| Policy |
5.1 |
Policy relating to zero duty EPCG scheme and concessional 3%
duty EPCG Scheme are given in Chapter 5 of FTP. |
Exclusions under
Zero Duty EPCG
Scheme |
5.1A |
Zero duty EPCG Scheme under para 5.1 of FTP shall not be
available for import of capital goods relating to export of products
covered under following chapters/headings of ITC(HS) classification:
Chapters 1 to 24, 25 to 27, 31, 40, 43, 44, 45 , 47 to 49, 68 to 70,
71, 81 (metals in primary and intermediate forms only), 89, 93, 97,
98
ITC(HS) 7201 to 7212, 7218 to 7220, 7224 to 7226, 7401
to 7406, 7501 to 7504, 7601 to 7603, 7801, 7802, 7901 to 7903, 8001,
8002 and 8401. However, zero duty EPCG Scheme will be available for
handicraft exports under Chapters 5, 44, 68, 97.
Delete [Imports under] zero duty scheme shall also not be available for units
who are currently availing any benefits under Technology Upgradation
Fund Scheme (TUFS) administered by Ministry of Textiles, Government
of India. Zero duty EPCG scheme shall also not be available to
applicants, who avail in that year, the benefit of Status Holder
Incentive Scheme under Paragraph 3.16 of FTP. (This para amended by
DGFT PUBLIC NOTICE NO. 73/2009-2014, dated :08.06.2010)
All other provisions pertaining to the concessional 3% EPCG scheme
under this Chapter, to the extent they are not inconsistent with the
above provisions of zero duty EPCG scheme, shall be applicable to
the zero duty scheme also. |
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| Application Form |
5.2 |
An application for grant of an authorization may be made to RA
concerned in ANF 5A along with documents prescribed therein. |
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5.3 |
RA concerned shall, on the basis of nexus certificate from an
Independent Chartered Engineer (CEC) submitted by the applicant in
Appendix 32A, issue EPCG authorization.
Reasonable wastage, if any, anticipated at the time of installation
of capital goods will also be certified by the
Chartered Engineer in the nexus certificate and the same would be
mentioned in the condition sheet of the EPCG authorization at the
time of issue. RA shall thereafter forward a copy of the EPCG
authorization to the concerned Jurisdictional Central Excise
Authority. The wastage so permitted at the time of issuance of
authorization would be allowed to be sold on payment of applicable
duty on sale of scrap/ waste.
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5.3.1 |
Authorization holder shall produce to the concerned RA a
certificate from the Jurisdictional Central Excise Authority,
confirming installation of Capital Goods at factory/premises
[Old - factory premises ] of
authorization holder or his supporting manufacturer(s) / vendor(s)
within six months from date of completion of import. (This para
amended by
DGFT Public Notice No. 11/RE:2009-2014, Dated :
16/09/2009 )
In the case of import of spares, the installation certificate shall
be submitted by the Authorization holder within a period of three
years from the date of import.
However, in case of units not registered with Central Excise
Authorities, the Authorization holder shall produce to the concerned
RA, a certificate from an independent Chartered Engineer confirming
the said installation of capital goods/spares. |
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5.3.2 |
EPCG authorization shall be issued with a single port of
registration mentioned in paragraph 4.19 of HBPv1 for imports.
However, exports can be made from any port specified in paragraph
4.19. |
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5.3.3 |
(i) An applicant may also apply for import of spares, tools,
spare refractories and catalyst as are required for
installation and maintenance of Capital Goods.
Application shall contain list of plant/ machinery installed in
factory/ premises of applicant for which spares, tools, spare
refractories and catalyst are required, duly certified by Chartered
Engineer or Jurisdictional Central Excise Authorities.
In such cases EPCG authorization shall not specify list of spares
but shall indicate:-
(a) Name of plant /machinery for which spares are required.
(b) Value of duty saved allowed under the authorization.
(c) Description of product to be exported with value of export
obligation as per FTP.
