08 April 2013
The Export Promotion Capital Goods (EPCG) scheme was one of the several export-promotion initiatives launched by the government in the early '90s. The basic purpose of the scheme was to allow exporters to import machinery and equipment at affordable prices so that they can produce quality products for the export market.
The import duty on capital goods — like all other items — was high during that period, inflating the cost of capital goods nearly 50%, so the government allowed exporters to import capital goods at only 25% import duty. For waiver of the remaining portion of import duty, exporters were supposed to undertake an 'export obligation' (a promise to export) which was worked out on the basis of the duty concession obtained.
Exporters were given eight years to carry out their commitment to export. Once the 'export obligation' was fulfilled, the owner of the capital goods concerned could sell them or transfer them to another facility. Till the promised export materialised, the owners of the machinery or equipment were barred from even moving the goods concerned out of their manufacturing unit.
REFUND OF TERMINAL EXCISE DUTY
(1) PROCUREMENT OF CAPITAL GOODS UNDER EPCG SCHEME FROM INDIGENOUS SOURCES AND
(2) SUPPLY UNDER DEEMED EXPORTS.
In terms of para 5.6 of FTP, the EPCG Authorisation holder may source the capital goods from domestic sources instead of importing them. In this case, the supplier of capital goods will charge the excise duty at the time of supply of capital goods which is refundable either to the EPCG Authorisation holder or to the supplier. The EPCG authorisation holder can also take the CENVAT if he does not want to avail of the exemption. However, this provision of refund is beneficial to those EPCG Authorisation holder whose final products are exempt and cannot avail CENVAT.
If you supply to the Project Authority which are not covered under the International Competitive Bidding then there is a provision to get the refund of excise duty. The recipient may also claim the benefit on production of suitable disclaimer from the supplier along with necessary documents.
The refund of Terminal Excise Duty in terms of para 8.3(c) will be available from the Regional Authority by filing an application in ANF-8 form within twelve months from the date of payment.
SUPPLIES ELIGIBLE FOR REFUND :
The following supplies are considered for refund of Excise.
1) Supply to EOU/EHTP/STP/BTP.
2) Supply of goods to projects financed by multilateral agencies under the International Competitive Bidding in terms of para 8.2(d)
3) Supply of goods to any project or purpose in respect of which the Ministry of Finance by a notification permits the import of such goods at zero customs duty.
4) Supply of goods to power projects and refineries not covered in 3 above.
5) Supply of goods to nuclear power projects through competitive bidding as opposed to I.C.B.
6) Supply of C. G. to EPCG Authorisation holder against invalidation authorisation issued by R. A.
7) In case of intermediate supplies, Excise Duty is exempted.
The supplier is also entitled to obtain advance authorisation under Deemed Exports benefits for inputs used in the capital goods supplied under the EPCG authorisation holder. The procedure for filing an application is similar to the one described under the procedure for obtaining the advance authorisation in Chapter - 4.
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