of
capital goods
for producing quality goods and
services
and enhance India’s manufacturing competitiveness.Foreign Trade Policy 2023
CHAPTER 5
Export Promotion Capital Goods (EPCG) Scheme
(Relevant Procedure Chapter 5)
5.00 Objective
The objective of the EPCG Scheme is to facilitate
import
of
capital goods
for producing quality goods and
services
and enhance India’s manufacturing competitiveness.
*5.01 EPCG Scheme
(a)
EPCG Scheme allows import of capital goods (except those
specified
in negative list in
Appendix 5 F) for pre- production, production and post-production at zero customs duty. Capital goods imported under EPCG Authorisation for physical exports are also exempt from IGST and Compensation Cess, leviable thereon under the subsection (7) and subsection (9) respectively, of
section 3 of the Customs Tariff Act, 1975 (51 of 1975), as provided in the notification issued by Department of Revenue. Alternatively, the
Authorisation
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 11 including in CKD/SKD condition thereof;
(ii)
Computer systems and software which are a
part
of the Capital Goods being imported;
*(iii)
Spares
, moulds, dies, jigs, fixtures, tools & refractories; and
*(iv) Catalysts for initial charge plus one subsequent charge.
(b)
Import under EPCG Scheme shall be subject to an
Export Obligation
(EO) equivalent to 6 times of duties, taxes and cess saved on capital goods, to be fulfilled in 6 years reckoned from date of issue of Authorisation.
*(c) Import/procurement under EPCG scheme shall also be subjected to Average Export Obligation (AEO) as given in para 5.04(c) of FTP.
(d) Authorisation shall be valid for import for 24 months from the date of issue of Authorisation. Revalidation of EPCG Authorisation shall not be permitted.
*(e) In case Integrated Tax and Compensation Cess are paid in cash on imports under EPCG, incidence of the said Integrated Tax and Compensation Cess would not be taken for computation of net duty saved provided Input Tax Credit is not availed.
(f)
Import of items which are
restricted
for import shall be permitted under EPCG Scheme only after approval from Exim Facilitation Committee (EFC) at DGFT Headquarters.
(g)
If the goods proposed to be exported under EPCG Authorisation are restricted for
export
, the EPCG Authorisation shall be issued only after approval for issuance of Export Authorisation from Exim Facilitation Committee (EFC) at DGFT Headquarters.
*5.02 Coverage
(a)
EPCG scheme 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
Authorisation
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
RARegional Authority shall intimate such change to jurisdictional Customs Authority of existing as well as changed supporting manufacturer(s) and the Customs at port of registration of Authorisation.
(b) Export Promotion Capital Goods (EPCG) Scheme also covers a service provider who is certified as a Common Service Provider (CSP) by the DGFT - HQs, Department of Commerce in a Town of Export Excellence or Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA) subject to provisions of Foreign Trade Policy/Handbook of Procedures with the following conditions:
(i) Common utility services like providing Electricity, Water, Gas, Sanitation, Sewerage, Telecommunication, Transportation etc. shall not considered for benefit of CSP;
(ii) Export by users of the common service shall be counted towards fulfillment of EO of the CSP provided the EPCG Authorisation details of the CSP is mentioned in the respective Shipping bills and concerned RA must be informed about the details of the users prior to such export;
(iii) Such export will not count towards fulfillment of specific export obligation in respect of other EPCG Authorisations of the user;
(iv)
Authorisation
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
CSPCommon Service Provider; and
(v) Capital goods shall be installed within a Town of Export Excellence or PM MITRA.
5.03
Actual User
Condition
Imported capital goods shall be subject to Actual User condition till export obligation is completed and Export Obligation Discharge Certificate (EODC) is granted.
5.04
Export obligation
Following conditions shall apply to the fulfillment of Export obligation:-
(a)
Export obligation shall be fulfilled by the Authorisation holder through export of goods which are manufactured by him or his
supporting manufacturer
/
services
rendered by him, for which the EPCG authorisation has been granted.
*(b) For export of goods, EPCG Authorisation holder may export either directly or through third party(ies).
*(c)
EOExport Obligation 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 5.12(a). Such average would be the arithmetic mean of export performance in the preceding three licensing years for same and similar products. The Average Export Obligation (AEO) shall be fulfilled every financial year, till export obligation is completed. Exports/supplies made over and above AEO shall only be considered for fulfillment of Export Obligation.
*(d)
In case of indigenous sourcing of
Capital Goods
, specific EO shall be 25% less than the EO stipulated in Para 5.01. There shall be no change in average EO imposed, if any, as stipulated in Para 5.04(c).
