Export Promotion Capital Goods Scheme (EPCG)

Why in News?

According to a recent report by the Comptroller and Auditor General, the Commerce Ministry needs to properly monitor the Export Promotion Capital Goods (EPCG) scheme.

• EPCG Scheme – It allows the import of capital goods for pre-production, production and post-production at zero customs duty.
• It is one of the earliest export promotion schemes that is presently in operation.
• Established in – 1992.
• Nodal Ministry – Ministry of Commerce and Industry.
• Administered by – Regional Licensing Authorities (RLAs) under the Director General of Foreign Trade (DGFT).
• Governed by – Foreign Trade Policy (FTP).
• Objective – To facilitate the import of capital goods to produce quality goods and services and enhance India's manufacturing competitiveness.
• Imported capital goods
  • Computer systems and software are part of Capital Goods,
  • Spares, moulds, dies, jigs, fixtures, tools & refractories
  • Catalysts for initial charge plus one subsequent charge
• EPCG License – It is granted to exporters to import capital goods at a concessional rate of customs duty.
• The licensees have to fulfil 2 types of Export Obligation (EO), which are:
  1. Average export obligation for preceding 3 years exports.
  2. Specific exports 6 times the duty saved amount in 6 years.
• Coverage – It covers the following:
  • Manufacturer exporters with or without supporting manufacturer(s),
  • Merchant exporters tied to supporting manufacturer(s) and
  • Service providers, including Common Service Provider (CSP).
• Pre-Requisite – An Importer-Exporter Code (IEC) is required to be eligible under the scheme.
• Exemption - Integrated Goods and Services Tax (IGST) and Compensation cess on the import of capital goods are exempted until 31 March 2020.

References

1. Business Standard| CAG Report on EPCG
2. DGFT| Export Promotion Capital Goods Scheme
3. Indian Trade Portal| EPCG