EPCG

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. EPCG scheme allows import of capital goods for pre-production, production and post-production at zero customs duty.

The Directorate General of Foreign Trade under the Ministry of Commerce and Industry administers the EPCG Scheme, which allows the import of capital goods (except those specified in the negative list in Appendix 5F) for pre-production, production, and post-production activities at zero customs duty. Capital goods imported under an EPCG Authorisation for physical exports are also exempt from IGST and Compensation Cess leviable under sub-sections (7) and (9) of Section 3 of the Customs Tariff Act, 1975, as notified by the Department of Revenue. Alternatively, the authorisation holder may procure capital goods from indigenous sources in accordance with the provisions of paragraph 5.07 of the Foreign Trade Policy (FTP).

Capital goods for the purpose of the EPCG scheme shall include:

• Capital Goods as defined in Chapter 11 including in CKD/SKD condition thereof;
• Computer systems and software which are a part of the Capital Goods being imported;
• Spares, moulds, dies, jigs, fixtures, tools & refractories; and
• Catalysts for initial charge plus one subsequent charge.

• 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.
• Import/procurement under EPCG scheme shall also be subjected to Average Export Obligation (AEO) as given in para 5.04(c) of FTP.
• Authorisation shall be valid for import for 24 months from the date of issue of Authorisation. Revalidation of EPCG Authorisation shall not be permitted.
• 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.
• 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.
• 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.
• 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 RA 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

Pre-conditions for applying for EPCG:

• IEC Entity has already Imported Items by paying customs duty.
• The applicant has an ‘Active’ IEC and is logged into the DGFT Customer Portal.
• E-Sign and DSC are enabled for submission.
• The applicant is authorised to draft and submit applications for an IEC.
• GSTN details corresponding to the branches of the IEC. The same may be added from Services > IEC Profile Management > Modify IEC.

EPCG Scheme allows import of capital goods for pre-production, production and post-production at Zero customs duty & IGST.

The specific export obligation may be reduced for the EPCG authorisation holder, in the following cases:

• In cases, where they have completed 75% or more of specific export obligation and 100% of average export obligation till date (if any), in half or less than half of the original export obligation period specified. Then exemption will provided, remaining export obligation shall be condoned and the authorisation be redeemed by the RA concerned.
• For exporters of Green Technology Products.Exmption will be provide Specific EO shall be 75% of the EO.
• For units located in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Jammu and Kashmir.Exemption will be given Specific EO shall be 25% of the EO.