Norms for EPCG import tightened

"In order to ensure proper and intended use of vehicles under EPCG scheme, customs authorities will endorse that such vehicles have to be registered as a vehicle 'for tourist purpose only' while clearing such vehicles. This would make purpose of import of vehicles absolutely clear and would also facilitate registration," a Directorate General of Foreign Trade (DGFT) circular has said.

The notification also added that cars imported under EPCG by hotels in the past would also have to conform to the new norm and be re-registered as tourist vehicles.

The circular, issued earlier this month, comes in the wake of the government detecting that vehicles imported under EPCG had ended up in the open market. Hotels and tour operators import these cars for the use of foreign tourists.

Sources said the Revenue department had found many cars, imported under the scheme, being used by high networth individuals. These people, it is alleged, benfited from the fact that import duty under EPCG is much lower than the normal route.

The present basic customs duty imposed on foreign cars is 114 per cent, but firms engaged in tourism related activities can import them at 3 per cent under the EPCG scheme.

As per the scheme, hotels and tour operators, which have foreign exchange earning of Rs 1.5 crore in the preceding three years are eligible for concessional import of cars and SUVs.

Import of these cars used to attract an import duty of five per cent in 2006-07, which was brought down to three per cent in 2007-08. Firms taking benefit of EPCG has to export eight times the duty saved in a period of eight years.