In the ever-evolving landscape of global trade, the significance of Export Promotion Capital Goods (EPCG) licences stands as a pivotal element shaping international commerce. These licences are crucial in facilitating cross-border transactions, fostering economic growth, and encouraging investments in various sectors.
Designed to promote the export of goods and services, the EPCG scheme acts as a catalyst for businesses aiming to expand their global footprint by providing them with a strategic advantage.
We will delve into the profound significance of EPCG licences in the context of global trade, exploring how they contribute to economic development, enhance competitiveness, and create opportunities for businesses to thrive in the dynamic international market.
What is the EPCG Licence?
The Export Promotion Capital Goods (EPCG) Scheme is designed to empower importers engaged in export-oriented businesses by allowing them to import capital goods at zero rates of customs duty. However, participation in the scheme is contingent upon the commitment to achieve an export value equivalent to six times the duty saved on the imported capital goods within six years from the date of authorisation issuance.
In simpler terms, businesses availing themselves of the EPCG Scheme are obligated to generate foreign currency amounting to 600% of the duty saved on the importation, measured in domestic currency. This obligation must be fulfilled within six years from the initiation of the Export Promotion Capital Goods Scheme.
Permissible Capital Goods under the EPCG Scheme
The Export Promotion Capital Goods (EPCG) Scheme encompasses a wide range of capital goods, including spares (reconditioned or refurbished), fixtures, jigs, tools, moulds, and dies. Notably, the scheme extends its scope to accommodate second-hand capital goods, without imposing any restrictions based on their age.
Operational Framework under Foreign Trade Policy
Within the framework of the Foreign Trade Policy (FTP), the EPCG Scheme facilitates the importation of capital goods required for the manufacturing of specific export-oriented products listed in the Export Promotion Capital Goods Authorization. This importation is permitted at concessional or nil rates of duty, fostering technological up-gradation within the indigenous industry.
Issuance of EPCG Authorizations
The Directorate General of Foreign Trade (DGFT), serving as the licensing authority, issues Export Promotion Capital Goods (EPCG) Authorizations. These authorizations are granted based on certificates issued by independent chartered engineers, ensuring compliance with the scheme’s stipulations.
Documents Needed for EPCG Licence
You will need these documents to obtain the EPCG licence including:
- Import Export Code (IEC)
- Pan Card
- Proforma Invoice
- Digital signature
- GST Registration Certificate
- Excise Registration (if registered)
- Registration certificate from the Tourism Department
- Brochure
- Registration cum Membership Certificate (RCMC)
- Self-Certified Original Copy of Certificate of Chartered Accountant
- Self-Certified Original Copy of Certificate of Chartered Engineer
What Role Does the EPCG Scheme Play in Indian Exports?
The Export Promotion Capital Goods (EPCG) is a government initiative primarily focused on machinery, its components, and analogous products crucial for exporters engaged in manufacturing. Targeting manufacturer exporters, this scheme extends financial support for the importation of machinery goods.
Its primary goal is to incentivize the production of high-quality goods within India and facilitate their exportation, thereby expediting the overall growth of the national economy.
Strategic Benefits of the EPCG Scheme
The Export Promotion Capital Goods (EPCG) scheme, introduced by the Director General of Foreign Trade (DGFT), aims to incentivize and assist exporters in their global trade endeavours. This scheme presents various advantages for exporters:
- Under the EPCG Scheme, exporters can benefit from duty-free imports of goods, provided they fulfil an export obligation equivalent to six times the amount of duty savings on capital goods within a stipulated period of six years.
- Additionally, the EPCG licence provides financial assistance to exporters by eliminating import charges, thereby reducing the financial burden on businesses engaged in international trade.
- For shipments valued below ₹1 crore, exporters are required to furnish a bank or bond guarantee as part of compliance. However, for exports exceeding ₹1 crore, the customs port is responsible for providing the bond, and a bank guarantee is not obligatory.
- Upon obtaining the EPCG licence, exporters must register it at the designated port of entry to avail themselves of duty waivers when submitting the Bill of Entry.
This scheme plays a pivotal role in promoting fast-track enterprises, thereby facilitating and encouraging the expansion of import and export business in the global market.
Conclusion
The EPCG scheme assumes a vital role in fostering exports and aiding businesses involved in global trade. Through the provision of duty-free imports and financial incentives, this scheme actively contributes to the expansion of the Indian economy. For those contemplating the application for an EPCG licence, it is imperative to comprehensively grasp and fulfil the specified export obligations as delineated within the scheme.
