What is EPCG Invalidation?
Posted On July 21, 2022
Hey, in our previous blogs, we discussed the EPCG scheme, and we generally take EPCG license to import Duty-free Capital goods (i.e. Machinery). Do you know Capital goods can also be procured indigenously (locally) under the EPCG scheme? Let’s see how to procure Machinery under the EPCG scheme locally: –
Anybody who wants to import Capital goods under the EPCG scheme usually applies for an EPCG license to DGFT, and the same will be produced at Customs for Duty-free import of Capital goods. If any industry is not having GST on their end product, then they may not be able to take the ITC / refund of GST incurred on Machinery purchased locally. Even if they have less percentage of GST, it takes a long time to take the ITC / refund of this GST. Such industries can procure the Machinery under invalidation of the EPCG scheme to avail of the GST refund benefit under Deemed export category.
In such cases, the applicant must first apply for an EPCG license and, after that, have to approach DGFT for issuance of invalidation by executing Bond & BG as applicable. DGFT will invalidate the EPCG license for imports and issue EPCG invalidation in the name of a domestic supplier by endorsing the machinery details.
While supplying the Machinery, the supplier must mention the EPCG, invalidation numbers, and dates on their supplier invoices. Such types of supplies are treated as Deemed export supplies per para 7.02 (c) of Chapter 7 of Foreign Trade Policy of 2015-20 and can also avail deemed export benefits as per para 7.03 of FTP of 2015-20.
For calculation of Export obligation in case of the domestic souring of Machinery, EO shall be reckoned concerning notional Customs duties saved on FOR value.
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Sudheer Varma Vegesna