EPCG Scheme: - CBEC's Customs Manual 2023 - Customs

5. EPCG Scheme: 5.1 Under FTP 2015-20, - (a) Zero duty EPCG scheme allows import of capital goods (except those specified in negative list in Appendix 5F of Handbook of Procedure). The Export Obligation is equivalent to 6 times of the duties/taxes and cess saved on the capital goods imported with EO period of 6 years (extendable by 2 years) from the date of issue of Authorization. A more favourable dispensation for EO is provided for export of specified green technology products as well as units located in North Eastern States, Sikkim and Jammu and Kashmir. The EO for spares for imported/domestically sourced capital goods is same as that for capital goods. (b) The import of capital goods has to be made within 18 months from the date of issue of the Authorisation. (c) EO is to be fulfilled in two blocks i.e. 4 years and 2 years wherein 50% EO is to be fulfilled in the respective blocks. The RA can grant extension of block-wise period or overall period of fulfilment subject to specified conditions. In the case of manufacturer/merchant/service exporters, the EO is required to be fulfilled by exporting goods manufactured or capable of being manufactured or services rendered by the use of capital goods imported under the scheme. The EO is to be over and above the average level of exports achieved in the preceding three licensing years for the same and similar products. Certain sectors as specified in Para 5.13 of the Handbook of Procedure 2015-20are not required to maintain average level of exports. (d) The Authorizations are issued to manufacturer exporters and merchant exporters with or without supporting manufacturer, and service providers and also available to Common Service Provider (CSP). The authorizations specify the value/quantity of the export product to be exported against it. (e) The Authorization holder is required to file bond with 100% Bank Guarantee with the Customs prior to commencement of import of capital goods. Certain categories of exporters get benefit of exemptions from Bank Guarantee in terms of the Circular No. 58/2004-Cus dated 21-10-2004 as amended last by Circular No. 15/2014-Customs dated 18.12.2014. The CG imported are subject to actual user condition and the goods imported cannot be transferred or sold, etc. till the fulfilment of EO. (f) Third party exports are permitted with respect to exported goods manufactured by the authorisation holder and conditions have been specified to ensure this aspect. (Refer para 5.04 of FTP 2015-20 read with 5.10 of HBP 2015-20). (g) Installation Certificates (ICs) for capital goods are permitted to be obtained from jurisdictional Customs Authority or independent Chartered Engineer at the latter case, the authorization holder would send copy of IC to the jurisdictional Customs office to the authorisation holder s option. Capital goods may be installed at supporting manufacturer s premises if prior to such installation the latter s details are endorsed on the authorisation by RA, who would intimate the change to jurisdictional Customs office and the Customs location where authorisation is registered in terms of para 5.02 of FTP 2015-20. (h) The EPCG Authorization holder is required to indicate the EPCG Authorization No./date on the shipping bill/invoice (in case of deemed exports). After fulfilment of specified EO, relevant documents are to be submitted to RA for obtaining EODC. This is taken into account by Customs authority at port of registration for purposes of redemption of bond/Bank Guarantee, subject to prescribed checks including intelligence based checks. (i) The export obligation is lower by 25% when capital goods are sourced indigenously. This is implemented by RA. (j) The EPCG authorisation for annual requirement, the provisions for technological upgradation and for transfer of EPCG capital goods to group companies in certain cases/sectors are discontinued in FTP 2015-20. [Refer Notification No.16/2015- Customs, dated 1-4-2015] 5.2 After introduction of GST, imports are liable to levy of IGST and Compensation Cess. W.e.f. 13.10.2017, imports under EPCG by all sectors are exempted from IGST and Compensation Cess. This exemption is optional for the EPCG holder. Such exemption is available only for physical exports. [Notification No.16/2015-Cus dated 1-4-2015 as amended by Notification No. 79/2017Cus. Dated 13.10.2017 DGFT Notification No. 33/2015-20 dated 13.10.2017] 5.3 Domestic supplies to holder of EPCG are treated as deemed export under Section 147 of CGST Act, 2017. Supplier or recipient of such supplies is eligible for refund of GST paid on such supply. [Notification No. 47/2017-Central Tax dated 18-10-2017 Notification No. 48/2017Central Tax dated 18-10-2017]