EPCG Scheme – Objective | Eligibility | License Getting Procedure and Much More!

The Export Promotion Capital Goods (EPCG) plan provides for the zero-percentage-duty importation of capital goods for pre-production, production, and post-production purposes, subject to an export requirement. Understand its benefits, paperwork necessary, and how to apply for EPCG in this blog.

Objective of the EPCG Scheme

The Export Promotion Capital Goods (EPCG) Scheme aims to improve India’s manufacturing competitiveness by facilitating the import of capital goods for the production of quality goods and services. EPCG Scheme permits duty-free imports of capital products for pre-production, production, and post-production.

Capital products imported under EPCG for tangible exports are also exempt from IGST and Compensation Cess up to 31.03.2020. Alternately, the exporter may acquire Capital Goods from the domestic market in accordance with section 5.07 of the FTP. Included as capital products for purposes of the EPCG programme are:

  • Chapter 9 defines Capital Goods.
  • Computer systems and applications that comprise Capital Goods
  • Spare parts, molds, dies, jigs, fixtures, equipment, and refractories
  • Catalysts for initial fee plus one additional fee
  • The EPCG scheme encompasses manufacturer exporters with or without supporting manufacturer(s), merchant exporters with ties to supporting manufacturer(s), and service providers.

Who Can Take Advantage of the EPCG Scheme?

The EPCG plan aims to encourage exports and the Indian government by providing incentives and other financial help to exporters. This clause may favor heavy exporters. However, it is not recommended to proceed with the EPCG Scheme for those who do not anticipate to produce in quality or sell the product entirely inside the nation, since meeting the obligations stipulated under this scheme may become nearly impossible.

What Import Goods/Machinery Does the EPCG Scheme Cover?

  • All computer equipment and software contained in imported capital goods;
  • All capital goods, including semi-knocked down and fully knocked down conditioned items;
  • Catalysts for the first charge and one subsequent charge;
  • Jigs, tools, spares, dies, molds, and refractories are all available.

According to the FTP 2015-20, capital goods are any plant, equipment, machinery, or accessories required for the production or manufacture of goods or the rendering of services, either indirectly or directly, including those required for replacement, technological upgradation, modernisation, or expansion. It includes packing equipment and machinery, refrigeration equipment, machine tools, power generation sets, testing equipment and instruments, and instruments for quality and pollution control.

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Capital goods can be utilized in the mining, manufacturing, aquaculture, floriculture, pisciculture, sericulture, animal husbandry, poultry, horticulture, and viticulture industries, as well as in the services sector.

Who May Apply for the EPCG Program?

Benefits under the EPCG Scheme are accessible to all exporters, regardless of their turnover. The EPCG License can be issued to the following categories of exporters:

  • Producer and exporter;
  • Mercantile exporter supported by a manufacturer;
  • Provider of Services (who exports services), such as the Hotel Industry.

What Are the Export Requirements of the EPCG Scheme?

The EPCG Scheme imposes two categories of export obligations:

  • Specific Export Obligation: Within six years of the issuance of the EPCG Authorization, goods manufactured with imported machinery must be exported in an amount equal to six times the taxes, duties, and cess avoided on capital goods. In the event of original procurement of Capital Goods, the specific Export Obligation shall be reduced by 25% relative to the aforementioned Export Obligation.
  • This obligation is the most important of the two export obligations stipulated by the EPCG Scheme. It generally implies that the average revenue maintained over the previous three years prior to obtaining the license must be maintained for each Financial Year until the specific export obligation has been fulfilled. It is imposed with the expectation that the obligation will be fulfilled. It is imposed with the expectation that after the upgrade and introduction of new machinery, the aggregate Export should not fall below the historical average of turnover, i.e., the export turnover should increase with the assistance of new machinery. It must be maintained beyond the specific export requirement.

If the Export Obligation is not satisfied within six years, a two-year extension may be obtained on a case-by-case basis. If the holder of EPCG Authorization fails to obtain the EO (even after an extension), the organization must pay the Customs Authority all conserved cess, taxes, and customs duties plus 15% annual interest. The EO can be satisfied through presumed exports, EOU Units, supply to SEZ, etc., third party exports, and service exports for service providers.

How Do You Apply Online For An EPCG License?

To get an EPCG License, the candidate or applicant must submit an online application to DGFT[1]. Please follow the instructions below:

  • You must first go to the DGFT’s official website;
  • Afterward, you must log in using DSC;
  • Afterward, choose services, and submit an online E-com Application;
  • choose EPCG (0%);
  • Complete the form completely and submit the required papers;
  • Please take notice of the following essential details to make sure the documents are created accurately:
  1. The applicant must be identified as a manufacturer exporter by IEC or RCMC;
  2. The address where the equipment is planned to be installed should be known to IEC or RCMC;
  3. The export items must be specified in the EPCG License by SSI, MSME, or Manufacturing proof.
  • Submit the application after providing all the necessary information;
  • The EPCG License will be issued by DGFT following a successful application.

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