| EPCG Scheme |
5.1 |
The scheme allows import of capital
goods for pre production, production and post production (including
CKD/SKD thereof as well as computer software systems) at 5% Customs
duty subject to an export obligation equivalent to 8 times of duty
saved on capital goods imported under EPCG scheme to be fulfilled
over a period of 8 years reckoned from the date of issuance of licence.
Capital goods would be allowed at 0% duty for exports of agricultural
products and their value added variants.
However, in respect of EPCG licences with a duty saved of Rs.100
crore or more, the same export obligation shall be required to be
fulfilled over a period of 12 years.
In case CVD is paid in cash on imports under EPCG, the incidence
of CVD would not be taken for computation of net duty saved provided
the same is not Cenvated .
The capital goods shall include spares (including refurbished/
reconditioned spares) , tools, jigs, fixtures, dies and moulds.
EPCG licence may also be issued for import of components of such
capital goods required for assembly or manufacturer of capital goods
by the licence holder.
Second hand capital goods without any restriction on age may also
be imported under the EPCG scheme.
Spares (including refurbished/ reconditioned spares), tools, refractories,
catalyst and consumable for the existing and new plant and machinery
may also be imported under the 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 whose total foreign exchange earning
in current and preceding three licencing years is Rs 1.5 crores.
However, the parts of motor cars, sports utility vehicles/ all purpose
vehicles such as chassis etc cannot be imported under the EPCG Scheme. |
| |
5.1A |
Spares (including refurbished/ reconditioned spares),
tools, spare refractories, catalyst & consumable for the existing
plant and machinery may also be imported under the EPCG Scheme subject
to an export obligation equivalent to 8 times of duty saved to be
fulfilled over a period of 8 years reckoned from the date of issuance
of licence. |
| EPCG for Projects |
5.1B |
An EPCG licence can also be issued
for import of capital goods for supply to projects notified by the
Central Board of Excise and Customs under S.No 441 of Customs Exemption
Notification No 21/2002 dated 01.03.2002 wherein the basic customs
duty on imports is 10% with a CVD of 16%.
The export obligation for such EPCG licences would be eight times
the duty saved. The duty saved would be the difference between the
effective duty under the aforesaid Customs Notification and the
concessional duty under the EPCG Scheme. |
| Eligibility |
5.2 |
The scheme covers manufacturer exporters
with or without supporting manufacturer(s)/ vendor(s), merchant exporters
tied to supporting manufacturer(s) and service providers. |
| Conditions for import of Capital
Goods |
5.3 |
Import of capital goods shall be subject
to Actual User condition till the export obligation is completed. |
| Export obligation |
5.4 |
The following conditions shall apply to the fulfillment
of the export obligation:- |
| |
|
| (i) |
The export obligation shall be fulfilled by
the export of goods capable of being manufactured or produced
by the use of the capital goods imported under the scheme.
The export obligation may also be fulfilled by the export
of same goods, for which EPCG licence has been obtained, manufactured
or produced in different manufacturing units of the licence
holder/specified supporting manufacturer (s).
When Capital Goods are imported for pre/ post- production
or license is taken for import of spares, the license holder
shall fulfill the export obligation by export of products
manufactured from the plant / project to which the pre/ post-
production capital goods/ spares are related.
The import of capital goods for creating storage and distribution
facilities for products manufactured or services rendered
by the EPCG licence holder would be permitted under the EPCG
Scheme.
The 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 same and similar products
except for categories mentioned in Handbook (Vol.1).
Alternatively, 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 licence.
However, in such cases, the additional export obligation
imposed under EPCG scheme shall be over and above the 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) even in cases where the
average is exempt for the substitute product (s)/ service
(s) as given in para 5.7.6 of the Handbook (Vol 1).
The incremental exports to be fulfilled by the licence holder
for fulfilling the remaining export obligation can include
any combination of exports of the original product/ service
and the substitute product (s)/ service (s). The exporter
of goods can opt to get the export obligation refixed for
the export of services and vice versa.
The licencee can also opt for the re-fixation of the balance
export obligation based on 8 times of the duty saved amount
for the CIF value in proportion to the balance Export obligation
under the scheme. The guidelines for the re-fixation of export
obligation is given in para 5.19 of the Handbook (Vol 1).
The aforesaid facilities shall only be available to manufacturer
exporters/ service provider on all the licences where export
obligation period including extended export obligation period
is valid on the date of application . In this regard, exports
made only on or after submission of application for alternate
item and/ or re-fixation of the export obligation based on
duty saved amount will be taken into account for fulfillment
of export obligation. |
| (ii) |
The export obligation under the scheme shall be, in addition
to any other export obligation undertaken by the importer, except
the export obligation for the same product under Advance Licence,
DFRC, DEPB or Drawback scheme. |
| (iii) |
The export obligation can also be fulfilled by the supply
of ITA-1 items to the DTA provided the realization is in free
foreign exchange. |
| (iv) |
Exports shall be physical exports. However, deemed exports
as specified in paragraph 8.2 (a), (b), (d), (f), (g) &
(j) of Policy shall also be counted towards fulfilment of
export obligation alongwith the usual benefits available under
paragraph 8.3 of the Policy.