(e)
Exports
under Advance Authorisation,
DFIADuty Free Import
Authorisation, Duty Drawback, RoSCTL and RoDTEP Schemes would also be eligible for fulfilment of EO under EPCG Scheme.
(f)
Export obligation may be fulfilled both by physical exports as well as
deemed exports
. Deemed export supplies shall also be eligible for benefits available under
paragraph 7.03 of FTP.
*(g) Exports made from DTA units shall only be counted for calculation and/or fulfillment of AEO and/or EO.
(h)
EO can also be fulfilled by the supply of ITA-I items to provided under GST Rules under the category of deemed
DTA,
provided realization is in
free
foreign exchange.
(i) Royalty payments received by the Authorisation holder in freely convertible currency and foreign exchange received for R&D services shall also be counted for discharge under EPCG.
*(j) Payment received in rupee terms for such Services as notified in Appendix 5D shall also be counted towards discharge of export obligation under the EPCG scheme.
*(k) Export proceeds realized in Indian Rupees as per para 2.52(d)(ii) are also counted towards fulfillment of export obligation.
(l) Only one benefit specified in paras 5.04(d), 5.09, 5.10 and 5.11 shall be admissible.
*(m) Extension of EO period shall be permitted as prescribed in Handbook of Procedures.
5.05 Provision for companies admitted under the provisions of Insolvency and Bankruptcy Code 2016
A company holding EPCG authorizations and having been admitted under the provisions of Insolvency and Bankruptcy Code 2016 for commencement of insolvency proceedings and in respect of whom the resolution plan has been approved under Section 31 of IBC 2016 by Adjudicating Authority may be permitted to relief, concessions and waivers in accordance with the resolution plan approved/ finalised by Adjudicating Authority/Appellate Authorities as the case may be.
5.06 LUTLegal Undertaking/Bond/BG in case of Agro units
LUT/Bond or 15% BG, as applicable, may be furnished for EPCG Authorisation granted to units in Agri-Export Zones provided EPCG Authorisation 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 Authorisation may
source capital goods from a
domestic manufacturer either through Invalidation Letter or through Advance Release
Order. Such
domestic manufacturer shall be eligible for
deemed export
benefits under
paragraph 7.03 of FTP, and as may be provided under GST Rules under the category
of deemed exports. Such domestic sourcing shall also be permitted from
EOU
s and
these supplies shall be counted for purpose of fulfillment of positive
NFENet Foreign Exchange by
said EOU as provided in Para 6.08 (a) of FTP.
5.08 Calculation of
Export Obligation
In case of direct
imports
,
EOExport Obligation shall be
reckoned with reference to actual
duty /Taxes/Cess saved amount. In case of domestic sourcing, EO shall be reckoned with reference to notional Customs duty /Taxes/Cess saved on
FORFreight on Road and Rails value as indicated in
AROAdvance Release Order / Invalidation letter.
*5.09 Incentive for early EO fulfillment
With a view to accelerating
exports
, in cases
where
Authorisation
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 Authorisation redeemed by
RARegional Authority concerned.
*5.10 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(b). There shall be no change in average EO imposed, if any, as stipulated in Para 5.04(c). The list of Green Technology Products is given in
Para 5.26 of HBP.
5.11 Reduced EO for North East Region and UTs of Jammu & Kashmir and Ladakh.
For manufacturing units located in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Jammu & Kashmir and Ladakh, specific EO shall be 25% of the EO, as stipulated in Para 5.01(b). There shall be no change in average EO imposed, if any, as stipulated in Para 5.04(c).
*5.12 Exemption from maintenance of average export obligation
(a) In case of export of goods relating to the following, the EPCG Authorisation holder shall not be required to maintain average export obligation.
(i) Handicrafts, (ii) Handlooms, (iii) Industries covered under Khadi and Village Industries Commission (KVIC) (iv) Agriculture (v) Aquaculture (including Fisheries),Pisciculture, (vi) Animal husbandry and Dairying, (vii) Floriculture & Horticulture, (viii) Poultry, (ix) Viticulture, (x) Sericulture, (xi) Carpets, (xii) Coir, and (xiii) Jute
(b)
However, this exemption from maintenance of average export obligation shall not be allowed for import of fishing trawlers, boats,
ships
and other similar items.
(c) Goods, excepting tools imported under EPCG scheme\
by sectors specified in sub-paragraph (a) above, shall not be allowed to be transferred for a period of five years from date of imports even in cases where export obligation has been fulfilled.
5.13 Transitional Arrangements:
Authorisations issued during various policy periods viz., 2002-07, 2004-09, 2009-14, 2015-20 issued prior to 05.12.2017 and 2015-20 RE 2017 shall be governed by corresponding Foreign Trade Policy provisions and Handbook of Procedures, unless otherwise specifically stated.