Export Promotion Capital Goods (EPCG) is a scheme introduced by the Indian government to promote exports of capital goods. It provides an opportunity for Indian manufacturers to import capital goods at a reduced cost and with a deferred payment option.
The EPCG scheme is aimed at making Indian manufacturers more competitive in the global market and encouraging them to export more. If you’re a business owner in India looking to expand your exports, understanding the EPCG scheme can be crucial.
In this article, we’ll discuss what EPCG is, how it works, and the benefits it can provide to your business.
How does the EPCG scheme work?
Under the EPCG scheme, Indian manufacturers can import capital goods at a concessional customs duty rate. The duty rate is usually 5% of the customs value of the capital goods. However, the actual duty rate may vary depending on the goods being imported.
The imported capital goods must be used for the production of goods or services for export. The EPCG scheme allows Indian manufacturers to import capital goods at a reduced cost, which can help reduce the overall cost of production.
Eligibility criteria for the EPCG scheme
The following conditions must be met to qualify for the EPCG scheme:
- The applicant must be a manufacturer or a service provider registered with the Directorate General of Foreign Trade (DGFT).
- The applicant must have an export obligation of at least six times the duty saved on the capital goods imported under the EPCG scheme.
- The capital goods must be new and not second-hand.
Benefits of the EPCG scheme
The EPCG scheme provides the following benefits to Indian manufacturers:
- Reduced cost of capital goods: The EPCG scheme allows Indian manufacturers to import capital goods at a reduced price, which can help reduce the overall cost of production.
- Deferred payment option: Indian manufacturers can pay the customs duty in installments over a period of time, which can provide them with additional cash flow to invest in their business.
- Increased competitiveness: The EPCG scheme aims to make Indian manufacturers more competitive globally by providing them access to advanced technology and equipment.
The application process for the EPCG scheme
Steps to apply for the EPCG scheme:
- Obtain an Import Export Code (IEC) from the DGFT.
- File an application with the DGFT for authorization under the EPCG scheme.
- Fulfill the export obligation within the prescribed period.
- Submit the required documents to the DGFT to get the duty credit scrip.
Common FAQs about the EPCG scheme
Q. What is the export obligation period under the EPCG scheme?
Ans. The export obligation period under the EPCG scheme is five years from the date of issue of the duty credit scrip.
Q. Can the duty credit scrip be transferred or sold?
Ans. Yes, the duty credit scrip can be transferred or sold to another party.
Q. What happens if the export obligation is not fulfilled?
Ans. If the export obligation is not fulfilled within the prescribed period, the Indian manufacturer will be liable to pay the customs duty saved on the capital goods imported under the EPCG scheme.
Q. Can the imported capital goods be used for domestic sales?
Ans. No, the imported capital goods under the EPCG scheme can only be used for the production of goods or services for export.
Conclusion:
The EPCG scheme is an excellent opportunity for Indian manufacturers looking to expand their exports. It provides access to advanced technology and equipment at a reduced cost, with a deferred payment option.
By fulfilling the export obligation, Indian manufacturers can avoid paying the whole customs duty on imported capital goods. While the EPCG scheme has several benefits, it is essential to note that there are several eligibility criteria that must be met, and the export obligation must be fulfilled within the prescribed period.
By carefully considering these factors and following the application process, Indian manufacturers can take advantage of the EPCG scheme and boost their export capabilities.