(ii) Further, at time of final redemption of export obligation,
authorization holder shall submit certificate from
Independent Chartered Engineer confirming use of spares, tools,
spare refractories and catalyst so
imported in the installed capital goods on the basis of stock &
consumption register maintained by
authorization holder. |
EPCG Scheme to
resultant DTA Unit
from conversion
of EOU/ Relocated
SEZ Units |
5.4 |
An EOU/ a relocated SEZ unit, while converting to a DTA Unit, may
apply for an EPCG authorization in ANF alongwith documents
prescribed therein. ‘No Objection Certificate’ should be produced
from concerned Development Commissioner.
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| Indigenous Sourcing of Capital Goods |
5.5 |
EPCG authorization holder intending to source capital goods
indigenously, either alongwith application or after issuance of EPCG
authorization, shall request to RA for invalidation of EPCG
authorization for direct import/ issue of ARO , alongwith name and
address of source person of the capital goods. |
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5.5.1 |
RAconcerned will issue such invalidation letter /ARO, in duplicate. |
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5.5.2 |
Indigenous manufacturer intending to supply capital goods to
EPCG authorization holder may apply to RA in ANF for issuance of
Advance authorization for import of inputs including components
required for manufacture of capital goods to be supplied to EPCG
authorization holder. |
Leasing of Capital
Goods |
5.6 |
An EPCG authorization holder may, source capital goods from a
domestic leasing company. In such cases, the Bill of Entry of
imported capital goods or commercial invoice of indigenous capital
goods, shall be signed jointly by EPCG authorization holder and
leasing company. However, EPCG authorization holder shall alone be
fully responsible for fulfillment of export obligation. |
Conditions for
fulfillment of
Export Obligation |
5.7 |
In addition to conditions mentioned in paragraph 5.5 of FTP
following conditions shall also be applicable for fulfillment of
export obligation. |
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5.7.1 |
EPCG authorization holder shall export either directly or
through third party (s). If a merchant exporter is EPCG
authorization holder, name of supporting manufacturer shall also be
indicated on shipping bills. At the time of export, EPCG
authorization No. and date shall be endorsed on shipping bills which
are proposed to be presented towards discharge of export obligation. |
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5.7.2 |
Export proceeds shall be realized in freely convertible currency
except for deemed exports. Exports to SEZ units /Supplies to
developers/ Co-developers, irrespective of currency of realization
would also be counted for discharge of Export Obligation. |
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5.7.3 |
Supplies made to Oil and Gas sector also may be counted towards
discharges of export obligation against an EPCG authorization
provided it has been issued on or before 31.03.2000 and no benefit
under paragraph 8.3.of FTP has been claimed on such supplies. |
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5.7.4 |
Exports made to former USSR, or to such countries as notified by
DGFT, shall not be counted for fixing average level of exports.
Additional Export Obligation (over and above indicated average) for
all previous EPCG Licenses, which have not been redeemed, will be
indicated separately. Exports made against EPCG authorizations,
which have not been redeemed, shall not be added up for calculating
the average export performance for the purpose of subsequent EPCG
authorization. |
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5.7.5 |
Exports under EPCG scheme shall also be entitled for benefits under
Chapter 4 of FTP. |
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5.7.6 |
In case of export of goods relating to handicraft, handlooms,
cottage, tiny sector, agriculture, aqua-culture (including
fisheries), animal husbandry, floriculture, horticulture,
pisciculture, viticulture, poultry and sericulture, the EPCG
authorization holders shall not be required to maintain average
level of exports. However, this exemption from maintenance of
average level of exports shall not be allowed for import of fishing
trawlers, boats, ships and other similar items.
