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CHAPTER-5
-EXPORT PROMOTION CAPITAL GOODS SCHEME

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.  

However, in respect of EPCG licences with a CIF value of Rs.100 crore or more, the same export obligation shall be required to be fulfilled over a period of 12 years.  

The capital goods shall include spares, 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 upto 10 years old may also be imported under the EPCG scheme.

 

5.1A

Spares 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.

 

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 fulfilment 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)/ vendor(s). 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 goods manufactured or service provided by the same firm/company 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 in preceding three years for the substitute products/services. This facility shall only be available to manufacturer exporters/ service provider.

 

(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.

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 fulfilment 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 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 fulfilment of export obligation

 

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 fulfilment of export obligation.

 

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.