| Zero duty EPCG Scheme
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5.1 |
Zero duty EPCG scheme allows import of capital goods for
pre-production, production and post production (including CKD/SKD
thereof as well as computer software systems) at zero Customs duty,
subject to an export obligation equivalent to 6 times of duty saved on
capital goods imported under EPCG scheme, to be fulfilled in 6 years
reckoned from Authorization issue-date.
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The scheme will be available for exporters of engineering &
electronic products, basic chemicals & pharmaceuticals, apparels &
textiles, plastics, handicrafts, chemicals & allied products, leather &
leather products, paper & paperboard and articles thereof, ceramic
products, refractories, glass & glassware, rubber & articles thereof,
plywood and allied products, marine products, sports goods and toys
subject to exclusions as provided in HBP Vol. I.
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Validity period for import of capital goods and provision for
extension in export obligation period will be as separately provided in
the HBP Vol. I. All other provisions pertaining to concessional 3% duty
EPCG scheme under this Chapter, to the extent they are not inconsistent
with the above provisions of zero duty EPCG scheme, shall be applicable
to the zero duty EPCG scheme also. The zero duty EPCG scheme will be in
operation till 31.3.2012.
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Concessional 3% Duty EPCG Scheme |
5.2 |
Concessional 3% duty EPCG scheme allows import of capital goods for
pre-production, production and post production (including CKD/SKD
thereof as well as computer software systems) at 3% Customs duty,
subject to an export obligation equivalent to 8 times of duty saved on
capital goods imported under EPCG scheme, to be fulfilled in 8 years
reckoned from Authorization issue-date.
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In case of agro units, and units in cottage or tiny sector, import
of capital goods at 3% Customs duty shall be allowed subject to
fulfillment of export obligation equivalent to 6 times of duty saved on
capital goods imported, in 12 years from Authorization issue-date.
For SSI units, import of capital goods at 3% Customs duty shall be
allowed, subject to fulfillment of export obligation equivalent to 6
times of duty saved on capital goods, in 8 years from Authorization
issue- date, provided the landed cif value of such imported capital
goods under the scheme does not exceed Rs. 50 lakhs and total investment
in plant and machinery after such imports does not exceed SSI limit.
However, in respect of EPCG Authorization with a duty saved amount of
Rs. 100 crores or more, export obligation shall be fulfilled in 12
years.
In case CVD is paid in cash on imports under EPCG, incidence of CVD
would not be taken for computation of net duty saved, provided the same
is not CENVATed.
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 EPCG scheme.
However, import of motor cars, sports utility vehicles/all purpose
vehicles shall be allowed only to hotels, travel agents, tour operators
or tour transport operators and companies owning/operating golf resorts,
subject to the condition that:
- total foreign exchange earning from hotel, travel & tourism and golf
tourism sectors in current and preceding three licensing years is Rs.
1.5 crores or more.
- ‘duty saved’ amount on all EPCG Authorizations issued in a
licensing year for import of motor cars, sports utility vehicles/ all
purpose vehicles shall not exceed 50% of average foreign exchange
earnings from hotel, travel & tourism and golf tourism sectors in
preceding three licensing years.
- vehicles imported shall be so registered that the vehicle is used
for tourist purpose only. A copy of the Registration certificate should
be submitted to concerned RA as a confirmation of import of vehicle.
However, parts of motor cars, sports utility vehicles/all purpose
vehicles such as chassis etc. cannot be imported under the EPCG Scheme.
Import of Restricted items of imports mentioned under ITC(HS) shall only
be allowed under EPCG Scheme after approval from EFC at Headquarters.
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5.2A |
Spares (including refurbished/reconditioned spares), moulds, dies,
jigs, fixtures, tools, refractory for initial lining and catalyst for
initial charge; for existing plant and machinery (imported earlier,
under EPCG or otherwise), shall be allowed to be imported under the EPCG
scheme subject to an export obligation equivalent to 50% of the normal
export obligation prescribed in para 5.1 and 5.2 above (for import of
capital goods), to be fulfilled in 8 years (6 years for zero duty EPCG
scheme), reckoned from Authorization issue date. This would however be
subject to the condition that the c.i.f. value of import of the above
spares etc. will be limited to 10% of the value of plant and machinery
imported under the EPCG scheme. In case of plant and machinery not
imported under the EPCG scheme, c.i.f. value of import of the spares
etc. will be limited to 10% of the book value of the plant and
machinery.
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| EPCG for Projects |
5.2B |
An EPCG Authorization can also be issued for import of capital goods
under Scheme for project Imports notified by the Central Board of Excise
and Customs under S.No.441 of Customs Exemption Notification No. 21/2002
dated 01.03.2002
Export obligation for such EPCG Authorizations would be eight times (6
times for zero duty EPCG scheme) of duty saved. Duty saved would be
difference between the effective duty under aforesaid Customs
Notification and concessional duty under the EPCG Scheme. |
| EPCG for Retail Sector |
5.2C |
To create modern infrastructure in retail sector,concessional duty
benefits under EPCG scheme shall be extended for import of capital goods
required by retailers having minimum area of 1 000 sq. meters. Such
retailer shall fulfill export obligation i.e. 8 times of duty saved, in
8 years. |
| EPCG Authorization for Annual
Requirement |
5.2D |
EPCG Authorization can also be issued for annual requirement to
Status Certificate Holders and all other categories of exporters having
past export performance (in preceding two years), both under zero duty
and 3% duty Schemes. The annual entitlement in terms of duty saved
amount shall be upto 50% of FOB value of Physical Export and / or FOR
value of Deemed Export, in preceding licensing year.