Royalty payments received in freely convertible currency
and foreign exchange received for R& D services shall
also be counted for discharge under the EPCG scheme. Payment
received in rupee terms for the port handling services, in
terms of Chapter 9 of the Foreign Trade Policy shall also
be counted for export obligation discharge under the Scheme. |
|
| Provision for BIFR units |
5.5.1 |
Any firm/company registered with BIFR or any firm/
company acquiring a unit, which is under BIFR shall be allowed EO
extension as per the rehabilitation package prepared by the operating
agency subject to subsequent approval of BIFR.
However, in cases where the rehabilitation package does not specify
the EO extension period, a time period upto 12 years reckoned from
the date of issue of licence would be permitted on merits of the
case for fulfillment of export obligation.
Similarly, small-scale SSI units shall also be entitled for similar
facility as per the rehabilitation scheme of the concerned State
government. However, in cases where the State rehabilitation scheme
does not specify the export obligation extension period, a time
period upto 12 years reckoned from the date of issue of licence
would be permitted on merits of the case for fulfillment of export
obligation |
| EPCG for agro units |
5.5.2 |
In the case of EPCG licences issued to agro units
in the agri export zones, a period of 12 years reckoned from the
date of issue of the licence would be permitted for the fulfillment
of export obligation.
The agro units in the agri export zones would also have the facility
of moving the capital good (s) imported under the EPCG within the
agri export zone.
An LUT/ Bond in lieu of BG may be given for EPCG licence granted
to units in the Agri Export Zones provided the EPCG licence is taken
for export of the primary agricultural product (s) notified in Appendix
15 or their value added variants. |
| Indigenous Sourcing of Capital Goods and benefits
to Domestic Supplier |
5.6 |
A person holding an EPCG licence may source the capital
goods from a domestic manufacturer instead of importing them. The
domestic manufacturer supplying capital goods to EPCG licence holders
shall be eligible for deemed export benefit under paragraph 8.3 of
the Policy. |
| Benefits to Domestic Supplier |
5.7 |
In the event of a firm contract between the EPCG
licence holder and domestic manufacturer for such sourcing, the
domestic manufacturer may apply for the issuance of Advance Licence
for deemed exports for the import of inputs including components
required for the manufacturer of said capital goods.
The domestic manufacturer may also replenish the inputs including
components after supply of capital goods to the EPCG licence holders.
|
| Fixation of Export Obligation |
5.7A |
In case of direct imports, the export obligation
relating to the EPCG licence shall be reckoned with reference to the
duty saved value on the CIF value of capital goods (including spares,
jigs, fixtures, dies and moulds) actually imported. In case of domestic
sourcing, the export obligation relating to EPCG shall be reckoned
with reference to the notional Customs duties saved on the FOR of
capital goods (including spares, jigs, fixtures, dies and moulds). |
| |
5.8 |
Service provider in Agri export zone shall have the
facility to move or shift the capital goods within the zone provided
he maintains accurate record of such movements. However, such equipments
shall not be sold or leased by the licence holder. |
| Maintenance of Average exports under EPCG |
5.9 |
As per the provisions of para 5.4(i) , the EPCG
licence holder would have to maintain the average level of exports
equivalent to the average of the exports in the preceding three
licencing years for the same and similar products except for exempted
categories given in Handbook (Vol 1) during the entire period of
export obligation.
Notwithstanding the above, the licence holder shall maintain at
least 75% of the average exports in any particular year (s) provided
the same is offset by excess exports to fulfil the average in other
year (s). |
| Technological Upgradation of existing EPCG
machinery |
5.10 |
EPCG licence holders can opt for Technological
Upgradation of the existing capital good imported under the EPCG
licence.
The conditions governing the Technological Upgradation of the existing
capital good are as under: |
| |
|
| (i) |
The minimum time period for applying for Technological
Upgradation of the existing capital good imported under EPCG
is 5 years from the date of issuance of the licence. |
| (ii) |
The minimum exports made under the old capital good must be
40% of the total export obligation imposed on the first EPCG
licence |
| (iii) |
The export obligation would be refixed such that the total
export obligation mandated for both the capital goods would
be the sum total of 6 times the duty saved on both the capital
goods. |
| (iv) |
The procedure governing the replacement of capital good is
given in para 5.20 of the Handbook (Vol1). |
|
