Export Promotion Capital Goods – “What is EPCG Scheme?”, Benefits from EPCG, and “How to Obtain EPCG License?”

Introduction

In order to produce high-quality goods and services and to increase India’s export competitiveness, the Export Promotion Capital Goods (EPCG) Scheme makes it easier to import capital goods into India. The EPCG plan allows for the duty-free importation of capital items used in pre-production, production, and post-production. This article will emphasis on “What is EPCG Scheme?”, Benefits from EPCG, Document required for EPCG License and information on EPCG License.

What is EPCG Scheme?

This programme allows importers who operate export-oriented businesses to bring in capital goods at zero percent customs charge. The plan is nonetheless restricted to an export value equal to six times the tariff avoided on the importing of such capital goods within six years of the authorization’s date of issuance. In other words, the business is required to import foreign currency equal to 600% of the duty saved on such importation calculated in local currency. Within six years of using the Export Promotion Capital Goods Scheme, this must be completed.

Entity that are benefited from EPCG (Export Promotion Capital Goods Scheme)

The EPCG scheme is designed to encourage exports, and the Indian government provides incentives and financial support to exporters through this programme. Those who export a lot might profit from this clause. However, it is not suggested to move through with this scheme for those who do not expect to manufacture in large quantities or want to sell the produce solely within the country, as it could become nearly hard to fulfil the requirements in this scheme.

Eligibility Criteria for EPCG Scheme

Under the EPCG scheme, the following categories of capital goods are eligible for duty-free importation into India:

• For the initial lining, refractories
• Equipment for refrigeration
• Power generation equipment
• Device tools
• Plant, machinery, equipment, or accessories needed for the direct or indirect production of commodities or the provision of services, including those needed for expansion, modernization, or technical advancement
• Catalysts for one further charge after the initial charge
• Equipment and machines for packaging
• For the initial charge, catalysts
• Tools and instruments for testing, development, quality assurance, and pollution prevention
• Jigs, fixtures, spare parts, moulds, and dies
• Capital goods utilized by the manufacturing, mining, agricultural, aquaculture, animal husbandry, horticulture, poultry, agriculture, viticulture and industries, as well as the services sector
• Software systems for computers
• Other types of capital goods, in addition to those mentioned above, may be allowed under the EPCG programme with the approval of the DGFT’s Exim Facilitation Committee.

Note: The EPCG (Export Promotion Capital Goods) plan does not apply to used capital goods.

Documents required for EPCG License

Director General of Foreign Trade (DGFT), The licensing authority is the issuing authority. The following documents must be self-certified and attached to the DGFT portal:

• GST Registration
• Chartered Accountant Self Certified Copy and Original Certificate of CA needs to be attached.
• IEC (Import Export Code)
• Brochure
• Digital Signature
• Excise Registration
• Proforma Invoice
• Chartered Engineer Self Certified Copy and Original Certificate
• PAN Card
• Registration Cum Membership Card
• Registration certificate from Tourism Department

Obtaining an EPCG License

• An application for an EPCG License must be submitted to the licensing body, the Director General of Foreign Trade (DGFT), together with any necessary supporting documentation, company and individual information, and a history.
• The value addition is fixed based on the amount of import duty exemption, and export obligations must be met correspondingly. It maybe possible to obtain an extension of the export requirement period if it was truly unable to perform the export obligation within the time frame set by the licensing body.
• On the other hand, once the export obligation is fulfilled, all manufactured goods can now be sold locally and in the domestic tariff zone. As a result, companies must first try to fulfil their duties in international markets before they try to take advantage of favorable circumstances at domestic market.
• It provides varying degrees of financial help, exemption from import duty, etc. to exporters who make foreign currency. In this instance, imported machinery is being utilized to produce commodities that must be exported in order to generate foreign exchange.
• However, this necessitates a substantial upfront financial investment, and the machinery’s advantages will only start to materialize gradually in the upcoming years. A near-total exemption of the import tariff amount when importing such machinery is possible, additionally other financial aid for exporters.
• The company guarantees that it will export the necessary number or quantity of goods within the allotted time when seeking for an EPCG license from the government. EPCG (Export Promotion Capital Goods) is a useful service that the government offers to exporters and importers in exchange for a reduction in import duty.

Conclusion

The EPCG (Export Promotion Capital Goods) Scheme aids in making it easier to import capital goods for the production of high-quality products and to boost India’s export competitiveness. The licensee under the EPCG system will be responsible for paying the customs fines together with a 15% interest rate to the customs authority in circumstances when the license holder fails to fulfil the specified export obligation.