Who would benefit from EPCG Scheme?
EPCG is intended for promoting exports and the Indian Government with the help of this scheme offers incentives and financial support to the exporters. Heavy exporters could benefit from this provision. However, it is not advisable to go ahead for this scheme for those who don’t expect to manufacture in quantity or expect to sell the produce entirely within the country, as it could become almost impossible to fulfill the obligations set under this scheme.
How to obtain an EPCG License?
In order to obtain a License under EPCG scheme, it is a primary requirement to file an application with the licensing authority of Director General of Foreign Trade. The application shall be attached with the required documents along with the company and personal details.
Documents required for EPCG License
The issuing authority is the licensing authority – Director General of Foreign Trade (DGFT). ANF 5B is to be filled along with Self-certified copies of the followings:
- Import Export Code (IEC)
- Registration cum Membership Certificate (RCMC)
- Digital signature
- Registration certificate from Tourism Department
- Pan Card
- Excise Registration (if registered)
- GST Registration Certificate
- Proforma Invoice
- Self-Certified Copy + Original of Certificate of Chartered Accountant
- Self-Certified Copy + Original of Certificate of Chartered Engineer
What is the export obligation under the scheme?
The Importation of capital goods under the scheme of EPCG is subject to an export obligation which is equal to six times of duty saved, to be satisfied within 6 years from date of issue of EPCG authorisation. If a holder of the EPCG authorisation is unable to meet the stipulated export obligation, the importer of the capital goods is required to pay customs duties along with interest on it as prescribed.
Points to Remember:
- Is there any extension of the time limit available?
The Extension of the time limit is available but only in exceptional cases where the exporter has sufficient evidence/proof to prove that the factors were beyond his control in order to meet the deadline.
- Penalty in case of Non-Compliance
In cases where the license holder under the EPCG scheme fails to fulfill the stipulated export obligation then the license shall be liable to pay the customs dues along with 15% interest per annum to the customs authority.
- Selling goods in the Domestic Tariff Area (DTA)
Where the exporter as per his export obligation meets the deadline then only this business can sell the goods in the Domestic Tariff Area.
- Exemption from IGST & Compensation Cess under EPCG scheme
In the Goods and Services Tax regime, merchant exporters need to pay IGST and claim a refund for the same. The DGFT vide Notification No. 54/2015-20 has amended the FTP (Foreign Trade Policy) and has extended IGST and Compensation Tax exemption under EPCG Scheme till 31st March’2020. This move would offer much-needed relief to exporters who are under the stress with respect to refunds under the GST regime.