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| EPCG scheme cuts visits to licence office |
| TNC Rajagopalan / New Delhi Sep 20, 2010, 00:08 IST |
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In the annual supplement to the Foreign Trade Policy 2009-14 (FTP), the commerce ministry introduced the annual Export Promotion Capital Goods (EPCG) scheme, as a measure of simplification and facilitation. The scheme reduces the need to approach the licensing authorities every time there is a need to import capital goods under the EPCG scheme. Exporters should, however, take note of the conditions.
The annual EPCG scheme is available for all exporters who have export performance in the preceding two years. Para 5.2 D of FTP is so worded that it appears the export performance must be under zero duty and 3 per cent EPCG schemes. But, a closer reading indicates that this does not appear the intention. The idea seems to be to make the scheme available under the zero duty as well as 3 per cent EPCG schemes.
The limit up to which annual EPCG licence can be obtained is 50 per cent of the FOB (free on board) value of physical exports and/or FOR value of deemed exports in the preceding licensing year. The limit refers to the duty saved amount. Thus, against an export performance of Rs 1 crore in the preceding year, annual EPCG licence can be applied up to Rs 50 lakh duty saved amount. That would mean that under the zero duty scheme, annual EPCG licence may enable duty-free import of capital goods up to a value of more than Rs 2 crore.
The applicant has to mention the export product at the time of making the application but there is no need to submit the Chartered Engineer Certificate (CEC) at that time. The CEC, certifying the nexus between the imported capital goods and the export product, must be submitted to the Customs at the time of clearance of the imported capital goods. Within 30 days of clearance of the goods, a copy of CEC must be submitted to the licensing authority along with copy of the bill of entry.
The application form ANF 5A suggests that the CEC must certify the end use of machinery sought for import under the scheme in the pre-production/production/post-production activity of the export goods (explaining the end use of the machinery) and that for spares the certification must confirm the essentiality of spares for existing machinery, besides usage of the equipment for rendering services that will be exported. The CEC format prescribed at Appendix-32A of the Handbook of Procedures (HBP) does not say anything about spares but calls for more details such as the model number and technical details of the capital goods, stepwise process flowchart, etc.
The statement of exports and/or deemed exports made during the preceding three years must be certified by the chartered accountant in the format given at appendix-26 of the HBP. This is somewhat simplified compared to last year. The scope to further simplify the form of application, redemption and clubbing of EPCG licences needs to be explored.
The scope of the zero-duty EPCG scheme has been widened to include additional sectors such as paper and paperboard and articles thereof, ceramic products, refractories, glass and glassware, rubber and articles thereof, plywood and allied articles, marine products, sports goods and toys and additional engineering products.
Overall, the commerce ministry has done well to extract concessions from the finance ministry. The other small improvements will help but not substantially bring down the transaction costs.
Email: tncr@sify.com
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