EOU can exit under EPCG scheme for CG procured from DTA also: Expert

TNC Rajagopalan answers SME queries related to GST, export and import matters

We want to exit from the EOU scheme. We want to apply for EPCG scheme for the imported CG as well as the CG procured from the DTA. From Para 6.17 of the FTP or the provisions of the HBP, it is not clear whether we can ask for EPCG authorisations for CG procured from DTA. Please clarify quoting the specific provision, if any.

Yes. You can ask for EPCG authorisations for CG procured from DTA also. As you mention, the FTP or HBP does not make this position very clear. However, please see the guideline at 2(f) at form ANF-5A that mentions about submitting the NOC from the DC for the imported as well as the indigenous CG. It is on the basis of this guideline that you can ask for EPCG authorisations for CG procured from DTA also, at the time of exit from the EOU scheme.

In anticipation of issue of EPCG authorisation, we had asked our supplier to ship the goods to us but due to some unexpected issues, the issue of the EPCG authorisa­tion is delayed. Is it necess­ary that we should have the EPCG aut­h­orisation before the goods are imported into India?

No. Para 2.12 of the FTP says that goods already imported/s­hip­­ped/a­rriv­­e­d, in advance, but not cleared from Customs may also be cleared against an Authorisation issued subsequently. However, this Para (quite unnecessarily, in my view) says that such goods already imported/shipped/ar­ri­­­v­­­e­­d, in advance are first warehoused against bill of entry for warehousing and then cleared for home consumption against an Authorisation issued subsequently. My opinion is that where the EPCG authorisation is obtained before filing the bill of entry for home consumption, there ought to be no issue in clearance of the goods under the authorisation. 

We refer to Para 6.09 of FTP and Para 6.19 of HBP regarding exports by EOU through other parties. We, an EOU, have received an order from a merchant exporter, who wants us to charge him 0.1% IGST under the notificat­ion 41/2017-IT (Rate) dated 23rd October 2017. Will we have to reverse the BCD paid on the inputs used in the manufacture of the goods in accordance with Para 6.07(a)(ii) of the FTP?

In my opinion, if you dispatch the goods directly to the port, you need not reverse the BCD paid on the inputs, as the matter falls squarely within the requirements mentioned at Para 6.19 of the HBP and therefore, qualifies as export through third party. However, this issue is not specifically dealt with in any of the provisions and therefore, it is far from certain that the authorities would raise no disputes (which, in my opinion, will go in your favour). A safer option you may consider is BCD payment. You may indicate that in the invoice and ask the merchant exporter to claim drawback of the same through brand rate route. In any case, I think you should seek a clarification from the DGFT on this matter. 

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