InfoBytes

Export Promotion Capital Goods (EPCG) Scheme

Prepared For

Confidential | August 2018

What is EPCG
Scheme?
• Export Promotion of Capital Goods (EPCG) is one of the schemes
provided by government of India [under the licensing authority of
Directorate General of Foreign Trade (DGFT)] to importers and
exporters to promote exports.
• It consists in the waiving of import duty on products imported in
return for performance or discharge of an export requirement or
obligation to the tune of several times the import duty saved within a
preset time.

InfoBytes
2
Export Promotion of Capital Goods (EPCG) Scheme | Hyosung | Confidential | August 2018
The two major stakeholders in the EPCG authorisation process are the DGFT and CBIC

The two major stake holders in the process of issuance and redemption of EPCG license are:
1. Directorate General of Foreign Trade (DGFT): This government body has the authority to grant EPCG authorisation and redemption.
2. Central Board of Indirect Taxes & Customs (CBIC): The customs has the authority over the closure of EPCG authorisation and bond cancellation.

DGFT
• The Directorate General of foreign Trade (DGFT) is the
agency of the Ministry of Commerce and Industry of the
Government of India, responsible for execution of the
import and export Policies of India.
• DGFT plays a very important role in the development of
trading relations with various other nations and thus
help in improving not only the economic growth but also
provides a certain impetus needed in the trade industry.
For promoting exports and imports DGFT establish its
regional offices across the country.
• Directorate General of Foreign Trade is an attached
office of the Department of Commerce, Ministry of
Commerce and Industry.
• It’s headquartered in Udyog Bhavan, New Delhi. Under
its jurisdiction, there are four Zonal Offices at Delhi,
Mumbai, Kolkata and Chennai headed by Zonal Joint
Director General of Foreign Trade.
Customs
• The Directorate General of foreign Trade (DGFT) is the
agency of the Ministry of Commerce and Industry of the
Government of India, responsible for execution of the
import and export Policies of India.
• DGFT plays a very important role in the development of
trading relations with various other nations and thus
help in improving not only the economic growth but also
provides a certain impetus needed in the trade industry.
For promoting exports and imports DGFT establish its
regional offices across the country.
• Directorate General of Foreign Trade is an attached
office of the Department of Commerce, Ministry of
Commerce and Industry.
• It’s headquartered in Udyog Bhavan, New Delhi. Under
its jurisdiction, there are four Zonal Offices at Delhi,
Mumbai, Kolkata and Chennai headed by Zonal Joint
Director General of Foreign Trade.

InfoBytes
3
Export Promotion of Capital Goods (EPCG) Scheme | Hyosung | Confidential | August 2018
EPCG Export Promotion Capital Goods (EPCG) scheme allows import of capital goods at zero duty
subject to an export obligation

• 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.
Objective

Definition
• Import under EPCG Scheme shall be subject to an export obligation equivalent to 6 times
• EPCG Scheme allows import of of duties, taxes and cess saved on capital goods, to be fulfilled in 6 years reckoned from
capital goods for pre-production, Export date of issue of authorisation.
Obligation
production and post-production at
zero customs duty.
• EPCG authorisation is valid for import for 18 months from the date of issue of
• Capital goods imported under EPCG
authorisation.
authorisation for physical exports are
also exempt from IGST and Validity • Revalidation (or Extension) of EPCG authorisation is not permitted.
Compensation Cess

• Import of capital goods for Project • EPCG authorisation holder can export either directly or through third party (s). Export
Imports notified by Central Board of proceeds are to be realized in freely convertible currency except for deemed exports.
Excise and Customs is also Import of capital goods imported under the EPCG scheme shall be subject to Actual
Actual User
permitted under EPCG Scheme. Condition User condition till export obligation is completed.

To know more about the scheme kindly

refer Chapter 3 of Foreign Trade Policy • EPCG scheme covers manufacturer exporters with or without supporting
2015-2020. manufacturer(s)/ vendor(s), merchant exporters tied to supporting manufacturer(s) and
service providers. The Scheme also covers a service provider who is designated /
Coverage
certified as a Common Service Provider (CSP).

InfoBytes
4
Export Promotion of Capital Goods (EPCG) Scheme | Hyosung | Confidential | August 2018
Any machinery, equipment, plant or other accessories that are directly or indirectly used for
production of goods or rendering services are eligible for import EPCG Scheme

Capital Goods Eligible for EPCG Scheme:

• "Capital Goods" means any plant, machinery, equipment or accessories required for manufacture or production, either directly or
indirectly, of goods or for rendering services, including those required for replacement, modernization, technological up-gradation or
Capital Goods

expansion.
• It includes Capital goods for pre-production, production and post-production such as packaging machinery and equipment, refrigeration
equipment, power generating sets, machine tools, equipment and instruments for testing, research and development, quality and
pollution control. These capital goods can be in Semi Knocked Down (SKD) / Completely Knocked Down (CKD) conditions.
• Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture,
poultry, sericulture and viticulture as well as for use in services sector.
Spare Parts

