In this year’s annual supplement to the Foreign Trade Policy (FTP), a new post-export Export Promotion Capital Goods (EPCG) scheme has been introduced. This gives an option to exporters but regular ones might not prefer this dispensation.
The new scheme gives the exporters a choice to import or locally procure capital goods (CG) on duty payment and claim the duty back (the portion not taken as Cenvat credit), as and when exports take place, by way of transferable duty credits that can be used for payment of customs duty on imported goods or excise duty on locally procured goods.
An exporter who opts for the scheme has to file an application for EPCG authorisation before making any exports. The Handbook of Procedures, Vol. 1, says EPCG authorisation will mention ‘not for import’, meaning the authorisation need not be produced before the customs for import clearance, as the CG will have to be imported on payment of normal duty. The authorisation will mention the annual average exports to be maintained and specific export obligation (EO). The mention of EO need not bind the exporter; if he does no exports, the only consequence is that he will not earn any duty credits. The mention of EO is only to enable computation of the entitlement of duty credits, in case of any claims against exports made after issue of authorisation.
The EO will be fixed at 85 per cent of the normal, says the FTP, but it is not clear whether the normal EO will be based on the three per cent or zero duty EPCG scheme and whether the exporter has the option to ask for normal EO to be reckoned in line with one of those schemes. The duty saved under the three per cent or zero duty schemes is based on the full duty leviable but for the exemption. In the case of a post-export EPCG scheme, full duties have to be paid on imported goods but the component of Countervailing Duty (CVD) and Special Additional Duty(SAD) can anyway be taken as Cenvat credit by most manufacturers. Even so, it appears their EO will be based not on 85 per cent of the basic customs duty and cess that cannot be taken as Cenvat credit but on 85 per cent of full duty paid, including CVD and SAD.
From time to time, an exporter who has opted for the scheme may file application(s) for issue of duty credit scrip(s) in proportion to the EO completed. With the first such application, proof of actual duty paid on CG (including evidence of duty Cenvated or otherwise), nexus and installation certificate(s) of CG, etc, must be filed along with evidence of exports made. Subsequently, only documents showing additional exports need be sent.
The new scheme might be useful for manufacturers and service providers who are unsure about fulfilling export obligations. In their case, they may opt to pay full duties and claim duty credits as and when they manage to export something. Regular exporters, however, may not prefer to block funds in payment of duties when an option for exemption from payment of duties is available under the regular EPCG scheme.