The Ministry of Commerce and Industry has introduced an export promotion capital goods scheme. This scheme made easy various procedures under this scheme in order to reduce compliance requirements and facilitate ease of doing business.
The objective of the EPCG Scheme is to ease the import of capital goods for producing quality goods and services and increase India’s manufacturing competitiveness.
Export Promotion Capital Goods (EPCG) License is intended to act as an input for exports. It allows the import of capital goods at 3% Customs Duty subject to the condition that an Export Obligation of eight times the duty saved is to be fulfilled within 8 years of the Authorization issue date.
Features of the EPCG Scheme
- The EPCG Scheme supports the import of capital goods (except the negative list in Appendix 5 F) for pre-production, production, and postproduction at zero customs duty.
- Import of capital goods for Project Imports announced by the Central Board of Excise and Customs is also permitted under EPCG Scheme.
- The authorization holder shall be required to submit Bank Guarantee (BG) which shall be equivalent to the duty saved. BG can be taken from CSP or by any of the users or a combination therein, at the option of the CSP.
- The license cannot be issued for the import of the following capital goods, under the EPCG scheme:
- Captive Plants
- Power Generation
- Supply of Electrical Energy (Power)
- Export of Electrical Energy (Power)
- Export/Supply of Electricity Transmission Service
- Use of Power (Energy)
Advantages of EPCG Scheme:
- EPCG is aim to promote exports and the Indian Government with the help of this scheme offers incentives and financial support to the exporters.
- Heavy exporters could benefit from this provision. However, it is not advisable to move forward with this scheme for those who don’t expect to manufacture in quantity or expect to sell the produce entirely within the territory, as it is not possible to fulfill the obligations set under this scheme.
Calculation of Export Obligation
In direct imports, EO shall be considered with reference to the actual duty saved amount. In the case of indigenous sourcing, EO shall be deemed with reference to notional Customs duties saved on FOR value.
Documents required to obtain an EPCG license from DGFT (Director General of Foreign Trade)
The following documents are required for the EPCG Online Application:
- Pro forma Invoice or Purchase order of the Capital Goods or Machinery.
- Copy of IEC (Import Export Code), RCMC, MSME (Micro Small Medium Enterprises)GST (Goods and Services Tax)Central excise registration & GST Certificate.
- Details of Capital Goods asked to be imported with HSN code/Name, Model Number, and Technical Description.
- The List of Products that are exported using the mentioned machinery with HSN code.
- Chartered Engineer Certificate indicating the connection between the Capital Goods and the products to be exported.
- CA Certificate indicating the last three financial year turnover in USD & INR only for the above-mentioned Export Products.
- Factory’s full Address where the machine will be installed.
- Stepwise Process/Flow Chart showing the stages where the capital goods are to be used.
- End-use of Capital Goods for Export products and stage how and where should be used.