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What is Export Promotion Capital Goods Scheme (EPCG)?

The Export Promotion Capital Goods (EPCG) scheme allows the import of capital goods for pre-production, production and post-production at zero percent customs duty subject to an export obligation. In this blog, understand its benefits, documents required and how to apply for EPCG.

To increase and improve the manufacturing quality of Indian goods in international markets, the Export Promotion Capital Goods (EPCG) scheme was introduced. The scheme enables exporters to import capital goods that can be used to produce high-quality final products to be exported from India. Through EPCG scheme, exporters can export goods like spare parts for pre-production, production and post-production at zero customs duty¹. The concessional 3% duty EPCG scheme allows the import of capital goods for pre-production, production and post-production at 3% customs duty, subject to an export obligation equivalent to 8 times the duty saved on capital goods imported under the EPCG scheme, to be fulfilled in 8 years reckoned from Authorization issue-date².

What is the EPCG scheme?

EPCG scheme is the scheme that enables exporters to import capital products that include spares for pre-production, production and post-production at zero customs duty¹.

What are export promotion capital goods?

Export promotion capital goods are goods that exporters can bring in from other countries. These goods can even include spare parts for production, pre-production and post-production¹.

Products under EPCG scheme

Following are some of the products that can be imported to India at zero customs duty under the EPCG scheme³:

• Plant, machinery, equipment or accessories required for manufacture or production
• Packaging machinery and equipment
• Refrigeration equipment
• Power generating sets
• Machine tools
• Equipment and instruments for testing, research and development, quality and pollution control
• Computer and software systems

To benefit from the EPCG scheme, it is mandatory to obtain a license by filling an application with Director General of Foreign Trade (DGFT).

Benefits of the EPCG scheme

Some of the common benefits of the scheme are:⁴
• Under the EPCG scheme, eligible businesses can import capital goods at zero customs duty. It is subject to the requirement of the export obligation equivalent to 6 times the duty saved on imported goods is met within the 6 years.
• As a requirement of the scheme, the exporter must fulfill an export obligation (EO), which is equivalent to 8 times the amount of duty saved. The duty saved amount is calculated as the difference between the duty payable and the 3% BCD (Basic Customs Duty) that was actually paid during the import.
• This scheme promotes technological upgradation that enables businesses to enhance their production capabilities and be competitive in global markets.
• It facilitates import of capital goods for producing quality goods and services that enhance India’s manufacturing competitiveness.

What is an EPCG license?

EPCG license is used to import capital goods at zero customs duty issued by the regional licensing authorities of the Director General of Foreign Trade (DGFT)⁵.

What is the eligibility criteria to apply for EPCG scheme?

1. Manufacturer exporters with or without supporting manufacturer(s),
2. Merchant exporters tied to supporting manufacturer(s) and
3. Service Providers including Common Service Provider (CSP).

Documents required to obtain an EPCG license

Some of the documents required to apply for EPCG scheme are:
• Importer Exporter Code (IEC)
• Two copies of ANF 5A duly filled in
• Digital Signature Certificate (DSC)
• PAN
• Self-certified copy of valid RCMC from respective Export Promotion Council
• Consent letter of supporting manufacturer
• Self-certified copy and original certificate of Chartered Accountant
• Self-certified copy and original certificate of Chartered Engineer

How to apply online for an EPCG license?

An exporter can follow the below-mentioned process to apply for an EPCG license:

Step 1:

Visit the official website of DGFT

Step 2:

Under services, go to the EPCG page and click on apply for the EPCG scheme. Log in using your credentials.

Step 3:

Fill in the required details in the application and upload the necessary documents.

Step 4:

Make the required payment if asked.

Step 5:

Submit the application. The DGFT will issue an EPCG license after verification.

What are the features of EPCG scheme?

EPCG scheme aims to make export value equivalent to 6 times of duty saved in the importation of capital goods within 6 years from the date of issue of the authorization. EPCG license is mainly for businesses that export in large quantities to businesses abroad. It consists of import duty on products imported in return for performance or discharge of an export requirement or obligation of the import duty saved within a present time.

Export obligation under EPCG scheme

There are two types of export obligations that are mandatory to be fulfilled under the EPCG scheme⁵:
• Average export obligation for preceding 3 years exports.
• Specific exports are 6 times the duty saved amount in 6 years.

How to benefit from the EPCG scheme ?

1. Once you have received an EPCG license from DGFT, you must indicate the export items to be manufactured using the imported machinery or capital goods.
2. Then, register the license at customs or via ICEGATE.
3. You can import machinery or capital goods at import duty. Once installed, obtain an installation certificate for the machinery.
4. Submit it to the DGFT for an EODC (Export Obligation Discharge Certificate).
5. Submit EODC or closure letter to the customs department and redeem bank guarantee.

