Here’s everything you need to know about the EPCG Scheme for Import of Capital Goods? (Manufacturing Industry)
Here’s everything you need to know about the EPCG Scheme for Import of Capital Goods?
About EPCG Scheme
The EPCG (Export Promotion Capital Goods) Scheme was designed to operate the import of capital goods for producing good quality products. It also looks forward to increasing the competitiveness of India’s export. With the help of the EPCG Scheme, an importer is exempted from paying any kind of customs duty. There’s no stress regarding custom duty among the importers due to the EPCG Scheme.
The EPCG authorization carries a validity of 24 months from the date of issuance of the authorization. There is no shortcut for obtaining an EPCG license, one has to follow all the rules and regulations of DGFT (Director General of Foreign Trade) in order to acquire it. The actual time required for getting an EPCG license is usually 10-15 working days whereas, the number of days can vary if there are some public holidays in between or due to the unavailability of some officers.
Items permitted for import under EPCG Authorization
Mainly, almost all products are allowed for import under EPCG authorization but as they say, exceptions are always there. If you need to know which products are excluded from the list you can refer to Appendix 5F.
Precautions to be taken for importing Capital goods under EPCG authorization
Make sure to see that the HSN (Harmonized System of Nomenclature) code is clearly stated. HSN code is a 6-digit code that categories goods and services.
Gather knowledge about the EPCG scheme and be certain of the fact that EPCG is just put on CIF (Cost, Insurance and Freight) value of the machinery.
We all want to get clearances as soon as possible so in order to do that pay full attention to all the little details like the items must have the same description, quantity, and model number on the EPCG license, Proforma Invoice, and Final Import invoice.
Pointers for clearance from Indian Port through the customs department
The importer must reach out to CHA (Customs House Agents) to complete all formalities.
When you get EPCG from DGFT then you have to further get it registered from the customs authority port through executing bond and bank guarantee.
When we talk about the manufacturing industry, there has to be 15% BG (Bank Insurance) for continuous 8 years. If you want to get a deeper understanding of the same you can refer to CBEC Circular.
After the EPCG gets licensed by the customs department, then customs by CHA will carry out the procedure of completing the basic formalities.
Post License Process
Now that all items have been registered, the license holder must submit a certificate from the jurisdictional customs authority or an independent chartered engineer within six months. This certificate will verify the installation of goods at the factory or manufacturing premises of the license holder. Late submission of the certificate can further lead to the imposition of a penalty. As soon as the import procedure is completed, the importer must submit a copy of the bill of entry and installation certificate to DGFT as good proof of installation and import of capital goods via EPCG. After this periodical returns have to give an annual basis report which will be about the fulfillment of the export obligation.
The license holder must fulfill the needs of Export Obligation (SEO) which is duty saved x 6 times by exporting their finished goods within 6 years from the date of license (50% within 4 years and balance 50% in 5th & 6th year).
In addition to this, if the company has exported in the preceding three years or any one of the three years then DGFT has the full authority to put additional export obligation which also goes by the name of Average Export Obligation (AEO). The license holder must maintain it till the realization of SEO and must focus on achieving obligations of both AEO and SEO. It does not apply to new firms.
If the license holder fails to accomplish the above obligations, then he/she will have to return customs duty with an interest of 15% per annum.
Documents required for the attainment of Export obligation
The license holder must carry copies of shipping bills and E-BRC’s (Electronic Bank Realization Certificate). The list of documents can differ in the case of Deemed exports, SEZ, and third parties.
When the procedure of Export Obligation gets completed then the license holder must approach DGFT for a closure certificate. In the last step, you have to reach out to the customs department to cancel your bond and isuue BG.
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