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Click here to read Foreign Trade Policy of India 2015-20 (FTP 2015-20) in pdf format: Foreign Trade Policy 2015-20.pdf
Export Promotion Capital Goods (EPCG) scheme under Export Import Policy 2015-2020
Objective
The objective of the EPCG Scheme under Indian Foreign Trade Policy 2015-20 is to facilitate import of capital goods for producing quality goods and services to enhance India’s export competitiveness.
EPCG Scheme Export Promotion Capital Goods under Export Import Policy 2015-20
(a) EPCG Scheme under Import Export Policy 2015-20 allows import of capital goods for pre-production, production and post-production at Zero customs duty. Alternatively, the Authorization holder may also procure Capital Goods from indigenous sources in accordance with provisions of paragraph 5.07 of FTP. Capital goods for the purpose of the EPCG scheme shall include:
(i) Capital Goods as defined in Chapter 9 including in CKD/SKD condition thereof;
(ii) Computer software systems;
(iii) Spares, moulds, dies, jigs, fixtures, tools & refractories for initial lining and spare refractories; and
(iv) catalysts for initial charge plus one subsequent charge.
(b) Import of capital goods for Project Imports notified by Central Board of Excise and Customs is also permitted under EPCG Scheme.
(c) Import under EPCG Scheme Import Export Policy 2015-20 shall be subject to an export obligation equivalent to 6 times of duty saved on capital goods, to be fulfilled in 6 years reckoned from date of issue of Authorization.
(d) Authorization shall be valid for import for 18 months from the date of issue of Authorization. Revalidation of EPCG Authorization shall not be permitted.
(e) In case countervailing duty (CVD) is paid in cash on imports under EPCG, incidence of CVD would not be taken for computation of net duty saved, provided CENVAT is not availed.
(f) Second hand capital goods shall not be permitted to be imported under EPCG Scheme under Exim Policy 2015-20.
(g) Authorization under EPCG Scheme as per IMPEX Policy 2015-20 shall not be issued for import of any Capital Goods (including Captive plants and Power Generator Sets of any kind) for
(i) Export of electrical energy (power)
(ii) Supply of electrical energy (power) under deemed exports
(iii) Use of power (energy) in their own unit, and
(iv) Supply/export of electricity transmission services
(h) Import of items which are restricted for import shall be permitted under EPCG Scheme Import Export Policy 2015-20 only after approval from Exim Facilitation Committee (EFC) at DGFT Headquarters.
(i) If the goods proposed to be exported under EPCG authorization are restricted for export, the EPCG authorization shall be issued only after approval for issuance of export authorization from Exim Facilitation Committee at DGFT Headquarters.
Coverage
(a) EPCG scheme under International Trade Policy of India 2015-20 covers manufacturer exporters with or without supporting manufacturer(s), merchant exporters tied to supporting manufacturer(s) and service providers. Name of supporting manufacturer(s) shall be endorsed on the EPCG authorization before installation of the capital goods in the factory / premises of the supporting manufacturer (s). In case of any change in supporting manufacturer (s) the RA shall intimate such change to jurisdictional Central Excise Authority of existing as well as changed supporting manufacturer (s) and the Customs at port of registration of Authorization.
(b) Export Promotion Capital Goods (EPCG) Scheme under EXIM Policy 2015-20 also covers a service provider who is designated / certified as a Common Service Provider (CSP) by the DGFT, Department of Commerce or State Industrial Infrastructural Corporation in a Town of Export Excellence subject to provisions of Foreign Trade Policy/Handbook of Procedures with the following conditions:-
(i) Export by users of the common service, to be counted towards fulfillment of EO of the CSP shall contain the EPCG authorization details of the CSP in the respective Shipping bills and concerned RA must be informed about the details of the Users prior to such export;
(ii) Such export will not count towards fulfillment of specific export obligations in respect of other EPCG authorizations (of the CSP/User); and
(iii) Authorization holder shall be required to submit Bank Guarantee (BG) which shall be equivalent to the duty saved. BG can be given by CSP or by any one of the users or a combination thereof, at the option of the CSP.
Actual User Condition
Import of capital goods shall be subject to Actual User condition till export obligation is completed.
Export Obligation (EO) as per Indian Foreign Trade Policy 2015-20
Following conditions shall apply to the fulfillment of EO:-
(a) EO shall be fulfilled by the authorization holder through export of goods which are manufactured by him or his supporting manufacturer / services rendered by him, for which the EPCG authorization has been granted.
(b) EO under the scheme shall be, over and above, the average level of exports achieved by the applicant in the preceding three licensing years for the same and similar products within the overall EO period including extended period, if any; except for categories mentioned in paragraph 5.13(a) of HBP. Such average would be the arithmetic mean of export performance in the preceding three licensing years for same and similar products.
(c) In case of indigenous sourcing of Capital Goods, specific EO shall be 25% less than the EO stipulated in Para 5.01.
