0% & 3% EPCG SCHEME (EXPORT PROMOTION CAPITAL GOODS SCHEME)


0% EPCG SCHEME:
The Zero duty EPCG scheme allows import of capital goods for pre production, production and post production (including CKD/SKD thereof as well as computer software systems) at zero Customs duty.

EXPORT OBLIGATION:
Export Obligation is equivalent to 6 times of Duty Saved on the Capital Goods imported under EPCG scheme. E.O. to be fulfilled in 6 years from the Authorization issue-date.
The zero duty EPCG scheme will be in operation till 31.03.2012.

Validity:
Validity period for import of capital goods under 0% EPCG scheme is 9 months.

Extension:
Only ONE extension of 2 years in E.O. period shall be available, subject to conditions.

All other provisions pertaining to 3% duty EPCG scheme to the extent they are not inconsistent with the above provisions of zero duty EPCG scheme, shall be applicable to the zero duty EPCG scheme also.

NOTE: The above scheme of 0% EPCG will Only be available for Exports of the following Products:
  • Engineering & electronic products,
  • Basic chemicals & Pharmaceuticals,
  • Apparels & Textiles,
  • Plastics,
  • Handicrafts,
  • Chemicals & Allied products and
  • Leather & Leather products
  • Paper & paperboard and articles thereof,
  • Ceramic products,
  • Refractories,
  • Glass & glassware,
  • Rubber & articles thereof,
  • Plywood and allied products,
  • Marine products,
  • Sports Goods and
  • Toys subject to given below exclusions.


Zero duty EPCG Scheme shall NOT be available for the following:
  • For Export of products covered under following Chapters / Headings of ITC(HS) classification as given in annexure I below:
  • Units who are currently availing any benefits under Technology Upgradation Fund Scheme (TUFS) administered by Ministry of Textiles.
  • To applicants, who avail in that year, the benefit of Status Holder Incentive Scheme under chapter 3 of FTP.


ANNEXURE I
Chapters 1 to 24,
  • Live Animals & Animal Products,
  • Vegetable & Fruit Products,
  • Live trees & other Plants,
  • Animal or Vegetable Fats and Oils and their cleavage Products, Prepared Edible Fats; Animal or Vegetable Waxes.
  • Prepared Foodstuffs, Beverages, spirits & vinear, Tobacco & Manufactured Tobacco Substitutes.,
  • Sugar & Sugar Confectionary, Cocoa & cocoa Preparations,
  • Coffee, Tea, Mate & spices,
  • Cereals, Products of Milling Industry, Malt Starches, Inulin,
  • Wheat Gluten, Oil Seeds & Oleaginous Fruits, Miscellaneous Grains, Seed and Fruit, Industrial or Medicinal Plants, straw & fodder, lac, gums , resins & other vegetable saps & extracts,
  • Vegetable Plating Materials,
  • Prepared Edible Fats, Animal or Vegetable Waxes,
  • Preparation of Meat, of Fish or crustaceans, Mulluscs or other Aquatic Invertebrates,
  • Preparation of Cereals, Flour, Starch or Milk; pastry cooks products, Preparation of Vegetables, Fruits, Nuts or other parts of Plants.
  • Misc Edible preparations.Residues & waste from the Food industries, Prepared Animal fodder.
   
25 to 27,
  • Mineral Products
  • Salt ,sulphur,earths & stone; plastering materials, lime & cement.
  • Ores slag & Ash,
  • Mineral Fuels, Mineral Oils & Products of their Distillation, Bituminous Substances; Mineral Waxes.
   
31,
  • Fertilisers
   
43, 44 (Except Plywood & allied Products),45 ,
  • Furskins & Artificial Fur, Manufacturers thereof.
  • Wood and Articles of Wood; wood charcoal.
  • Cork & Articles of Cork.
   
47.
  • Pulp of wood or of other Fibrous cellulosic material.
  • Recovered (waste & scrap) paper or paper board.
   
68,
  • Articles of Stone, Plaster, Cement, Asberstos, Mica or similar Materials.
   
71,
  • Natural or Cultured Pearls, Precious or semiprecious stones, Precious metals, Metals clad with Precious metals and Articles there of; Imitation Jewellery; coin.
   
81 (metals in primary and intermediate forms only),
  • Other Base Metals; cermets Articles thereof.
   
89,
  • Ships, Boats & floating structures.
   
93,
  • Arms & Ammunitions, Parts & accessories there of.
   
97,
  • Works of Arts, Collectors Pieces & Antiques.
   
ITC (HS) 4011 to 4013,
  • New pneumatic tyres, of rubber.
  • Retreaded or used pneumatic tyres of rubber, solid or cushion tyres, tyre treads
  • and tyre flaps of rubber.
  • Inner tubes, of rubber.
   
7401 to 7406,
  • Copper mattes; cement copper(precipitated copper).
  • Unrefined Copper, Copper anodes for electrolytic refining.
  • Refined Copper and copper alloys, unwrought.
  • Copper waste & scrap.
  • Master alloys of copper.
  • Copper Powders & Flakes.
   
7501 to 7504,
  • Nickel Mattes, Nickel Oxide sinters & other intermediate products of nickel metallurgy.
  • Unwrought Nickel.
  • Nickel wase & scrap.
  • Nickel Powders & Flakes.
   