An EPCG license can benefit your business in the long run. The Government of India has introduced many schemes and incentives to assist exporters and accelerate export growth from India. With e-commerce exports programs, Indian exporters can grow their businesses and take their local products across the world with ease.

Amazon Global Selling: Export via e-commerce

To make exporting from India easy for sellers and MSMEs, Amazon Global Selling, an e-commerce exports program, provides assistance at every step of export journey. From obtaining export documents to easy product listing and international shipping, Amazon Global Selling enables Indian exporters to sell internationally in a simple way via e-commerce. By registering as an Amazon Global Seller, your products can reach over 300 million customers across the world. The more the customers view your product; there are higher the chances of your sales.

Guide to export with Amazon

More blogs on export schemes

1. A guide to the Export Oriented Units (EOUs) scheme and process to avail its benefits

2. Gold Card Scheme for exporters: Objectives, eligibility and benefits

3. How to register for the Market Access Initiative (MAI) scheme?

4. What is the NIRVIK scheme for exporters?

5. All you need to know about Interest Equalisation Scheme and its benefits

6. All you need to know about the Transport and Marketing Assistance Scheme (TMA Scheme)

7. RoSCTL scheme: Benefits, eligibility and application procedure

8. What is Duty Entitlement Passbook (DEPB) Scheme for exporters?

9. Advance Authorisation Scheme: How does it help exporters?

10. Understanding export incentives in India: What are the benefits for exporters?

11. What is Duty Drawback in export: Meaning, types and process

12. Understanding the benefits of RoDTEP scheme: A guide for Indian exporters

13. What is Authorized Economic Operator (AEO) Programme: How to register and obtain AEO certificate?

Frequently Asked Questions

What is zero-duty EPCG scheme?

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

What is EPCG License?

Export Promotion Capital Goods or EPCG scheme helps in facilitating the import of capital goods (capital goods includes machinery, machinery parts and similar goods) for manufacturing quality end-products and to bring a positive change in the competitiveness of India's exports.

Which goods can be imported under EPCG scheme?

The scheme allows import of capital goods like spares, tools, machinery, fixtures, dies, moulds, etc.

What is not eligible under the EPCG scheme?

Some of the goods that are not permitted under EPCG scheme are captive plants, supply of electrical energy under deemed exports, supply of electrical transmission service, etc.

How do I surrender my EPCG License?

Some of the documents required to surrender EPCG license are shipping bill or bill of export, e-BRC (Electronic Bank Realization Certificate), statement of average exports, relevant forms and declarations.

Is it mandatory to register for EPCG license at customs?

If you don't register for EPCG license at customs, you will not be able to clear machinery duty-free unless you register the license at the port, where the consignment will arrive. After successfully registering for the EPCG license at customs and executing a bond or bank guarantee, the custom department will allow duty-free import clearance of capital machinery.

Can a new exporter avail the EPCG Scheme?

EPCG Scheme can be availed by any exporter irrespective of their turnover. It must be noted that the import of capital goods has to be completed within 18 months of obtaining the EPCG license.

What is export obligation under EPCG Scheme?

There are two types of export obligation that needs to be obliged to by the authorization holder:
- Annual average export obligation: This is the average level of export as achieved in the preceding three licensing years within the overall export obligation period.
- Specific export obligation: It is calculated as six times of the duty saved amount. A minimum of 50% of export obligation in each block of years must be fulfilled, where the first block is the first 4 years and the next block is the remaining 2 years⁵.

What is zero-duty EPCG scheme?

Exporters who can benefit from the EPCG scheme are:
• Merchant exporters tied to supporting manufacturer(s).
• Manufacture exporters with or without supporting manufacturer(s).
• Service providers, including the Common Service Provider (CSP).

Published on June 24, 2022.

Sources:
1. https://content.dgft.gov.in/Website/dgftprod/5ff3762d-94a4-48ac-a461-33e2b318613d/FTP%202021%20updated%20on%2026.3.21.pdf
2. https://www.startupindia.gov.in/content/sih/en/government-schemes/epcg.html
3. http://dgftcom.nic.in/dgftmumbai/html/trmum/fy13/Check%20Lists/Check%20List%20for%20Application%20of%20EPCG%20Authorisation.pdf
4. http://customsandforeigntrade.com/FT%20Policy%20epcg.pdf
5. https://www.indiantradeportal.in/vs.jsp?lang=0&id=0,55,286
6. https://content.dgft.gov.in/Website/dgftprod/e17fcb62-c7e9-4e0b-b300-96023e72741f/DGFT%20FAQs%20-%20Export%20Promotion%20Capital%20Goods%20(EPCG)%20v1.0.pdf

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