(d) Shipments under Advance Authorization, DFIA, Drawback scheme or reward schemes under Chapter 3 of FTP; would also count for fulfillment of EO under EPCG Scheme Import Export Policy 2015-20.
(e) Export shall be physical export. However, deemed exports as specified in paragraph 7.02 (a), (b), (e), (f) & (h) of FTP shall also be counted towards fulfillment of export obligation, along with usual benefits available under paragraph 7.03 of FTP.
(f) EO can also be fulfilled by the supply of ITA-I items to DTA, provided realization is in free foreign exchange.
(g) Royalty payments received by the Authorization holder in freely convertible currency and foreign exchange received for R&D services shall also be counted for discharge under EPCG.
(h) Payment received in rupee terms for such Services as notified in Appendix 3E shall also be counted towards discharge of export obligation under the EPCG scheme.
Provision for units under BIFR /Rehabilitation as per Foreign Trade Policy of India 2015-20
A company holding EPCG authorization and registered with BIFR / Rehabilitation Department of State Government or any firm/ company acquiring a unit holding EPCG authorization which is under BIFR / Rehabilitation, may be permitted EO extension for the EPCG authorization(s) held by the acquired unit, as per rehabilitation package prepared by operating agency and approved by BIFR / Rehabilitation Department of State Government. If time-period up to which EO extension is to be granted is not specifically mentioned in the BIFR order, EO extension of 3 years from the date of expiry of EOP (including extended period) or the date of
BIFR order, whichever is later, shall be granted without payment of composition fee.
LUT/Bond/BG in case of Agro units
LUT/Bond or 15% BG, as applicable, may be furnished for EPCG authorization granted to units in Agri-Export Zones provided EPCG authorization is taken for export of primary agricultural product(s) notified or their value added variants.
5.07 Indigenous Sourcing of Capital Goods and benefits to Domestic Supplier
A person holding an EPCG authorization may source capital goods from a domestic manufacturer. Such domestic manufacturer shall be eligible for deemed export benefit under paragraph 7.03 of FTP. Such domestic sourcing shall also be permitted from EOUs and these supplies shall be counted for purpose of fulfillment of positive NFE by said EOU as provided in Para 6.09 (a) of FTP.
Calculation of Export Obligation
In case of direct imports, EO shall be reckoned with reference to actual duty saved amount. In case of domestic sourcing, EO shall be reckoned with reference to notional Customs duties saved on FOR value.
Incentive for early EO fulfillment under Export Import Policy 2015-20
With a view to accelerating exports, in cases where Authorization holder has fulfilled 75% or more of specific export obligation and 100% of Average Export Obligation till date, if any, in half or less than half the original export obligation period specified, remaining export obligation shall be condoned and the Authorization redeemed by RA concerned. However no benefit under Para 5.21 of HBP shall be permitted where incentive for early EO fulfillment has been availed.
Reduced EO for Green Technology Products
For exporters of Green Technology Products, Specific EO shall be 75% of EO as stipulated in Para 5.01. There shall be no change in average EO imposed, if any, as stipulated in Para 5.04. The list of Green Technology Products is given in Para 5.29 of HBP.
Reduced EO for North East Region and Jammu & Kashmir
For units located in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Jammu & Kashmir, specific EO shall be 25% of the EO, as stipulated in Para 5.01. There shall be no change in average EO imposed, if any, as stipulated in Para 5.04.
Post Export EPCG Duty Credit Scrip(s) as per Export Import Policy 2015-20
(a) Post Export EPCG Duty Credit Scrip(s) shall be available to exporters who intend to import capital goods on full payment of applicable duties in cash and choose to opt for this scheme.
(b) Basic Customs duty paid on Capital Goods shall be remitted in the form of freely transferable duty credit scrip(s), similar to those issued under Chapter 3 of FTP.
(c) Specific EO shall be 85% of the applicable specific EO under the EPCG Scheme. However, average EO shall remain unchanged.
(d) Duty remission shall be in proportion to the EO fulfilled.
(e) All provisions for utilization of scrips issued under Chapter 3 of FTP shall also be applicable to Post Export EPCG Duty Credit Scrip (s).
(f) All provisions of the existing EPCG Scheme shall apply insofar as they are not inconsistent with this scheme.
The above information is a part of Online international business guide course
What is EPCG How EPCG works in Export Import trade?
Difference between EPCG and ECGC
EPCG scheme under new Foreign Trade Policy 2015-20 (FTP 2015-20)
EPCG under Foreign Trade Policy 2015-20
Guidelines to execute Bank Guarantee, Legal under Taking for EPCG and Advance Authorization
Action on default in export obligation under the Advance or EPCG authorizations
FTP 2015-20, Changes in Schemes of reward or incentive, advance authorization or DFIA, EPCG or post export EPCG
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