Chapter
5 of the Foreign Trade Policy 2015-2020 deals with the EPCG scheme.
The objective of this scheme is to facilitate import of capital goods
for producing quality goods and services to enhance India’s export
competitiveness.
Capital goods
The following are the capital goods for the purpose of this scheme:
Capital
goods as defined in Chapter 9 including in CKD/SKD condition thereof.
The term ‘capital goods’ is defined as any plant, machinery, equipment
or accessories required for manufacture or production, either directly
or in directly, of goods or for rendering services, including those
required for replacement, modernization, technological up gradation or
expansion. It includes packaging machinery and equipment, refrigeration
equipment, power generating sets, machine tools, equipment and
instruments for testing, research and development, quality and pollution
control. Capital goods may be for use in manufacturing, mining,
agriculture, animal husbandry, floriculture, horticulture, pisciculture,
poultry, sericulture and viticulture as well as for use in services
sector;
Computer software systems;
Spaces, moulds, dies, jigs, fixtures, tools & refractories for initial lining and spare refractories; and
Catalysts for initial charge plus one subsequent charge.
EPCG Scheme
This scheme allows import of capital goods for pre production, production and post production at zero customs duty;
The
Authorization holder may also procure capital goods from indigenous
sources. A person holding an EPCG authorization may source capital
goods from a domestic manufacturer. Such domestic manufacture shall be
eligible for deemed export benefit. Such domestic sourcing shall also
be permitted from EOUs. These supplies shall be counted for the purpose
of fulfillment of positive net foreign exchange by said EOU as
provided in Para 6.09 (a) of FTP;
Import of capital goods for project imports notified by Central Board of Excise and Customs is also permitted;
Import
shall be subject to an export obligation equivalent to 6 times of duty
and on capital goods, to be fulfilled in 6 years reckoned from the date
of issue of Authorization;
Authorization shall be valid for import for 18 months from the date of issue of authorization;
Revalidation of authorization shall not be permitted;
In
case of countervailing duty is paid in cash on imports under EPCG,
incidence of CVD would not be taken for computation of net duty saved,
provided CENVAT is not availed;
Second hand capital goods shall not be permitted to be imported under this Scheme;
Authorization shall not be issued for import of any capital goods, including plants and power generator sets of any kind, for
Export of electrical energy;
Supply of electrical energy under deemed exports;
Use of power in their own unit; and
Supply/export of electricity transmission services;
Import
of items which are restricted for import shall be permitted under this
scheme only after approval from Exim Facilitation Committee at DGFT
headquarters;
If the goods proposed to be export under this scheme
are restricted for export, the authorization shall be issued only after
approval for issuance of export authorization from Exim Facilitation
Committee.
Coverage of the scheme
The scheme
covers the manufacturer exporters with or without supporting
manufacturer(s), merchant exporters tied to supporting manufacturer(s)
and service providers,. The name of the supporting manufacturer(s)
shall be endorsed on the authorization before installation of the
capital goods in the factory of the supporting manufacturer(s). If there
is any change the Regional Authority shall intimate such change to
jurisdictional Central Excise Authority of existing as well as changed
supporting manufacturer(s) and the Customs at port of registration of
authorization.
The scheme also covers a service
provider who is designated or certified as a Common Service
Provider(CSP) by the DGFT, Department of Commerce or State Industrial
Infrastructural Corporation of a Town of Export Excellence subject to
the following conditions:
Export by users of the common
service, to be counted towards fulfillment of export obligation of the
CSP shall contain EPCG authorization details of the CSP in the
respective shipping bills and concerned Regional Authority must be
informed about the details of the Users prior to such export;
Such export will not count towards fulfillment of specific export obligations in respect of other EPCG authorization; and
Authorization
holder shall be required to submit bank guarantee equivalent to the
duty saved. Bank guarantee can be given by CSP or by any one of the
users or a combination thereof, at the option of CSP.
Condition
Import of capital goods shall be subject to Actual User condition till export obligation is completed.
Export Obligation
The following are the conditions to be fulfilled for export obligations:
EO
shall be fulfilled by the authorization holder through export of goods
manufactured him or his supporting manufacturers/services rendered by
him, for which authorization has been granted;
It 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 including extended period, if any, except for
categories mentioned in para 5.13 (a) of Hand book of procedures. Such
average would be the arithmetic mean of export performance in the
preceding three licensing years for same and similar products;
In case of indigenous sourcing of capital goods, specific EO shall be 25% less than the EO stipulated;
Shipments
under advance authorization, Duty Free Import Authorization, draw back
scheme or reward schemes would also count for fulfillment of EO;
The export shall be physical. Deemed exports shall also be counted towards fulfillment of export obligations;
It can also be fulfilled by the supply of ITA-1 items to DTA provided realization is in free foreign exchange;
Royalty
payments received in freely convertible currency and foreign exchange
received for R&D services shall also be counted for discharge;
Payment
received in rupee terms for such services notified in Appendix 3E shall
also be counted towards discharge of export obligation.
Calculation of EO
Export
obligation shall be reckoned with reference to actual duty saved amount
in case of direct imports. It shall be reckoned with reference to
notional customs duties saved on FOR value in case of domestic sourcing.
Incentive for EO
Where
authorization holder has fulfilled 75% or more of specific export
obligation and 100% of average export obligation, till date, if any, in
half or less than half the original export obligation period specified,
remaining export obligation shall be condoned and the authorization
redeemed by Regional Authority concerned. No benefit shall be permitted
where incentive for early EO fulfillment has been availed.
Reduced EO
For
the exports of the Green Technology products, EO shall be 75% of EO as
stipulated. There shall be no change in average EO imposed, if any. The
list of Green Technology Products is given in Para 5.29 of HBP.
For
the units located in Arunachal Pradesh, Assam, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, Tripura and J&K, specific EO shall be 25%
of the EO as stipulated. There shall be no change in average EO
imposed.
Units under BIFR/Rehabilitation
A
company holding EPCG authorization and registered with
BIFR/Rehabilitation Department of a State Government or any firm/company
acquiring a unit holding authorization which is under
BIFR/Rehabilitation may be permitted the EO extension as per
rehabilitation package prepared by operating agency and approved by
BIFR/Rehabilitation Department. If time period up to which extension is
to be granted is not specially mentioned in the BIFR order, the
extension of 3 years from the date of Export obligation period
(including extended period)or the date of NIFR order, whichever is
later, shall be granted without payment of composition fee.
Post Export EOCG Duty Credit Script(s)
The
Post Export EPCG duty credit script(s) shall be available to exporters
who intend to import capital goods on full payment of applicable duties
in cash and choose to opt for this scheme. Basic customs duty paid on
capital goods shall be remitted in the form of freely transferable duty
credit scrip(s).
Specific
EO shall be 85% of the applicable specific EO under this scheme.
Average EO shall remain unchanged. Duty remission shall be in proportion
to the EO fulfilled. All provisions for utilization of scrips shall
also be applicable to Post Export EPCG Duty Credit Scrip(s). All the
provisions of the existing scheme shall apply insofar as they are not
inconsistent with this scheme.