The Advance Authorization Scheme and the EPCG (Export Promotion Capital Goods) Scheme are both initiatives introduced by the Government of India under its Foreign Trade Policy (FTP) to promote exports. Both of these schemes allow exporters to import goods without paying customs duties, but they have distinct purposes, eligibility criteria, and conditions. Below is a detailed comparison between the two schemes.
1. Advance Authorization Scheme
Purpose:
- The Advance Authorization Scheme is designed to allow exporters to import inputs (raw materials, components, etc.) without paying customs duties, provided the imported goods are used in the manufacture of export products.
- It aims to reduce the cost of production for exporters, thereby making their products more competitive in international markets.
Key Features:
- Duty Exemption: Import of inputs is allowed duty-free under this scheme.
- Export Obligation: The exporter must export the finished goods in a specific quantity and value within a prescribed time frame (usually 12 months).
- Validity: The authorization is valid for 12 months from the date of issue. An extension can be requested if required.
- Input-Output Norms: The exporter needs to adhere to the input-output norms prescribed by the Directorate General of Foreign Trade (DGFT) based on the nature of the product.
- No Minimum Export Requirement: There is no specific minimum export requirement in terms of value or quantity, but the export obligation must be fulfilled as per the authorization.
- Conditions for Import: Only raw materials or components that are essential for manufacturing the export product are allowed to be imported duty-free.
Eligibility:
- All exporters, including manufacturers and merchant exporters (with or without manufacturing units), are eligible.
- Exporters must have a track record of exports in the preceding years or should demonstrate the ability to export the finished goods within the prescribed time.
Utilization of Inputs:
- The inputs imported under this scheme must be consumed in the production of export goods.
Export Obligation (EO):
- The EO is calculated based on the value of the export products to be produced and exported, with a general time frame of 12 months for completion.
- Exporters may be allowed to fulfil the obligation through exports of goods made from other sources or trading.
2. EPCG (Export Promotion Capital Goods) Scheme
Purpose:
- The EPCG Scheme is designed to facilitate the import of capital goods (machinery, equipment, etc.) required for manufacturing export products.
- It aims to encourage the modernization of production facilities by allowing import of capital goods at zero or concessional customs duty.
Key Features:
- Duty Exemption: Import of capital goods is allowed at zero percent.
- Export Obligation: The exporter must fulfil an export obligation within 6 years from the date of authorization.
- Capital Goods: Only capital goods, including machinery, plant, tools, and equipment required for manufacturing, are allowed under this scheme.
- Condition of Utilization: The capital goods imported under EPCG must be used in the manufacture of export products.
- Offset Clause: The EPCG scheme also allows for "offset" of some export obligations by producing and exporting goods from different facilities or Supporting Manufacturer.
Eligibility:
- Exporters who are manufacturing goods for export or providing services eligible for export are eligible.
- The applicant must have been in the business of exporting for a minimum of 1 year.
Export Obligation (EO):
- The export obligation is calculated based on the value of the capital goods imported and the commitment to export within 6 years.
- Typically, the EO is calculated at 6 times the value of duty saved, and must be met through export of goods or services.
Utilization of Capital Goods:
- The capital goods imported under this scheme must be used in the production of export products and not for domestic production.
Comparison in Tabular Form:
|
Aspect
|
Advance Authorization Scheme
|
EPCG Scheme
|
|
Purpose
|
To import raw materials and inputs duty-free for manufacturing export products.
|
To import capital goods (machinery, equipment) at concessional duty for manufacturing export goods.
|
|
Type of Goods Allowed
|
Raw materials, components, intermediates, etc. used in the manufacture of export products.
|
Capital goods (machinery, plant, equipment, tools, etc.) used for manufacturing export products.
|
|
Duty Exemption
|
Yes, on imported raw materials.
|
Yes, on imported capital goods (usually at 0% or concessional duty).
|
|
Eligibility
|
All exporters (manufacturers, merchant exporters) are eligible.
|
Exporters of goods or services, must have at least 1 year of export experience.
|
|
Export Obligation (EO)
|
Export products manufactured using the imported inputs must be exported in a specific quantity within 12 months.
|
Must export goods manufactured using the capital goods within 6 years.
|
|
Time Period
|
12 months validity (extension possible).
|
6 years to fulfill the export obligation.
|
|
Input-Output Norms
|
Exporters must adhere to prescribed norms for inputs and outputs.
|
Not applicable.
|
|
Scope of Goods
|
Limited to raw materials and components required for manufacturing.
|
Limited to capital goods necessary for production.
|
|
Additional Conditions
|
Inputs must be used in the manufacture of export products.
|
Capital goods must be used for export production.
|
|
Scheme Type
|
Focuses on reducing costs of raw material imports for exporters.
|
Focuses on facilitating modernization and technology upgradation of production facilities for exporters.
|
Conclusion:
- Advance Authorization Scheme is more suited for exporters who need raw materials and components to manufacture their export goods. It offers a direct benefit in terms of duty exemption on inputs.
- EPCG Scheme, on the other hand, is designed to help exporters modernize their manufacturing facilities by allowing them to import capital goods at zero or concessional duties. This scheme is ideal for those looking to upgrade or expand their production capacity for export purposes.
Both schemes are vital tools for enhancing the competitiveness of Indian exporters in global markets, but they cater to different needs: The Advance Authorization Scheme is for input-based export manufacturing, while the EPCG Scheme is for capital goods used in export production.
9911796707
