Export Promotion Capital Goods (EPCG) Scheme

India had two variants of EPCG Scheme viz. Zero Duty EPCG for few sectors and 3% Duty EPCG for all sectors. On 5th June, 2012, a new Post Export EPCG Scheme was also announced which was notified on 18 February, 2013 by the CBEC. From April 2013, the government has merged Zero Duty EPCG and 3% EPCG Scheme into one scheme which is now known as Zero Duty EPCG Scheme covering all sectors.

EPCG is a zero duty scheme which allows the import of capital goods such as machinery for preproduction, production and post production of export items. But it is not a free lunch. The duty free import by an exporter has to be paid back in the form of an export obligation equivalent to 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from Authorization issue-date. This means that if an exporter imports a tool making machine and saves an import duty of Rs. 100, he will have make the tools and export tools worth minimum Rs. 600 within 6 years.

Salient Features

  • Authorization holders will have export obligation of 6 times the duty saved amount. The export obligation has to be completed in a period of 6 years.
  • The period for import under the Scheme would be 18 months.
  • Export obligation discharge by export of alternate products as well as accounting of exports of group companies will not be allowed.
  • The exporters who have availed benefits under Technology Upgradation Fund Scheme (TUFS) administered by Ministry of Textiles, can also avail the benefit of Zero duty EPCG Scheme.
  • The import of motor cars, SUVs, all purpose vehicles for hotels, travel agents, or tour transport operators and companies owning/operating golf resorts will not allowed under the new Zero Duty EPCG Scheme.

Reduced EO for Domestic Sourcing of Capital Goods

  • The quantum of specific Export Obligation (EO) in the case of domestic sourcing of capital goods under EPCG authorizations has been reduced by 10%. This would promote domestic manufacturing of capital goods.

Reduced EO for units in the State of Jammu & Kashmir

  • In order to encourage manufacturing activity in the State of Jammu & Kashmir, it has been decided to reduce the specific export obligation (EO) to 25% of the normal export obligation. Earlier, this benefit was announced on 5th June, 2012 in respect of units located in North Eastern Region and Sikkim. This provision is now being extended to J&K.

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