Export Promotion Capital Goods Scheme Presentation

7/29/2019 Export Promotion Capital Goods Scheme Presentation

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EXPORT PROMOTION CAPTIAL GOODSSCHEME (EPCG)


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The scheme was introduced by Sh. P.Chidambaram Ministry of commerce in 1990 toallow import of capital goods at low Custom

duty. This scheme has helped in boosting exports in

the initial years of introduction when thecustoms duty on capital goods were very high.

This scheme has primarily helped exporters tobecome more competitive as it reduces theinitial cost on capital goods .


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EPCG scheme EPCG scheme allows import of capitalgoods for pre production, production and postproduction (including CKD / SKD thereof as well ascomputer software systems) at 5% Customs dutysubject to an export obligation equivalent to 8 timesof duty saved on capital goods imported under EPCGscheme to be fulfilled in 8 years reckoned fromAuthorization issue date In case of agro unit, units in

cottage or tiny sector. SSI unit - to be completed EO period in 6 years. It is subject to actual user condition till export

obligation is completed.


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The scheme allows following items which are freelyimportable as per ITC (HS) classification:-

Capital goods (Plant, machinery, equipment, accessories) Second hand capital goods (without any restriction on

age) Catalyst for initial charge Refractory's for initial lining. Refrigeration equipments Power generating sets . Machine Tools Equipment & instrument for testing,

research and development, quality & pollution control.

Spares for existing plant & machinery ( imported earlier) Catalyst for replacement.


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Eligibility Manufacture, Mining, agriculture,aquaculture, animal husbandry, floriculture,

horticulture, pisciculture, poultry, sericulture& viticulture Merchant exporter withmentioning details of supportingmanufacture Service Provider.


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Along with digital application, the importer shall approachtheir RLA with following details :-

Source of material with specification and catalogue. Nexus certificate from an independent chartered Engineer (CEC).

In case of second hand capital goods : - Inspection certificate from an independent chartered Engineer

from listed agencies as per Appendix 5.

In case of initial charge catalyst :- suppliers confirmation letter In case of spares :-

List of plant & machinery (for which spares are required) dulycertified from Chartered engineer or jurisdictional CE authorities.If the duty saved amount of Rs. 50 Cr and more, the applicant mayapply to DGFT HQ directly with a copy endorsed to RLA.


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The license specifies the value of resultant export

product to be exported.

The license is valid for 36 months and furtherextension is not applicable. EO shall be fulfilled by export of goods ,

manufactured / services rendered by the EPCG holder. Manufacture / merchant exporter can be fulfilled EO

with the help of importing CG. Service Provider should fulfill EO by earning FFE

through rendering services.


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Export obligation under the scheme shall be over & abovethe average level of exports achieved by him in thepreceding three licensing years for the same & similar

products within the overall export obligation periodincluding extended period.

Such average would be the arithmetic mean of exportperformance in the last 3 years for the same & similarproducts. Provided that premier trading house (PTH) shallhave option of fixing average level of export based onarithmetic mean of export performance in the last 5 yearsinstead of 3 years.


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Let us say:

Average Export = Rs. 20 crores

Duty saved amount = Rs. 10 crores

The EO is in addition to maintaining the annual

average for the same or similar product. If youraverage is Rs. 20 crores & duty saved amount is Rs.

10 crores, your total obligation would be as under:

contd


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Contd..

a) Average export * 8 ( 20 * 8) 160 crore

b) 8 times the utilized dutysaved amount

(10*8)

80 crore

Total 240 crore

To be

completed

in 8 years.


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Year

Average tobe maintain

(in crore)

AdditionalEO

(in crore)Totalexport

Offeredtowardsannualaverage(in crore)

OfferedtowardsadditionalEO(in crore)

1 20 22 20 2

2 20 15 20 (5)

3 20 21 20 6

4 20 40 30 20 10

5 20 31 20 11

6 20 35 20 15

Total 120 44


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From the previous table you will understandthat average has to be discharged first &

whatever exports you do additionally thoseexports would be counted towards dischargeof additional Export Obligation.


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Years

Total exporteffected by you( In crore)

Calculations Amount

1 30

2 30 Average 4 years(20*4)

80 crore

3 50 75% of additionalEO ( 75% of 80

crore)

60 crore

4 50

140 Total 140 crore


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If your Export Obligation discharged asprevious table, you can redeem your case in

the 5th

year itself.


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1st Extension up to 2 years:

Subject to pay of composition fees of 2% of the total duty saved.OR

An enhancement in EO imposed to the extent of 10% of the total EO.

2nd Extension up to 2 years:

Subject to condition that 50% of duty payable in proportion to the

unfulfilled EO is paid by the Authorization holder to the CustomsAuthorities before an endorsement of extension is made on the EPCGAuthorization by the RLA.


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In case the firm is still not able to complete the EO, the dutyalready deposited will be deducted from the total duty +interest too be paid for EO default.

