EPCG License Redemption

EPCG Scheme

The EPCG scheme given benefit of saving import duty to against completing targeted export of goods.

Simply is permit import of Capital Goods ,Spare Parts, Accessories at Zero duty with a condition that importer need to export goods of value of six time of duty saved at time of import.

Who can Avails EPCG Scheme:

• Manufacturer Exporter,
• Merchant Exporter tied with supporting manufacturer and
• Service Provider

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What is EPCG License Export Obligation

Export obligation for EPCG license can be completed in INR as well as Foreign currency within 6 years from the date of EPCG authorization issued by DGFT .  There are two types of Export obligations i.e. Average Export Obligation and specific Export obligation.Example : XYZ Limited imported machine from Japan in year 2015 for value of Rs. 100 Lac and duty saved under EPCG license was Rs. 25 Lac. The EPCG license export obligation shall be Rs. 150 Lac for next 6 Year ( 2015 to 2021 ) ( Rs. 25 Lac x 6 Years )

Average Export Obligation :

This obligation has fixed on the basis of last three years export performance of the same product. This Export obligation are maintained in overall period or extended period of EPCG authorization.

Specific Export Obligation :

 This obligation are fixed on 6 times of duty saved on import of capital goods and it will be completed in 6 years period from the date of EPCG authorization issued date.

For first 4 year Export obligation will be completed by 50% and Balance 50% will be completed in the year of 5^th and 6^th.

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Extension of Export Obligation period:

The EPCG scheme allows extension of export obligation period on payment of composition fee equal to 2% proportionate duty saved amount on unfulfilled of export obligation.  Such extension period can be for maximum period of 2 years.

Exit from Scheme 

If EPCG authorization holders fails to fulfill export obligation , then they shall pay custom duty + interest prescribed by Customs authority .  In case the EPCG authorization holder is not able to complete the export obligation, he shall pay duty of customs with interest and exit from scheme.

Relaxation of Export obligation

Units located in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Jammu &Kashmir, specific Export obligation shall be 25% of the Export obligation.

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Important Points for Export Obligation  

• Group Company’s Exports / Alternative Export Product are not qualify for Export obligation fulfillment.
• Export obligation will be fulfilled with the products manufactured out of the use of the Imported Capital Goods /Machinery. Imported Capital Goods under the EPCG scheme shall be subject to actual user condition till export obligation is completed.
• EPCG authorization holder can export their finished product, either directly or through third party (s). Export proceeds are to be realized in freely convertible currency except for deemed exports.

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Procedure for Redemption of EPCG License

• The EPCG authorization holder to be maintain shipping bill wise export statement along with  BRC details.
• Manufacturer  / Merchant Exporter  provide Bank Realization Certificate for each shipment as evidence of payment received in Foreign Currency.
• Service providers to provide FIRC’s for the foreign currency earned along with Month wise and bank wise Statement of Foreign Currency received.
• Application for Export obligation to be submitted to concerned DGFT for redemption / closure of EPCG authorization.
• Export to be computed towards obligation against Advance Authorization / Duty Drawback and all rewards under chapter 3 i.e. (MEIS / SEIS )
• Physical Export s/ Deemed Exports/Services  to be counted for Export obligation . Also Royalty payment received in Foreign currency can be counted.

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Checklist of documents for Redemption of EPCG License

1. Original EPCG authorization with Customs debit sheet.
2. Installation certificate .
3. All Import Bill of Entry’s with Duty payment challans.
4. Import documents ( Invoice, Pkg List, Bill of lading etc. )
5. Shipping bills
6. Bank Realization Certificate (BRC)
7. Bill of lading / Airway bill

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