Export Promotion Capital Goods (EPCG) Scheme

Export Promotion Capital Goods EPCG Scheme

International trade plays a pivotal role in the sustainability and growth of any economy. However, in order to gain a favourable position in the international market and minimise the level of trade deficit, a country needs sufficient foreign currency. There is only one way to increase the inflow of foreign currency i.e. to increase Exports. Hence, it is right to say that no country can survive self-sufficiently without enough amount of exports. Lack of foreign currency results in high trade deficit and foreign debt crunch.

Considering such crucial role of export in the economy, Indian Government comes up with many Export Promotion Schemes time and again. Such schemes ease regulations & compliance requirements and provide tax benefits to export businesses. The purpose of such schemes is not only to promote entrepreneurs engage in export business but also increase the competitiveness of export-oriented business in the international market. One such scheme is "Export Promotion Capital Goods" (EPCG) Scheme.

What is Export Promotion Capital Goods (EPCG)?

Export Promotion Capital Goods are such capital goods which are used for the production of goods exported outside India. Capital Goods can include both machineries as well as spares. Hence, for any capital goods to qualify under EPCG, the commodity produced must be exported outside India.

What is Export Promotion Capital Goods (EPCG) Scheme?

EPCG Scheme allows an export-oriented business to import capital goods at zero duty. However, this is subject to an export value equal to six times duty saved on such imports within six years from the date of authorisation issued. This means, within six years from availing the EPCG scheme, the business must bring in enough foreign currency which is equivalent to 600% of customs duty saved on import of capital goods measured in domestic currency.

What Capital Goods are allowed under EPCG Scheme?

The capital goods shall include spares (including refurbished/reconditioned spares), tools, jigs, fixtures, dies and moulds. Second hand capital goods, without any restriction on age, may also be imported under the EPCG Scheme.

What is the process to obtain an EPCG License?

The importer of capital goods must file the application of EPCG with necessary supporting documents with Director General of Foreign Trade (DGFT). The export obligation is fixed based on the amount of import duty exemption.

Is there any extension available in the time limit?

Extension is available for further time period only in exceptional cases where the exporter is able to prove that the deadline was not met due to factors beyond his control.

Penalty in case of Non-Compliance:

As per EXIM Policy, 2002-07, "In case EPCG License Holder fails to fulfil prescribed export obligation he shall pay dues of Customs plus 15% interest per annum to the customs authority".

Can an exporter sell goods in the domestic market?

If an exporter can meet the deadline as per his export obligation, such business can then sell the goods into the domestic market as well.

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