Waiver of EO may be considered where, because of forcemeasures or other unforeseen circumstances/reasons whichare beyond the control of the exports like steep fall ininternational prices, technological obsolescence, etc. &the exporter is unable to fulfill EO. Such request shall beconsidered by a committee comprising representative(s) ofDOC & DOR under DGFT. Decision of this committee shall benotified by DOR for implementation.


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Suppose you complete entire Rs. 240 crore infirst 6 years, you will not be required to

maintain annual average subsequently. There is also another provision where if you

export 75% of your total export in 4 years orless than 4 years (including average) you willnot have to complete balance 25%.


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Up to 50% export obligation can be fulfilled by

exports of other goods manufactured or services

provided by the same firm or group

companies/managed hotel, which has the EPCGAuthorization.

However, in such cases, additional export obligation

imposed shall be over & above average exports

achieved by the unit companies/group companies

managed hotel in preceding 3 years for both the

origioanl & the substitute products/services.


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Shipments under advance Authorization, DFRC, DFAI, DEPB,Drawback Scheme or Incentive Schemes under chapter 3 ofFTP; would also count for fulfillment of EPCG Export

Obligation.

Exports made to farmer USSR or to such countries asnotified by DGFT shall be counted for fixing average level ofexports.

Royalty payments received in freely convertible currency &foreign exchange received for R&D services can be countedfor discharge under the EPCG scheme.


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Duty saved amount Duty saved amount

calculation =Merit duty (inclusive of Basic duty + CVD +cess on CVD + SAD+ Edu.cess etc)Less :- EPCG duty


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Export obligation 8 times duty saved amountover a period of 8 years

(i.e. duty saved amount X 8 times = EOfulfilled ) Average Exports :- Average level exports to

be calculated simple arithmetic mean of past3 years export performance.


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Discharge of Exports obligation EO may alsobe fulfilled by exports of good produced bygroup company Shipment under AdvanceLicense, DEPB, DBK & DFIA would alsocounted with mentioning EPCG license no. &date Supplies to indigenous customer

(Deemed exports) counted towards dischargeof EO. Exports proceeds shall be realized in FFE

except for deemed exports.


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Indigenous sourcing of capital goods EPCG

holder intending to source CG indigenously,shall request RLA to grant invalidation eitheralong with application or after issuance ofEPCG license.


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Automatic Pro-rata enhancement &reduction Up to 10% of CIF value / duty saved

amount of EPCG license is allowed. Customs shall automatically allow clearance

of goods in excess up to 10% of CIF value /duty saved amount without endorsement ofconcerned RLA.


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In cases where authorization holder hasfulfilled 75% or more of the export obligation

under the scheme (including average level ofexports) in half or less then half the originalexport obligation period specified in theauthorization, the remaining exportobligation is condoned & the authorizationredeemed by the licensing authorityconcerned.


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As evidence of fulfillment of exportobligation, the Authorization holder will have

to furnish the documents as prescribed inANF5B. ANF5B.doc
http://localhost/var/www/apps/conversion/tmp/scratch_4/ANF5B.dochttp://localhost/var/www/apps/conversion/tmp/scratch_4/ANF5B.doc


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Redemption of EPCG License Along with Applicationform of Aayat Niryat the following to be submitted:-

Import utilization statement duly certified from CA Copy of BRC Shipping bill & Bill of Entry Original EPCG License Consolidated statement of EO completed duly

certified by CA Bankers Bank certificates Statement of average EO

completed duly certified by CA & Bankers Installation certificate (In case of CG / spares) /

consumption certificate (in case of spares tools) dulycertified by CE / Jurisdictional C.E.


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In case of failure to fulfill the exportobligation or any other condition of the

Authorization, the Authorization holder shallbe liable for penal action under the ForeignTrade (Development & Regulation) Act 1992,the orders & rules made there under, theprovisions of FTP & the Customs Act 1962.


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In case EPCG Authorization holder fails tofulfill prescribed export obligation, he shall

pay duties of customs plus interest asprescribed by customs authority. Such facilities can be availed by EPCG

authorization holder to exist at his option.


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Installation certificate to be submitted to RLAfrom jurisdictional.

C.E authorities or an independent charteredengineer confirming installation of CG atfactory premises with in six months from thedate of import whereas in case of spares thecertificate to be submitted with in 3 yearstime from the date of import.


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Two or more EPCG license of same holderwould be permitted.

Clubbing shall not be permitted in case oflicense issued by different RLA. No clubbing would be permitted after expiry

of EOP.


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Miscellaneous EPCG holder shall submit to RLA by

30th April of every year, report of EO. RLA may issue partial EO fulfillment certificate

proportionate adequate to fulfillment of exportobligation.

Every EPCG holder should maintain record up to 3years from the date of redemption.

CG imported under EPCG scheme, which are founddefective, may be re-exported is permitted withinthree years from the date of payment of duty withpermission of RLA/ Customs. Accordingly EO wouldbe refixed.

Export Promotion Capital Goods Scheme Presentation

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