7601 to 7603,
  • Unwrought Aluminium.
  • Aluminium Waste & Scrap.
  • Aluminium Powders & Flakes.
   
7801, 7802,
  • Unwrought Lead.
  • Lead waste & scrap.
   
7901 to 7903,
  • Unwrought Zinc.
  • Zinc Waste & Scrap.
  • Zinc dust, powders & flakes.
   
8001, 8002
  • Unwrought Tin.
  • Tin waste & scrap.
   
8401.
  • Nuclear reactors; Fuel elements (cartridges), non irradiated for nuclear reactors; machinery & apparatus for isotopic separation.


NOTE:
1. However, zero duty EPCG Scheme will be available for handicraft exports under Chapters 5, 44, 68, 97.
2. 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.

(c). Imports of Moulds , dies, jigs, spares, etc under 0% EPCG Scheme with an E.O. equivalent to 50% of the normal E.O.:
Moulds, dies, jigs, fixtures, including Spares (including refurbished/reconditioned spares), tools, refractory for initial lining and catalyst for initial charge; for existing plant and machinery (imported earlier, under EPCG or otherwise), shall be allowed to be imported under the EPCG scheme subject to an E.O. equivalent to 50% of the normal E.O. prescribed (for import of capital goods), to be fulfilled in 8 years (6 years for zero duty EPCG scheme), from Authorization issue date.

NOTE: This would however be subject to the condition that the c.i.f. value of import of the above spares etc. will be limited to 10% of the value of plant and machinery imported under the EPCG scheme.

In case the plant and machinery is not imported under the EPCG scheme, c.i.f. value of import of the spares etc. will be limited to 10% of the book value of the plant and machinery.

(e). E.O. for 0% EPCG scheme :
The Export Obligation for Zero Duty EPCG scheme is to be fulfilled over a period of 6 years from the date of issuance of Authorisation in the following proportions:

Period from the date of issue of Authorisation Minimum E.O. to be fulfilled
Block of 1st to 4th Year 50%
Block of 5th & 6th Year 50%


If the Duty Saved is Rs. 100 Crores or More the Export Obligation shall be fulfilled over a period of 12 years from the date of issuance of Authorisation in the following proportions:

Period from the date of issue of Authorisation Minimum E.O. to be fulfilled
Block of 1st to 10th year 50%
Block of 11th & 12th Year 50%


COMMON CONDITIONS:
  • Capital goods is defined under Para 9.12 of the FTP 2004-2009 as under:
  • Capital Goods" means any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernisation, technological upgradation or expansion. It also includes packaging machinery and equipment, refractories for initial lining, refrigeration equipment, power generating sets, machine tools, catalysts for initial charge, equipment and instruments for testing, research and development, quality and pollution control. Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture and viticulture as well as for use in services sector.
  • Second hand capital goods without any restriction on age may also be imported under the EPCG scheme.
  • Import of Restricted items of imports mentioned under ITC(HS) shall only be allowed to be imported under the Scheme after approval from the Import Licensing Committee.
  • Spares (including refurbished/ reconditioned spares), tools, spare refractories & , catalyst for existing Plant & Machinery ( Imported earlier, under EPCG or otherwise).
  • The GRC Committee has decided that "construction items" are not considered under EPCG Licence except for service industry.


Eligibility: The scheme covers manufacturer exporters with or without supporting manufacturer(s)/ vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers.

Conditions for import of Capital Goods: Import of capital goods shall be subject to Actual User condition till the export obligation (E.O.) is completed.

The following shall apply to the fulfillment of the export obligation:-
  • Export Obligation can be fulfilled by export of goods Manufactured / Services rendered by the Applicant.
  • Physical Exports.
  • Deemed Exports.
  • Royalty Payments received in Freely Convertible Currency.
  • Foreign exchange received for R& D services.
  • Supplies to SEZ Units / Supplies to Developers/Co-Developers.
  • Port Handling Services.


In addition to the above, the following conditions shall be applicable for fulfillment of E.O:
(i) EPCG authorization holder shall export either directly or through Third Party(s).
(ii) Export proceeds shall be realized in Freely convertible Currency Except for Deemed Exports, Export to SEZ Units / Supplies to Developers/Co-Developers & for Port Handling services.
(iii) Upto 50% of Export Obligation may also be fulfilled by exports of Other Good(s) manufactured or service(s) Provided by the Same Firm / Company.
(iv) Upto 50% of Export Obligation may also be fulfilled by exports of Other Good(s) manufactured or service(s) Provided by the Group Company / managed hotel.

AEP (Average Export Performance) : The export obligation under the scheme shall be, over and above, the average level of exports achieved by him in the preceding three licensing years for same and similar products within the overall export obligation period.
Indigenous Sourcing of Capital Goods : A person holding an EPCG Authorisation may also source the capital goods from a domestic manufacturer instead of importing them. The domestic manufacturer supplying capital goods to EPCG Authorisation holders shall be eligible for deemed export benefit under the Policy.
Regularisation of Bonafide Default : In case EPCG authorization holder fails to fulfill prescribed export obligation, he shall pay duties of Customs plus interest as prescribed by Customs authority on pro-rata basis of the exports made.
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