Goods, excepting tools imported under EPCG scheme by such sectors,
shall not be allowed to be transferred for a period of five years
from date of imports even in cases where export obligation has been
fulfilled. Transfer of capital goods to group companies, within five
years from the date of import would however be permitted after
fulfillment of EO, under intimation to RA and jurisdictional Central
Excise Authority. |
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5.8 |
The Authorization holder under the EPCG scheme shall fulfill the
export obligation over the specified period in the following
proportions:
| For Zero Duty EPCG Scheme |
Period from the date of
issue of Authorization |
Minimum export
obligation to be
fulfilled |
| Block of 1st to 4th year |
50% |
| Block of 5th and 6th year |
50% |
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|
| For concessional 3% duty EPCG Scheme |
| Period from the date of issue of Authorization |
Minimum export
obligation to be
fulfilled |
| Block of 1st to 6th year |
50% |
| Block of 7th and 8th year |
50% |
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5.8.1 |
In respect of Authorizations, on which the value of duty saved
is Rs.100 crore or more , the export obligation shall be fulfilled
over a period of 12 years (not applicable to zero duty EPCG scheme)
in the following proportion:-
| Period from the date of issue of Authorization |
Minimum export
obligation to be
fulfilled |
| Block of 1st to 10th year |
50% |
| Block of 11th and 12th year |
50% |
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5.8.2 |
However, the export obligation of a particular block of year may
be set off by the excess exports made in the preceding block year.
The Authorization holder would intimate the regional authority on
the fulfillment of the export obligation, as well as average
exports, within three months of completion of the block, by secured
electronic filing using digital signatures. |
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5.8.3 |
Where export obligation of any particular block of years is not
fulfilled in terms of the above proportions, except in such cases
where the export obligation prescribed for a particular block of
years is extended by the Regional Authority subject to payment of
composition fee of 2% on duty saved amount equal to unfulfilled
portion of EO, such Authorization holder shall, within 3 months from
the expiry of the block of years, pay duties of customs (alongwith
applicable interest as notified by DoR) of an amount equal to that
proportion of the duty leviable on the goods which bears the same
proportion as the unfulfilled
portion of the export obligation bears to the total export
obligation. |
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5.8.4 |
EPCG authorizations issued upto 31.03.2000 shall be governed by
provisions laid down in paragraph 6.11 in HBP v1 (RE-99).
Notwithstanding the same in HBPv1 (RE-99), authorization holder
shall not have to surrender special Import licence in case of value
wise shortfall.
Authorizations issued from 1st April, 2000 upto 31st March, 2002
shall be governed by provisions of Chapter 6 of HBPv1 (RE-01) as
amended from time to time.
Authorizations issued from 1st April, 2002 upto 31st August, 2004
shall be governed by provisions of para 5.8 of HBP v1 (RE-02) as
amended from time to time. |
Monitoring of
Export Obligation |
5.9 |
Authorization holder shall submit to RA concerned by 30th April
of every year, report on fulfillment of export obligation. RA
concerned may issue partial EO fulfillment certificate, provided
export performance is proportionately adequate to fulfillment of
export obligation. |
Automatic
Reduction/Enhancement
upto 10% of CIF value
and prorata Reduction/
Enhancement in export
obligation |
5.10 |
If authorization issued has actually been utilized for import of
a value in excess, upto 10% of CIF value /duty saved amount of
authorization, authorization shall be deemed to have been enhanced
by that proportion. Customs shall automatically allow clearance of
goods in excess, upto 10% of authorization value/ duty saved amount,
without endorsement by concerned RA
In such case, authorization holder shall furnish additional fee to
cover excess imports effected, in terms of CIF value/duty saved
amount, to RA concerned, within one month of excess imports taking
place. Export obligation shall automatically stand enhanced
proportionately.
In case of utilization being more than 10%, concerned RA as per
their financial powers, may endorse as per extant provisions.
Authorization holder shall furnish additional BG/ LUT to the customs
authority. |
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5.10.1 |
Similarly, if EPCG authorization holder has utilized
authorization less than the value earmarked in authorization, his
export obligation shall stand reduced on prorata basis with
reference to actual utilization of authorization. |
Extension of Export
Obligation Period |
5.11 |
Concerned RA, may consider one or more requests for grant
Obligation Period of extension in export obligation period, on
payment of composition fee equal to 2% of proportionate duty saved
amount on unfulfilled export obligation or an enhancement in export
obligation imposed to the extent of 10% of total export obligation
imposed under authorization, as the case may be, at the choice of
exporter, for each year of extension sought. Such first extension in
EO period can be for a maximum period of 2 years.
