Under the Export Promotion Capital Goods (EPCG) plan, capital goods, including spares for pre-production, production, and post-production, can be imported duty-free if an export requirement of six times the duty saved on the capital goods is met within six years following the Authorization issue date.
Manufacturer exporters with or without supporting manufacturer(s)/vendor(s), merchant exporters with supporting manufacturer(s), and service providers are all covered under the EPCG scheme. A service provider who is designated/accredited as a Common Service Provider is likewise covered by the Scheme (CSP).
The bearer of an EPCG authorization can export directly or through a third party (s). Except for considered exports, export proceeds must be realized in freely convertible currency. Until the export obligation is fulfilled, capital items imported under the EPCG plan will be subject to the Actual User condition. Under the EPCG program, the applicant’s export obligation must be met through the export of commodities manufactured or services rendered.
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Royalty payments made in freely convertible currency, as well as foreign exchange obtained for R&D services, will be counted against EPCG discharge. A holder of an EPCG Authorization can also purchase capital goods from a domestic manufacturer. Under the FTP, such a domestic manufacturer will be entitled for a presumed export benefit. EPCG Authorization holders have the option of upgrading current capital goods imported under the EPCG Authorization to a higher level of technology. The EPCG system forbids the import of second-hand capital items.
Extension of the EO term beyond two years may be considered, under the condition that the authorization holder pays 50 percent of the duty payable in proportion to the unfulfilled export requirement to Custom authorities before the RA involved endorses the extension on the EPCG permission. In such circumstances, there is no need to pay a composition fee or impose additional EO. If the company is still unable to satisfy the export obligation, the duty already paid will be subtracted from the total duty due, as well as the interest due for EO default.
If an EPCG permit holder fails to meet his export obligations, he must pay Customs duties as well as interest as determined by the Customs department. EPCG permission holders can also use this service to exit at their leisure. In addition, the EPCG Scheme provides for a special EO of 75% of the usual Export Obligation for the export of Green Technology Products. The system also includes Post Export EPCG duty credit scrips, which are accessible to exporters who want to import capital goods after paying all applicable duties in cash.
Furthermore, particular EO will be 25% of the EO for units in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and Jammu & Kashmir.
Spares (including reconditioned/refurbished), fixtures, jigs, tools, moulds, and dies are among the capital goods allowed under the Export Promotion Capital Goods Scheme. Furthermore, under the EPCG Scheme, second-hand capital goods may be imported without regard to their age.
Importation of capital goods required for the manufacturing of export-oriented products stated in the Export Promotion Capital Goods Authorization is permitted at a concessional/nil rate of duty under this Foreign Trade Policy (FTP) scheme. This strategy, which is part of the Foreign Trade Policy, enables for the technological advancement of indigenous industries.
Authorizations for Export Promotion Capital Goods (EPCG) are issued by the licencing body – the Director General of Foreign Trade (DGFT) – based on a certificate provided by an independent chartered engineer.
EPCG is designed to promote exports, and the Indian government uses it to provide incentives and financial assistance to exporters. This clause may favour heavy exporters. However, it is not suggested to proceed with this program if you do not expect to manufacture in large quantities or sell your products solely within the country, as it may become nearly difficult to meet the scheme’s commitments.
A fundamental need for obtaining a License under the EPCG Scheme is to submit an application to the Director-General of Foreign Trade’s licensing authority. The relevant documentation, as well as the corporate and personal information, must be linked to the application.
The licensing authority — the Director-General of Foreign Trade (DGFT) – is the issuing authority. ANF 5B must be completed with self-certified copies of the following documents:
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