• Spare parts of capital goods specified above as actually imported and required for maintenance of capital goods so imported,
assembled, or manufactured
• Spare parts required for the existing plant and machinery of the importer
IT

• Computer systems and software which are a part of the capital goods being imported;
Others

• Spares, moulds, dies, jigs, fixtures, tools & refractories for initial lining and spare refractories
• Catalysts for initial charge plus one subsequent charge

Domestic EPCG authorisation holder may also source capital goods from a domestic manufacturer. Such domestic manufacturer shall be eligible for
Sourcing of deemed export benefit under FTP. EPCG authorisation holders can opt for Technological Upgradation of existing capital good imported
Capital Goods under EPCG authorisation. Import of second hand capital goods is not permitted under the EPCG scheme.

InfoBytes
5
Export Promotion of Capital Goods (EPCG) Scheme | Hyosung | Confidential | August 2018
Export Obligation (EO) under EPCG scheme is required to be fulfilled by export of goods
manufactured/services rendered by the applicant

What is an EO?

• Export Obligation (EO) is a procedure as per the EPCG Scheme wherein the importer who has imported capital goods under this scheme, has to fulfill an
export requirement of the goods produced or services rendered equivalent to 6 times of duties, taxes and cess saved on capital goods, in 6 years reckoned
from date of issue of authorisation.
• In addition, as a part of the EO the applicant has to maintain the export performance

Conditions that apply to the fulfilment of EO

• EO shall be fulfilled by the authorisation holder through export of goods which are manufactured by him or his supporting manufacturer / services rendered
by him, for which the EPCG authorisation has been granted.
• EO under the scheme shall be, over and above, the average level of exports achieved by the applicant in the preceding three licensing years for the same
and similar products within the overall EO period including extended period, if any. Such average would be the arithmetic mean of export performance in the
preceding three licensing years for same and similar products.
• In case of indigenous sourcing of Capital Goods, specific EO shall be 25% less than the EO stipulated (6 times of duties, taxes and cess saved).
• Royalty payments received by the authorisation holder in freely convertible currency and foreign exchange received for R&D services shall also be counted
for discharge under EPCG.

Calculation of Export Obligation

• In case of direct imports, EO shall be reckoned with reference to actual duty saved amount. In case of domestic sourcing, EO shall be reckoned with
reference to notional Customs duties saved on FOR value.
• For example: If actual duty saved is ~INR100,000, then EO will be INR600,000 (INR100,000*6) to be fulfilled within 6 years from the date of authorisation.

InfoBytes
6
Export Promotion of Capital Goods (EPCG) Scheme | Hyosung | Confidential | August 2018
Extension of Export Obligation (EO) is allowed twice for two years each subject to conditions

First extension

• The scheme allows one or more requests for grant of extension in export obligation period, on payment of composition fee equal to 2% of proportionate duty
saved amount on unfulfilled export obligation or an enhancement in export obligation imposed to the extent of 10% of total export obligation imposed under
authorisation, as the case may be, at the choice of exporter, for each year of extension sought. Such first extension in EO period can be for a maximum
period of 2 years.

Second extension

• Extension in EO period beyond two years’ period may be considered, for a further extension upto 2 years with a condition that 50% of duty payable in
proportion to the unfulfilled export obligation is paid by authorisation holder to Custom authorities before an endorsement of extension is made on EPCG
authorisation by RA concerned.
• In such cases, no composition fee is to be paid or additional EO is to be imposed. In case the firm is still not able to complete the export obligation, duty
already deposited will be deducted from total duty plus interest to be paid for EO default.

Early fulfilment of export obligation

• To incentivize fast track companies to accelerate exports, there is a provision for early redemption and in cases where authorisation holder has fulfilled 75%
or more of specific export obligation and 100% of Average Export Obligation till date, if any, in half or less than half the original export obligation period
specified , remaining export obligation shall be condoned.

Failure to fulfil export obligation

• In case, EPCG authorisation holder fails to fulfil prescribed export obligation, he shall pay duties of Customs plus interest as prescribed by Customs
authority. This facility can also be availed by EPCG authorisation holder to exit at his option.

InfoBytes
7
Export Promotion of Capital Goods (EPCG) Scheme | Hyosung | Confidential | August 2018
Documents required for obtaining EPCG License

1 Import invoice ( Value in CIF to mention if Invoice is in FOB)

2 CA certificate as per APP-5B

Import Export Code (IEC), Industrial Entrepreneur’s Memorandum, Registration cum Membership Certificate,
3 Industrial License.