Extension in EO period beyond two years’ period available above, may
be considered, for a further extension upto 2 years with a condition
that 50% of duty payable in proportion to the unfulfilled export
obligation is paid by authorization holder to Custom authorities
before an endorsement of extension is made on EPCG authorization by
RA concerned. In such cases, no composition fee is to be paid or
additional EO is to be imposed as prescribed in the Para above. In
case the firm is still not
able to complete the export obligation, duty already deposited will
be deducted from total duty plus interest to be paid for EO default.
However for zero duty EPCG scheme only one extension of 2 years in
export obligation period shall be available, subject to conditions
mentioned above. Extension in export obligation period shall also be
subject to such terms and conditions as may be prescribed by
competent authority. |
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5.11.1 |
The firm /company, which is applying for registration with BIFR/
Rehabilitation Department of State Government, shall also intimate
DGFT with regard to relief sought for EPCG authorization, if any,
within 30 days of receipt of application by agency concerned.
DGFT, thereafter, shall take up the matter with agency concerned to
safeguard government interest on account of default in fulfillment
of export obligation imposed on EPCG authorization obtained by such
firm/companies.
DGFT may consider such application for grant of period of extension
upto 12 years, or as per rehabilitation package prepared by
operating agency and approved by BIFR board/ state authority. |
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5.11.2 |
To provide relief to exporters of those sectors where total
exports in that sector/product group has declined by more than 5% as
compared to the previous year, average export obligation for the
year may be reduced proportionate to reduction in exports of that
particular sector/product group during the relevant year as against
the preceding year. However, in case export decline is continuous
over consecutive years, the base year for calculation of eligibility
and calculation of reduction in Average Export Obligation will be
taken as the year after which the exports have shown continuous
decline. (this para is amended by
DGFT PUBLIC NOTICE
NO.36/2009-2014,DATED: 21/01/2010 )
[Old - To provide relief to exporters of those sectors where total
exports in that sector/product group has declined by more than 5%
compared to the previous year, average export obligation for the
year may be reduced proportionate to reduction in exports of that
particular sector/product group during the relevant year as against
the preceding year.]
The sectors/product groups for which this relaxation is to be
allowed shall be conveyed by the DGFT to all the RAs within seven
months of the end of the previous financial year, and the RAs shall
re-fix the annual average EO for previous year accordingly, for
exporters in that sector/product group. (These
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Automatic EO extension
in the event of ban on
export product |
5.11.3 |
Whenever a ban/restriction is imposed on export of any product,
export obligation period in respect of EPCG authorizations already
issued prior to imposition of ban of such export products, would
stand automatically extended for a period equivalent to the duration
of ban, without any composition fee and exporter would not be
required to maintain average E.O. as well for the ban period.
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| Export Obligation Shortfall |
5.12 |
RA concerned may condone shortfall upto 5% in export obligation
arising out of duty saved amount. |
| Redemption |
5.13 |
As evidence of fulfillment of export obligation, authorization
holder shall furnish application in ANF 5 B with documents
prescribed therein.
On being satisfied, RA concerned shall issue a certificate of
discharge of export obligation to the EPCG authorization holder and
send a copy to customs authorities with whom BG/LUT
has been executed.
RA shall ensure disposal of such applications within 30 days.
Shortcomings, if any, shall be pointed out in one go. All
correspondence, thereafter, shall relate to these deficiencies only.
Fresh correspondence, if necessary, shall be within 15 days. Once
documents are complete, EO will be discharged within 30 days of
receipt of complete documents /information.