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| Eligibility |
5.3 |
EPCG scheme covers manufacturer exporters with or without supporting
manufacturer(s)/ vendor(s), merchant exporters tied to supporting
manufacturer(s) and service providers.
Export Promotion Capital Goods (EPCG) Scheme 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:-
- EPCG licence to be given to the CSP should have a clear endorsement giving
the details of the users and the quantum of Export Obligation (EO) which each
user would fulfill;
- Such exports will not count towards fulfillment of other specific export
obligations ; and
- Each one of the users of the CSP apart from the CSP should furnish 100%
Bank Guarantee (BG) equivalent to their portion of duty foregone apportioned in
terms of quantum of EO to be discharged by them and the B.G. will be enforced in
the event of the obligation not being fulfilled
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Conditions for
import of
Capital Goods |
5.4 |
Import of capital goods shall be subject to Actual User condition
till export obligation is completed. |
| Export
obligation |
5.5 |
Following conditions shall apply to the fulfillment of the export
obligation:-
- Export Obligation shall be fulfilled by export of goods
manufactured/services rendered by the applicant.
Export obligation under the scheme shall be, over and above, the average
level of exports achieved by him in the preceding three licensing years
for the same and similar products within the overall export obligation
period including extended period, if any; except for categories
mentioned in paragraph 5 .7.6 of HBP v1. Such average would be the
arithmetic
mean of export performance in the last three years for the same and
similar products provided that Premier Trading House (PTH) shall have
option of fixing average level of exports based on arithmetic mean of
export performance in the last five years instead of three years.
Upto 50% Export Obligation may also be fulfilled by exports of other
good(s) manufactured or service(s) provided by the same firm / company,
or group company / managed hotel, which has the EPCG authorization.
However, EPCG authorization issued prior to 1 .4.2008 will be governed
by earlier policy provisions.
However, in such cases, additional export obligation imposed shall be
over and above average exports achieved by the unit / company / group
company /managed hotel in preceding three years for both the original
and the substitute product(s) / service(s), despite exemptions in Para
5.7.6 of HBP v1.
- Shipments under Advance Authorization, DFRC,DFIA, DEPB or Drawback
scheme, or incentive schemes under Chapter 3 of FTP; would also count
for fulfillment of EPCG export obligation.
- Export obligation can also be fulfilled by the supply ITA-I items
to DTA, provided realization is in free foreign exchange.
- Exports shall be physical exports. However, deemed exports as
specified in paragraph 8.2 (a), (b), (d) (f), (g) & (j) of FTP shall
also be counted towards fulfillment of export obligation, alongwith
usual benefits available under paragraph 8.3 of FTP.
Royalty payments received in freely convertible currency and foreign
exchange received for R&D services shall also be counted for discharge
under EPCG. Payment received in rupee terms for port handling services,
in terms of Chapter 9 of FTP shall also be counted for export obligation
discharge.
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Provision for BIFR units |
5.5.1 |
Any firm/ company registered with BIFR or any firm/ company
acquiring a unit, which is under BIFR, may be allowed EO extension, as
per rehabilitation package prepared by operating agency and approved by
BIFR/Rehabilitation Department of State Government, upto 12 years if not
specified.
Above provisions apply also to SSI units as per rehabilitation scheme of
concerned State government.
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| EPCG for
agro units |
5.5.2 |
LUT/Bond or 15 % BG ( as applicable) may be given for EPCG
Authorization granted to units in Agri Export Zones provided EPCG
Authorization is taken for export of primary agricultural product(s)
notified in Appendix 8 or their value added variants. |
Indigenous Sourcing of Capital Goods and
benefits to Domestic
Supplier |
5.6
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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 8.3 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 6.9 (a) of FTP. |
Fixation of Export
Obligation |
5.7 |
In case of direct imports, export obligation
shall be reckoned with reference to actual duty saved amount. In case of
domestic sourcing, export obligation shall be reckoned with reference to
notional Customs duties saved on FOR value. |
Technological
Upgradation of existing
EPCG machinery |
5.8 |
EPCG Authorization holders can opt for Technological Upgradation of
existing capital good imported under EPCG Authorization.
Conditions governing Technological Up-gradation of existing capital
goods are as under:
- Minimum time period for applying for Technological Up-gradation of
existing capital goods imported under EPCG is 5 years from Authorization issue date.
- Minimum exports made under old capital goods must be 4 0% of total
export obligation imposed on first EPCG Authorization.
- Export obligation would be re-fixed such that total export
obligation mandated for both capital goods would be sum total of 6 times
of duty saved on both the capital goods, to be fulfilled in 8 years from
new authorization issue-date.
- Facility for technological up-gradation shall be available only
once and the minimum imports to be made shall be at least 1 0% of the
existing investment in plant and machinery by applicant.
- Capital Goods to be imported must be new and technologically
superior to earlier CG.
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Incentives for
Fast
Track Companies |
| 5.9 |
To incentivize fast track companies with a view to accelerate
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 benefits under Para
5.12 of HBP Vol. I shall be available in such cases.
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