Clarification on EPCG, Customs - Exim - SEZ

[Kishan Barai]

Respected Sir,

As per FTP 2015 "Special 25% EO would be less if goods sourced from India" Is it for capital goods or raw material used in machinery.

If machinery is bought from India then how EPCG is beneficial as there would be no payment of Import duty.

Please enlighten...

Posts / Replies

[CS SANJAY MALHOTRA]

Dear Mr. Kishan,

Benefit of reduced EO is applicable for sourcing of Capital Goods indigenously under EPCG Scheme and NOT RELATED TO INPUTS.

Further you would find that in case of most of the Industries, Final products are exclusively exempt from Payment of Duty, as a result of which sourcing Capital goods from domestic sources adds to their Capital Cost. Hence, they prefer sourcing under EPCG with Invalidation letter in favour of domestic supplier of CG. Buyer can claim the benefit of TED (Terminal Excise Duty) i.e. refund of Excise Duty from the office of DGFT.

In short, duty is levied in Invoice by the seller and the same may be claimed either as CENVAT or Refund of TED from office of DGFT. (Supplier to mention on Invoice "Supplies under EPCG Licence & Invalidation letter No.....). Separate procedure is specified in case of refund of TED in FTP 2015-20

The above process holds goods when the party exports are substantial to cover Export Obligation.

Secondly, to avoid accumulation of CENVAT, various Exporters follow EPCG scheme for domestic sourcing of CG.

[surya narayana]

The views expressed by Mr. Sanjay are comprehensive and need no intervention.

Best Regards

Suryanarayana

[Kishan Barai]

Ohhh Thank you sir.

You mean Customs will believe that machinery is imported & export obligation 6 times in 6 years of probable saved duty needed to be exported in 18 months & you will get a script that can be used for the payment of TED or CENVAT.

Please correct me if I am wrong.

[CS SANJAY MALHOTRA]

Dear Mr. Krishan,

Custom Dept. has nothing to do with sourcing of Capital Goods indigenously. You have to apply Invalidation letter against EPCG with jurisdictional DGFT office and have to submit either Bond or BG (BG Exempted in case of Status Holder).

If you fail to fulfill EO i.e. 6 times the duty saved within 6 years or extension taken if any, jurisdictional office has the powers to issue Demand Notice for recovery of Duty alongwith Interest & Penalty besides invoking the BG.

Scrip issued is only EPCG and not for payment of TED. Please understand TED is Terminal excise duty refund which in short is nothing but Excise duty charged by supplier in Invoice for supply of goods against EPCG with Invalidation letter. Buyer has option to avail the said duty as CENVAT in his books or apply to DGFT office for refund of TED which is refunded by way of RTGS to Buyer account / By cheque.

[Kishan Barai]

Thank you very much CS SANJAY MALHOTRA

But still I need to clarify

1. Why a person gets a EPCG if he want to buy machine from INDIA ? Why he should fulfill Export Obligation even 25% Less? Actually he does not have to pay any import duty. You already said that 25% less EO is not for inputs of raw material.

2. I did not get your point "Scrip issued is only EPCG and not for payment of TED" then what is the benefit of EPCG with domestic sourcing,

please help sir...

[Ganeshan Kalyani]

I guess Sri Kishan ji is questioning only to make this forum / onlookers active otherwise he is an author of book Import Export made easy. Thanks. 

[Kishan Barai]

Yea, I am author but not God. I am still learning & always ready to become a student.

I respect you all.

 

[Kishan Barai]

Respected CS SANJAY MALHOTRA Sir mentioned two things in 1st answer

1. NOT RELATED TO INPUTS.

But in next passage sir wrote

2. Hence, they prefer sourcing under EPCG seems to be related to inputs (Raw material)

For the rest of the points I am aware but the above 2 points create following confusion

1. Is 25% less EO applicable for machinery or raw material source indigenously ?

2. People opt for EPCG only for.....

Final products are exclusively exempt from Payment of Duty, as a result of which sourcing Capital goods from domestic sources adds to their Capital Cost. Hence, they prefer sourcing under EPCG with Invalidation letter in favour of domestic supplier of CG. Buyer can claim the benefit of TED (Terminal Excise Duty) i.e. refund of Excise Duty from the office of DGFT.

Scrip issued is only EPCG and not for payment of TED. Please understand TED is Terminal excise duty refund which in short is nothing but Excise duty charged by supplier in Invoice for supply of goods against EPCG with Invalidation letter. Buyer has option to avail the said duty as CENVAT in his books or apply to DGFT office for refund of TED which is refunded by way of RTGS to Buyer account / By cheque.

Is 25% less EO applicable for machinery

or

raw material

source indigenously ??

[MUKUND THAKKAR]

Dear

Is 25% less EO applicable for machinery ?

Applicable in case of Machinery not against Raw material. please read chapter 4 and chapter 5 of FTP 2015-20 . you will getting clearity.

[Kishan Barai]

Thanks a lot sir, now I got it.

[KASTURI SETHI]

Sh.Kishan Barai Ji,

I have a great regard for your humbleness and thirst for learning more. This reminds of Sachin Tendulkar's humbleness who is honoured as "God of Cricket".

Kudos to your nature. I am of the view that such humbleness and thirst for knowledge will lead to zenith of indirect taxes.

[Kishan Barai]

Thanks a lot KASTURI SETHI Sir,

I am truly thankful to all tax management India team. I want to thank from the bottom of my heart.

Explaining my role in Tax Management India

According to me tax management India is the best website. Its a website I truly love. I become member now (before few months), earlier I was really not aware about this real gem (an outstanding thing)

My role in tax management India is to make it more interesting & and more popular.

I do lot of research / read books about Export & Import & come across many tricky situations. I post some tricky situations on discussion forum. To be honest I am still learning lot of things.. .

All experts in Tax Management India should be consider as Lord. To be honest I am thinking who will replace you all ?. I don't think there is replacement of you all experts.

Moreover, all experts are always keen to answer all questions to the best of their strength.

I will try my best to attract more & more youth towards tax management India. Its much better then ideal chat in social media. I will try my best to keep the TMI members active & happy.

Tax Management India can truly make Skill India.

[CS SANJAY MALHOTRA]

Dear Krishan,

Great efforts. Good ... Keep it up...

[Ganeshan Kalyani]

Sri Kishan Ji, very goods thoughts. Really commendable. Thanks.