Export Promotion Capital Goods are capital goods used in the production of goods which are exported to other countries. It includes machinery as well as spares. Hence, to qualify as Export Promotion Capital Goods, the commodity manufactured in India must be exported outside India.
This is a Scheme which enables an importer (being an export-oriented business) to import capital goods at zero rates of customs duty. However, the scheme is subject to an export value equivalent to 6 times of duty saved on the importation of such capital goods within 6 years from the date of issuance of the authorization. In simple words, there is a compulsion on the business to bring in foreign currency which is equal to 600 percent of duty saved on such importation measured in domestic currency. This is to be done within six years from availing the Export Promotion Capital Goods scheme.
What are the Capital Goods allowed under Export Promotion Capital Goods Scheme?
The capital goods allowed under Export Promotion Capital Goods Scheme shall include spares (including reconditioned/ refurbished), fixtures, jigs, tool, molds and dies. Further, second-hand capital goods may also be imported without any restriction on age under the EPCG Scheme.
Under this scheme of Foreign Trade Policy (FTP), importation of capital goods required for the manufacturing of export-oriented product specified in the Export Promotion Capital Goods Authorization is permitted at concessional/nil rate of duty. This scheme under Foreign Trade Policy allows technological up-gradation of the indigenous industry. Export Promotion Capital Goods (EPCG) Authorizations are issued by licensing authority – Director General of Foreign Trade (DGFT) based on the certificate issued by an Independent chartered engineer.
Who would benefit from this Scheme?
EPCG is intended for promoting 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 go ahead for this scheme for those who don’t expect to manufacture in quantity or expect to sell the produce entirely within the country, as it could become almost impossible to fulfill the obligations set under this scheme.
How to obtain an EPCG License?
In order to obtain a License under EPCG scheme, it is a primary requirement to file an application with the licensing authority of Director General of Foreign Trade. The application shall be attached with the required documents along with the company and personal details.
Documents required for EPCG License
The issuing authority is the licensing authority – Director General of Foreign Trade (DGFT). ANF 5B is to be filled along with Self-certified copies of the followings:
- Import Export Code (IEC)
- Registration cum Membership Certificate (RCMC)
- Digital signature
- Registration certificate from Tourism Department
- Pan Card
- Excise Registration (if registered)
- GST Registration Certificate
- Proforma Invoice
- Self-Certified Copy + Original of Certificate of Chartered Accountant
- Self-Certified Copy + Original of Certificate of Chartered Engineer
What is the export obligation under the scheme?
The Importation of capital goods under the scheme of EPCG is subject to an export obligation which is equal to six times of duty saved, to be satisfied within 6 years from date of issue of EPCG authorization. If a holder of the EPCG authorization is unable to meet the stipulated export obligation, the importer of the capital goods is required to pay customs duties along with interest on it as prescribed.