Trade contributes greatly to the economy of any country. Trade depends on import-export. Different countries make concessions and make plans based on policies in business. One such scheme is EPCG, which comes under the country’s foreign trade policy. Information related to this is being given through this article.
The Export Promotion Capital Goods (Export Promotion Capital Goods – EPCG) scheme is an export oriented business scheme. It allows importers to import capital goods at zero customs duty. The main objective of this scheme is to facilitate the import of capital goods to produce quality goods and services in India. The scheme enables authorized importers to import quality equipment and machinery at an affordable price to increase manufacturing competitiveness of Indian manufacturers. Producers can import capital goods at 0% customs duty, which can be used in pre-production, post-production or post-production processes of quality products for the export market.
- The EPCG scheme has been launched by the Government of India under the Foreign Trade Policy 2015-20.
- The scheme came into force on 1 April 2015. Under this scheme, manufacturers can import goods and equipment to export quality goods.
- The main advantage of the scheme is that the customs duty on capital goods imported is zero or the concession in customs is granted.
- The list of goods to be imported is specified under the scheme.
- The EPCG scheme provides an opportunity for the advancement of technology in the manufacturing sector.
- The Regional Licensing Authority of the Director General of Foreign Trade is authorized to issue EPCG authorization based on a certificate given by an independent chartered accountant.
Goods imported under the EPCG scheme are subject to export obligation. If the authority holder is unable to comply with the specified export obligations, the importer is required to pay customs duty with specified interest. To import capital goods under the EPCG scheme at 0% customs duty, an entity has to comply with the export obligations given below –
- Beneficiaries (authority holders) have to fulfill export obligations for the export of manufactured goods or services. Beneficiaries should have EPCG authority.
- According to the EPCG scheme, the export obligations of the shipment should be complied with under the drawback scheme, advance authorization and reward scheme.
- Deemed exports should meet export obligations.
- The beneficiary must comply with the export obligations to export above the average level of the last 3 licensing years for export of similar products. Manufacturers and exporters should keep the average export level during the overall export.
Export liability reduction
Export obligations are relaxed in the following situations –
- Reduction in export liability for green technology products –
The EPCG scheme states that up to 75% of the export liability can be relaxed in the case of green technology products.
- Minimum export obligation for select states – In some states like Jammu and Kashmir, Assam, Tripura, Nagaland, Manipur, Meghalaya, Sikkim and Arunachal Pradesh, the export liability reduces by up to 25%.
- Reward on timely supply – The reward is awarded to the authority holder who complies with the 75% or more export obligation. Such beneficiaries are eligible for exemption on export obligations. This also applies to compliance with the export obligation, which is 100%, half or even less than the average of the prescribed export obligation.
These capital goods get permission
There are some restrictions on capital goods being imported and exported under the EPCG scheme, but some are allowed, which are as follows –
- The scheme allows capital goods such as molds, tools, fixtures, jigs, and spares.
- Second-hand capital goods can be imported without any restrictions under the EPCG scheme.
- Computer software systems are part of the capital goods being imported.
Capital goods defined in foreign trade policy
Plant, equipment, goods, or machinery required to produce or manufacture goods directly or indirectly, or to render services. This includes equipment and accessories for refrigeration equipment, packaging machinery and equipment, machine tools, power generating sets, research and development, testing, quality and pollution control. Capital goods can be used in mining, construction, animal husbandry, agriculture, aquaculture, floriculture, fisheries, horticulture, sericulture, poultry etc.
Documents required for EPCG license
Some documents are mentioned below. Applicants have to produce these documents to get EPCG license –
- Import-Export Code (IEC)
- Registration / Membership Certificate (RCMC)
- pan card
- Digital signature
- Excise registration
- Registration certificate received from tourism department
- GST registration
- Certified original copy + self-certified copy from chartered accountant etc.