Export Promotion Capital Goods Scheme for the period 2009-2014 (updated as on 23.08.2010) has been announced in the Foreign Trade Policy. This Scheme allows the import of New & Secondhand Capital Goods, as well as computer software systems at concessional rate of Custom Duty by undertaking export obligation by the Exporters.
A. About ZERO DUTY EPCG Scheme
Government has announced Zero Duty EPCG Scheme for certain product groups. This Scheme is applicable to Sectors of:
b) Electronic Product
c) Basic Chemicals & Pharmaceuticals
d) Apparel & Textiles
g) Chemical & Allied Products
h) Leather & Leather Products
i) Paper & Paperboard and articles thereof
j) Ceramic Products
l) Glass & Glass ware
m) Rubber & articles thereon
n) Plywood & allied products
o) Marine Products
p) Sports goods & toys.
0% Duty Export Obligation on Duty Saved Amount 6 times in 6 Years.
B. Process of application-
An application (ANF 5A) shall be made to Regional authority for grant of authorization along with document required therein. Applicant has to mention the specific name of machinery or name of spare (preferably with the name of machine where it is to be attached) in the application which is proposed to be imported under EPCG scheme. The authorization or licence will be issued with the specific duty saved amount. Application fee is 1% of duty saved amount or Rs. 50,000 whichever is lower.
C. Process of redemption of licence-
v Licence shall be used for importing within 9 months from the date of issue of licence.
v Licence holder can import in excess of the value mentioned in licence but only upto 10% by paying proportionate application fees.
v if EPCG authorization holder has utilized licence less than the value earmarked in licence his export obligation shall bereduced on prorata basis.
v The Licence holder shall also be required to submit a Nexus Certificate from an independent Chartered Engineer (CEC), to the Customs authorities at the time of clearance of imported capital goods.
v A copy of the chartered engineer certificate shall be submitted to the concerned Regional Authority along with copy of the bill of entry, within 30 days from the date of import of the Capital Goods.
v Regional authority concerned shall, on the basis of nexus certificate from an Independent Chartered Engineer (CEC) submitted by the applicant shall issue EPCG authorization.
v In case of import of capital goods Licence holder shall issue a certificate to regional authority within 6 month of import, confirming installation of capital goods.
v In the case of import of spares, the installation certificate shall be submitted three years from the date of import. There is a flexibility to import Spares, Moulds, Dies, Jigs, Fixtures & Tools etc.
v If spares are imported along with the machinery or for the machinery which was earlier imported under EPCG scheme then there will 50% export obligation (ie 3 times) than regular export obligation (i.e 6 times), subject to the condition that CIF value these items should not increase more than 10% CIF value of import machinery and 10% of indigenous machinery which were imported under EPCG scheme.
v If the above value is not sufficient for import of Spares, manufacturer can apply for their regular requirement of spares as per regular EPCG licence provisions (ie 6 times export obligation in 6 years).
D. Import of capital goods or spares-
v A person holding an EPCG authorisation may source Capital Goods from domestic manufacturers also. (Excise duty will be refundable).
v New as well as Secondhand Capital Goods (without any age restriction) including Tools, Jigs, Spares, Fixtures,Dies, Moulds can be imported.
v Import of Capital Goods under lease arrangement is permitted under the scheme.
v EPCG authorisation Holder can also opt for Technological upgradation of existing Capital Goods imported under EPCG Scheme.
v Under this scheme, if required, the Transfer of Capital Goods would be permitted within the group companies under intimation to R. A. and jurisdictional Central Excise Authority.
v Spares can be imported subsequently but within the Export Obligation period i.e. it is not necessary to import spares along with the machine.
v If the Capital Goods/ spares imported under the EPCG Scheme are found defective or otherwise unfit for use they can be re-exported to the foreign buyer within 3 years from the date of payment of duty with the permission of the Regional Authority / Customs Authority. In this situation the export obligation would be re-fixed.
E. Export obligation-
Export obligations are set above the average of the past exports done, but where sectors where total exports in that sector/product group has declined by more than 5% as compared to the previous year, average export obligation for the year may be reduced proportionate to reduction in exports of that particular sector/product group during the relevant year. However, in case export decline is continuous over consecutive years, the base year for calculation of eligibility and calculation of reduction in average export obligation will be taken as the year after which the exports have shown continuous decline. Regional Authority concerned may condone shortfall upto 5% in export obligation arising out of duty saved amount.
F. Documents to be maintained and other obligation-
v Goods, excepting tools imported under EPCG scheme by such sectors, shall not be allowed to be transferred for a period of five years from date of imports even in cases where export obligation has been fulfilled. However, transfer of capital goods to group companies, within five years after the permission obtained from regional authority.
v Export obligation shall be fulfilled over a specified period in following proportion.
Period from the date of issue of Authorization
Minimum export obligation to be fulfilled
Block of 1st to 4th year
Block of 5th and 6th year
v Report on fulfillment of export obligation shall be submit to regional authority concerned by 30thApril of every year, regional authority concerned may issue partial EO fulfillment certificate, provided export performance is proportionately adequate to fulfillment of export obligation.
v As evidence of fulfillment of export obligation, Licence holder shall furnish application (ANF 5 B) with documents prescribed therein.
v Licence holder shall maintain a true and proper account of exports / supplies made towards fulfillment of export obligation for a period of 3 yearsfrom date of redemption.
v Where Export Obligation of any particular block of years is not fulfilled in terms of the above proportions such authorization holder shall, within 3 months from the expiry of the block of years, pay duties of customs (along with applicable interest) of an amount equal to that proportion of the duty leviable on the goods which bears the same proportion as the unfulfilled portion of the EO bears to the total EO. Ie duty along with interest to be paid on the goods not exported in the block.
v In these cases extension of export obligation period is also considered by either by paying 2% compensation fee on the proportionate duty amount on unfulfilled export obligation or by enhancing the export obligation to the extent of 10% of the total export obligation imposed at a choice of exporter for each year. Maximum extension can be made 2 years only.