4 Chartered Engineer (CE) Certificate of the machine(s) to be imported.

5 GST Registration and Address

6 ITC-HS Code No. of import item

7 Export product against import Capital Goods (CG) & ITC HS of export items

8 Total duty structure in percentage and in INR.

9 Catalogue of import item

10 Installation address of import item

11 Digital e- token for application

12 DGFT identity card

13 DGFT fees as actual (Rs. 1 per Rs.1000 of duty saved value)

InfoBytes
8
Export Promotion of Capital Goods (EPCG) Scheme | Hyosung | Confidential | August 2018
There is a seven stage process for obtaining EPCG authorisation

How will A V International help?

• We provide a one-stop solution for obtaining export benefit license for our clients, which include documentation, preparation of application,
submission, follow-up, dispatch, and closure.

• Below is the depiction of the step-by-step process to obtain any license and how A V International will help in the same:

Preparation of Follow-up License dispatch to

application the client
Follow-up with
Verification of the DGFT/Customs for License delivery
documents and expedition of licensing along with tracking
preparation of procedures. information.
application as per the
DGFT mandates.

Documentation
Submission of License sanction License
Collection of the documents to Closure
required documents DGFT/Customs Collection of the
from the client. sanctioned license License redemption
Submission of from the and closure at the
documents to the DGFT/Customs. customs
concerned authority at
DGFT/Customs.

InfoBytes
9
Export Promotion of Capital Goods (EPCG) Scheme | Hyosung | Confidential | August 2018
About
Us
• A V International is an ISO 9001:2015 certified company
registered under MSME Act 2006
• It provides export consulting services governing DGFT and
Customs-related matters
• Additionally, we provide logistics and import export market
intelligence services

InfoBytes
10
Export Promotion of Capital Goods (EPCG) Scheme | Hyosung | Confidential | August 2018
Located in Mumbai, A V International is one of the oldest export consulting company having an
experience of more than 25 years

Snapshot

Established 1991 Business • Established in 1991, A V International is a consulting and licensing firm focused on
Headquarters Fort, Mumbai Description Directorate General of Foreign Trade (DGFT), customs and export-import related
operations. Our services include export import consulting, industrial licensing, digital
Employees 25 (as of 2018)
signature certificate provision, logistics, and market intelligence.
Certification ISO 9001:2015
• These services are bolstered by our widespread industry specific experience and
• Pharmaceutical intelligence engine driving our operations.
• Steel
• Plastic • Headquartered in Mumbai, India, we have an experienced, dedicated, hardworking team
• Chemicals that enables seamless and proficient operations related to DGFT and customs matters all
• Paper
• Hotels & Tourism over India.
Industrial
• Legal & Advisory
sectors catered:
• Hospitals
• Management Our • Our dedicated teams operate corresponding to various service streams. Each
Consulting Operation independent team handles operations corresponding to EPCG, MEIS, SEIS, Advance
• Marine Transport Model:
authorisation, Export House licenses separately. Each team consists of members that
• Ports & Docks
• Textiles execute the application process, spearhead follow-ups at the DGFT office, and execute
redemption of the same license.
• Import Export
Consulting • There is a team of employees who are constantly at the DGFT office and handle follow-
• Industrial Licensing ups. This helps us to expedite the licensing process with ease. Additionally, there is
• Logistics another team of employees who report to the customs ports that handle redemption of
Services
• Digital Signature
Offered the licenses smoothly.
Certificate
• Global Import
• We begin with aggregating the expertise of our service streams to brainstorm and arrive
Export Market
Intelligence at a practical and realistic solution that can help our client.

InfoBytes
11
Export Promotion of Capital Goods (EPCG) Scheme | Hyosung | Confidential | August 2018
Why work with
us?
DECADES OF COLLECTIVE EXPERIENCE
Over 5,000 cases solved, spanning various industry verticals for over 100+ clients

POWER OF KNOWLEDGE
A strong knowledge database bolstered by a robust network across the stakeholders
in export import trade.

CLOSE PROXIMITY TO THE DGFT OFFICE

Our office location being 5 mins away from the DGFT Mumbai office, we use it as an
advantage to handle urgent client requests and provide quick & effective services

FLEXIBILITY, AGILITY AND COST-EFFECTIVITY

One stop logistics consulting solutions that are flexible, agile, and cost effective
supported by a diligent, and compassionate staff

InfoBytes
12
Export Promotion of Capital Goods (EPCG) Scheme | Hyosung | Confidential | August 2018
About A V International
Established in January 1991, A V International is a consulting and licensing firm focused on logistics, customs & Directorate General of
Foreign Trade (DGFT) related operations. Our services include export import consulting, industrial licensing, digital signature certificate
provision, logistics, and market intelligence. Headquartered in Mumbai, India, we have an experienced, dedicated, hardworking team that
enables seamless and proficient operations in DGFT and customs related matters all over India.

This material is exclusive property of A V International. No part of this presentation may be used, shared, modified and/or disseminated without permission. All rights reserved.

Visit us at: www.avigroup.in