Procedures of EPCG scheme now simplified

The Director-General of Foreign Trade (DGFT) has made helpful procedural changes to the Export Promotion Capital Goods (EPCG) scheme.

Under the EPCG scheme, exporters can import capital goods at zero duty against export obligation (EO) of six times the duty saved to be fulfilled in six years. At least, 50 per cent of the EO must be fulfilled within the first block of four years. The provisions allowing EO period extension for the first block and the final six-year period, subject to payment of prescribed fees, required the exporter to apply within a certain period. Many exporters who had failed to apply for an extension within the prescribed period had to approach the EPCG committee at the DGFT headquarters for suitable relaxation. Henceforth they will not have to do that. They can seek an extension at any time by paying the prescribed composition fees.  This welcome change eliminates the need to approach the EPCG committee for relaxations and thus reduces the unnecessary workload for exporters and administrators. Of course, eliminating the requirement of a minimum 50 per cent EO to be fulfilled within the first block of four years would simplify the matters further.

Sometimes, the duty saved amount indicated in the EPCG authorisation is less than the actual duty saved at the time of imports due to an increase in prices of capital goods or duty rates. So, the Customs are authorised to allow imports up to 10 per cent in excess of the amount indicated in the authorisation. The exporters were required to approach the authorities issuing the authorisation within a certain time limit to regularise the matter by paying the prescribed fees and getting the duty saved amount and proportionate EO enhanced.  Now, they can do so anytime — even at the time of seeking redemption of the EPCG authorisation.

Exporters were required to file an online annual report of exports made in discharge of EO, by June 30 every year. Now, the details that must be furnished in the report are specified and the exporters can file the report even after June 30 by paying the prescribed late fees. What the DGFT will do with the data is unclear. Also, the details of exports made by an exporter are anyway available to the authorities in the Customs automated system ICEGATE. So, it is worth reviewing whether this compliance is necessary at all.

Sometimes, the exporters are unable to maintain the annual average exports in some years and make up the shortfall in other years. The DGFT now clarifies that the annual average exports have to be maintained on an overall basis within the entire EO period.  Henceforth, whenever an EPCG authorisation is redeemed and an EO discharge certificate (EODC) is issued, the authorities must upload a copy of the EODC on the ICEGATE for further action by the jurisdictional Customs authorities with whom the authorisation holder executed a bond at the time of duty-free imports.

For regularisation of bona fide default or exit from the EPCG scheme, the exporters were allowed to pay the duty proportionate to the unfulfilled EO through duty credit scrips. The specific provision allowing the use of duty credit scrips to pay the duty has now been deleted. The reasons for this change are not clear. Apparently, the exporters can regularise defaults only through payment of duty in cash.  

Email: tncrajagopalan@gmail.com