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EPCG license

Harsha (Chartered Accountant CS (Final)) (227 Points)

25 September 2010

The Annual Supplemetary of the FTP (2009-14), released as on August 21 2010 introduced Annual Supplementary EPCG Scheme. I could not understand the use of the above license. Can anyone knows about it , please clarify?

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RAMESH KUMAR VERMA ( CS PURSUING ) (43853 Points)
Replied 25 September 2010

FOREIGN TRADE POLICY ISSUED ON 23.08.2010 BY THE MINISTRY OF COMMERCE , GOVT. OF INDIA &

EXPORT PROMOTION CAPITAL GOODS (EPCG) LICENCE / AUTHORIZATION ISSUED TO MANUFACTUERE EXPORTER, MERCHANT EXPORTERS, & HOTELS IN RESPECT OF FULFILLMENT OF EXPORT OBLIGATION (EO)

WHO ISSUE:-

CONCERNED OFFICE OF DIRECTOR GENERAL OF FOREIGN TRADE ISSUED IT

ELIGIBILITY:-

ZERO % EPCG:-

The scheme will be available for exporters of engineering & electronic products, basic chemicals & pharmaceuticals, apparels & textiles, pastics, handicrafts, chemicals & allied products, 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 exclusions as provided in HBP Vol. I.(2009-2014)

Export obligation:-

Subject to an export obligation equivalent to 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from Authorization issue-date.

Assume if you import any machinery for handicrafts items, none custom duty will impose on you. (But the licence issued assume for duty saved Rs. 1000, your liability will be export obligation six times of its (1000*6) Rs. 6000.00 in 24 month and export obligation can fulfilled till 6 year.

Except it the import criteria does not mentioned not above list apply for

3% EPCG:

As per para 5.2 of FTP (2010-11) issued on 23.08.2010

Concessional 3% 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 3% Customs duty, subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 8 years reckoned from Authorization issue-date.

Assume if you import any machinery for computer software items, the if 3% custom duty saved. ( licence issued assume for if you duty saved Rs. 1000, your liability will be export obligation eight times of its (1000*8) Rs. 8000.00

In case of agro units, and units in cottage or tiny sector, import of capital goods at 3% Customs duty shall be allowed subject to fulfillment of export obligation equivalent to 6 times of duty saved on capital goods imported, in 12 years from Authorization issue-date.

Assume if you import any machinery for agriculture products if 3% custom duty saved. (Licence issued assume for if you duty saved Rs. 1000, your liability will be export obligation six times of its (1000*6) Rs. 6000.00, , you can fulfill export obligation 12 year from the date of issue the licence date.

For SSI units, import of capital goods at 3% Customs duty shall be allowed, subject to fulfillment of export obligation equivalent to 6 times of duty saved on capital goods, in 8 years from Authorization issuedate, provided the landed CIF VALUE OF such imported capital goods under the scheme does not exceed Rs. 50 lakhs and total investment in plant and machinery after such imports does not exceed SSI limit.

However, in respect of EPCG Authorization with a duty saved amount of Rs. 100 crores or more; export obligation shall be fulfilled in 12 years.

Assume if your duty saved amount is more than 100 crore or more rupees for import any machinery if 3% custom duty saved. (Licence issued assume for if you duty saved Rs. 1000, your liability will be export obligation six times of its (1000*6) Rs. 6000.00, , you can fulfill export obligation 12 year from the date of issue the licence date.

KINDLY NOTED: - THAT Second hand capital goods, without any restriction on age, may also be imported under EPCG scheme

However, import of motor cars, sports utility vehicles/all purpose vehicles shall be allowed only to hotels, travel agents, tour operators or tour transport operators and companies owning/operating golf resorts, subject to the condition SPECIFIED AS PER para 5.2(i)

*******************************************************************************************

PLEASE READ CARE FULLYTHIS NOTE:-

When imports of machinery takes places under normal 7.5% duty, the total duty payable is @ 7.5%(basic) +14% (cvd)+3%(ed.cess)+3%(cess)+4%(sad)=28.64%

Similarly is the total duty payable under EPCG 3% basic duty for imports.

Duty saved = 28.64[-] 3=25.64

If you import without licence duty will be 28.64%

& if use import against EPCG licence =25.64

IF YOU NOT UNDERSTAND ASK ME AGIN I WILL TRY AGAIN.

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