The commerce ministry has tweaked the post-export EPCG (Export Promotion Capital Goods) duty credit scheme in the hope of making certain provisions more clear but doubts still persist on some points.
The scheme was introduced last June with a view to give the exporters a choice to import capital goods (CG) on duty payment and claim back the duty paid (the portion that is 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.
The latest amendments to the FTP say that duty credit scrips under the post-export EPCG scheme will be issued only in respect of basic customs duty and will have the same features as Chapter 3 scrips. The amendments in the Handbook of Procedures say that where the exporter has obtained EPCG authorisation declaring that he shall not avail Cenvat credit, the export obligation (EO) will be fixed with reference to the basic customs duty paid. In such cases duty credit scrip will be issued based on the certificate from central excise regarding non-availment of Cenvat credit. Such certificate from central excise regarding non-availing of Cenvat credit will not be required where the unit is not registered with central excise. Also, the CG imported shall not be disposed of till the date of last export for offsetting EO against such CG and in case of re-export of CG found defective or unfit for use if the exporter claims drawback on such re-export, there would be no remission of duty.
Last July, the Central Board of Excise & Customs (CBEC) had mentioned that there are certain areas of change in the Foreign Trade Policy (FTP) for which notifications shall be issued subsequently to make them operational. These included making operational the scheme of post-export EPCG duty credit scrip for which modalities were being worked out in consultation with Director General of Foreign Trade (DGFT) and changes made regarding catalyst for subsequent charge which were being reviewed by the DGFT. Last week, the finance ministry amended the notifications relating to the EPCG scheme stating that the catalyst for one subsequent charge shall be allowed under the authorisation in which plant, machinery or equipment and catalyst for initial charge have been imported, except in cases where the regional authority issues a separate authorisation for catalyst for one subsequent charge after the plant, machinery or equipment and catalyst for initial charge have already been imported. However on post-export EPCG scheme, there is no notification yet and CBEC has also not said anything.
The FTP says that the EO will be fixed at 85 per cent of the normal EO under the post-export EPCG scheme but whether the normal EO will be as per the 3 per cent or zero duty EPCG scheme and whether the exporter has the option to ask for normal EO to be reckoned as per one of those schemes is unclear. The clarification that duty remission of only the basic customs duty paid will be made seems to make the scheme less attractive for entities who do not take Cenvat credit. Despite the recent amendments, the scheme looks unattractive as it requires upfront payment of duties and a complex way to get it back.
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