Under the Export Promotion Capital Goods (EPCG) scheme, please clarify:
a) The procedure of filing returns for showing export obligation.
b) Whether 3 per cent duty can be paid through DEPB (Duty Entitlement) Scrips purchased from third parties.
c) Whether we can fulfill obligation by export of any other product manufactured in our own unit (even if it has no ‘nexus’ with the capital goods imported).
d) Whether we can export goods manufactured by our supporting manufacturer (not our group company) and fulfill the export obligation.
As per Para 5.13 of HB-1, as evidence of fulfillment of export obligation, the authorisation holder shall furnish application in ANF 5B with documents prescribed therein. This procedure can be followed even before completion of the full export obligation, for obtaining a partial export obligation discharge certificate.
As per Para 4.42 of the Handbook of Procedures, Vol-1 (HB-1), credit under DEPB shall be utilised for payment of customs duty on any item including capital goods, which is freely importable. DEPB Scrips can also be utilised for payment of duty against imports under EPCG Scheme w.e.f 1/1/2009. This specific provision can be used for payment of 3.09 per cent under the EPCG scheme.
As per Para 5.4 of the Foreign Trade Policy (FTP), Export Obligation shall be fulfilled by export of goods manufactured/services rendered by the applicant. Up to 50 per cent export obligation may also be fulfilled by exports of other good(s) manufactured or service(s) provided by the same firm / company, or group company / managed hotel, which has the EPCG authorisation.
So, the FTP does allow exports of other products to discharge export obligation but for that you have to submit necessary details of the past exports of the ‘substitute product’ and get the product name endorsed in the EPCG authorisation. Only the exports in excess of the annual average exports of the preceding three licensing years will be counted towards fulfillment of export obligation.
As per Para 5.2 of the FTP, EPCG scheme covers manufacturer-exporters with or without supporting manufacturer(s) / vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers. So, you may get the name of the supporting manufacturer, in whose factory the capital goods will be installed, and then export the goods manufactured by the supporting manufacturer to fulfill the export obligation.
Under excise notification no. 108/95 dated 28/8/95, we can clear goods manufactured by us to multilaterally funded projects without duty payment. Kindly suggest whether we can import materials without payment of import duty for execution of an order for supply to IMF funded projects.
The Customs exemption notification no.84/97 dated 11/11/1997 allows duty-free import for Projects funded by international organisations or United Nations agencies. The notification is similar to excise exemption notification no. 108/95 dated 28/8/1995.
Can a SEZ trading unit avail of income tax benefit?
As per Commerce Ministry Instruction no. 4/2006 dated 24/05/2006, the benefits under Section 10AA of the Income Tax Act, 1961 will be available only for trading in the nature of re-export of imported goods.
