartered engineer, at the option of the authorization holder,
confirming installation of capital goods at factory/premises of authorization holder
or his supporting manufacturer(s).
 EXIT FROM EOU SCHEME

With the approval of development commissioner (DC), an EOU may opt to exit out of
the EOU scheme. Such exit shall be subject to payment of applicable duties and
taxes saved on imported inputs and capital goods.

These applicable duties and taxes may also be discharged through advance
authorization and EPCG or in cash.

An EoU / EHTP / STP / BTP unit may also be permitted by DC to exit from the scheme at any
time on payment of applicable duties and taxes and compensation cess on capital goods under
the prevailing EPCG scheme for DTA units.
 EXIT FROM EOU SCHEME

This will be subject to fulfillment of positive NFE criteria under EOU scheme, eligibility

criteria under EPCG scheme and standard conditions indicated in hand book on
procedures.

An EOU / EHTP / STP / BTP unit may also be permitted by DC to exit under
advance authorization as one-time option.

This will be subject to fulfillment of positive NFE criteria.

 CONSEQUENCE OF EXIT FROM EOU

 If the unit has not achieved the obligations, it shall also be liable to penalty at
the time of exit.
 Further the Eo U has to pay the import duties foregone and other benefits like
GST (either claimed as refund by E o U or by the supplier, by way of paying gst on
outward supply).
 Depreciation upto 100% permissible on capital goods. On de-bonding, the duty to be
paid on the depreciated value of the capital goods.
 M/S. MIRACLE FOOD PROCESSORS
INTERNATIONAL LTD. VS. COMMISSIONER OF
CUSTOMS, COCHIN
Customs Appeal No.585/2008, Final Order No.21184/2019
 Case of Import of Fruit Dehydration Plant (Spray Evaporation Machine–SPV 10) from Germany
under EPCG Scheme to avail concessional rate of duty.
 Held: The appellants have failed to fulfill the export obligation and accordingly, Department has
issued a showcause notice to recover the applicable duty on the imported goods. Department was
within its rights to impose the conditions of the Bond for violation of the provisions therein. The
impugned show-cause notice is about the recovery of duty foregone in terms of the conditions of
the Notification. The appellants having not appealed against the assessment of the Bill of Entry
and having not requested for provisional assessment, cannot demand the same while replying to
the show-cause notice. Such a request, is beyond the scope of the provisions of Customs Act, 1962.
Once a machine is imported in terms of the EPCG license wherein certain export obligation has
been fixed by the DGFT authorities and particularly, in the case when the EPCG Committee has
rejected the appeal made by the appellant, Customs cannot revalue the goods and reduce the export
obligation accordingly.