Process of issue of final discharge certificate/ rejection shall be
completed within a period of 90 days from date of receipt of initial
request. Applications that remain outstanding beyond a period of 90
days shall be reported to DGFT alongwith reasons thereof,
immediately thereafter. |
Regularization of
Bonafide Default |
5.14 |
In case, EPCG authorization holder fails to fulfill prescribed
export obligation, he shall pay duties of Customs plus interest as
prescribed by Customs authority. Such facilities can also be availed
by EPCG authorization holder to exit at his option.
The authorization holder will have the option to furnish valid duty
credit scrips, issued under Chapter 3 of FTP & DEPB, for payment of
the customs duty component. |
| Maintenance of Records |
5.15 |
Every EPCG authorization holder shall maintain, for a period of
3 years from date of redemption, a true and proper account of
exports/ supplies made and services rendered towards fulfillment of
export obligation. |
Re-Export of Capital
Goods Imported under
EPCG Scheme |
5.16 |
Capital Goods imported under EPCG scheme, which are found
defective or unfit for use, may be re-exported back to foreign
supplier within three years from the date of payment of duty on
importation thereof, with permission of RA /Customs Authority.
Consequently, EO would be refixed. |
Replacement of
Capital Goods |
5.16.1 |
Capital Goods imported and found defective or otherwise unfit
for use may be exported, and Capital Goods in replacement thereof be
imported under EPCG scheme. In such cases, while allowing export,
the Customs shall credit the duty benefit availed which can be
debited again at the time of import of such replaced Capital Goods. |
| Penal Action |
5.17 |
In case of failure to fulfill export obligation or any other
condition of authorization, authorization holder shall be liable for
action under FT (D&R) Act, 1992, Orders and Rules made there under,
provisions of FTP and Customs Act, 1962. |
Clubbing of EPCG
authorization |
5.18 |
Clubbing of two or more EPCG authorizations of same
authorization holder would be permitted. |
|
5.18.1 |
An application for clubbing can be made only to RA concerned in
ANF 5D. Clubbing shall not be permitted in case authorizations are
issued by different RAs. |
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5.18.2 |
Total export obligation would be refixed taking into account
total of duty saved or total of CIF value of imports. |
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5.18.3 |
On Clubbing, authorizations for all purpose shall be deemed to
be a single EPCG authorization. Export obligation period for clubbed
authorization shall be reckoned from first authorization issue-date.
However, in cases where clubbed CIF /duty saved value exceeds Rs.100
crore, no corresponding benefit of increase in export obligation
period shall be admissible. |
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5.18.4 |
Average export obligation for clubbed authorizations would be
highest of average export obligations endorsed on individual
authorizations so clubbed. |
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5.18.5 |
No clubbing would be permitted after expiry of EOP. |
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5.18.6 |
The aforesaid provisions for Clubbing of EPCG Authorizations
shall be applicable for authorizations issued on or after 1.4.2007.
However, EPCG authorizations issued prior to 1.4.2007 shall be
governed by provisions contained in Chapter 5 of HBP v1 (RE-2006).
|
Refixation of Export
Obligation upon
conversion from CIF
based to duty based EO |
5.19 |
(a) EPCG authorization holder can apply for refixation of export
obligation as given in para 5.5 (i) of FTP in ANF 5C.
(b) For all EPCG authorizations, authorization holder should have
fulfilled mandated (original or amended) block wise export
obligation, till previous block to application date. In all such
cases, refixed export obligation would be computed as under: (%
export obligation unfulfilled) x (8) x (duty saved on
authorization issue-date)
(c) There would be no change in average export obligation fixed or
export obligation period of original authorization. |
Technological
Upgradation of
Capital Goods |
5.20 |
Application for technological upgradation of the capital goods
would be made in ANF 5A. |
Import of Refurnished/
Reconditioned Spares
and Tools |
5.21 |
Import of refurbished / reconditioned spares must have a
residual life not less than 80% of life of original spare, which
would be certified by EPCG authorization holder.
The tools imported under EPCG Scheme may be transferred to any of
units or group companies of applicant. |
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5.22 |
Revalidation of authorizations issued under EPCG scheme shall
not be allowed. |