International markets are a great prospect to Indian businesses, however, there is the cost of importing high technology machinery. In order to counter this, the Government of India came up with the EPCG Scheme for Exporters (Export Promotion Capital Goods Scheme).
The scheme enables the exporters to bring in capital goods at no customs duty or at concessional rates to enable them to modernize production and compete with other countries around the world. Meanwhile, the exporters undertake a given target of export assignment. We shall look at the EPCG Scheme for Exporters – its purpose, its advantages, its eligibility, the process and the role played by your IEC (Importer Exporter Code).
What is the EPCG Scheme for Exporters?
When introduced as part of the Foreign Trade Policy, the EPCG Scheme for Exporters by the Directorate General of Foreign Trade (DGFT) is aimed at facilitating exports through allowing businesses to upgrade their technology and increase their production capacity without paying high importation duties.
Within this program, exporters are allowed to import capital goods such as machinery, tools and equipment at zero custom duties provided that at the end of six years they have met an obligation similar to the savings made in terms of export (six times). It assists in increasing efficiency, quality of products and global competitiveness.
Key Features of the EPCG Scheme for Exporters
- Zero Customs Duty: Capital goods may be imported with zero or concessional rates of duties.
- Export Obligation: the exporters have a target of six times the amount of saved duty that they have to fulfill within six years.
- Eligibility: Eligibility can be applied by both manufacturers and service providers.
- Technology Upgrade: Promotes use of enhanced machinery in order to enhance productivity.
- Validity: Authorization has an 18 months duration of validity to the imports and 6 years to the export fulfillment.
- Mandatory IEC: It is a valid IEC which is necessary to all applications and compliance under this scheme.
- Relevant Sectors: It is open to various industries, such as manufacturing, tourism, logistics, and medical care.
Eligibility Criteria for EPCG Scheme for Exporters
In order to take advantage of the EPCG Scheme for Exporters, a business should:
- Have a valid IEC (Importer Exporter Code) that has been issued by DGFT.
- Be engaged in foreign trade policy manufacturing or qualified service.
- Possess an effective export strategy that shows the ability to fulfill export requirements.
- Make sure you use the imported machinery specifically for manufacturing the goods or services that will be exported.
Merchant exporters working with supporting manufacturers are also eligible, as long as both have valid IECs
Step-by-Step Process to Apply for EPCG Scheme for Exporters
You can apply under the scheme in the following way:
- Get IEC: IEC is a kind of individual identity of all exporters or importers in India. You can not apply to the scheme without it.
- Apply Online: Go to the portal of DGFT and fill an application of EPCG with your IEC credentials.
- Submit Documents: Attach project report, company profile, pro forma invoice of the machinery and certificate of a Chartered Engineer.
- DGFT Approval: Once this has been verified, DGFT sends you the EPCG authorization that will give you your obligation to export and the amount of duty saved.
- Import Machinery: Utilization of the permission to import capital goods with no or concessional duty.
- Fulfil Export Obligation: fulfil your export obligation in six years.
- Report Progress: You are to provide periodic export reports with your IEC on the DGFT online platform.
Documents Required for EPCG Scheme for Exporters
When you are applying to the EPCG Scheme for Exporters, you will require:
- Valid IEC (Importer Exporter Code)
- Registration certificate of GST.
- Company PAN and incorporation certificate.
- Proforma invoice of the machinery to be imported.
- The certificate of Chartered Engineer.
- Export performance details
- Bank certificate of financial ability.
Benefits of the EPCG Scheme for Exporters
The scheme provides a number of advantages; thus, it is among the most preferred incentive of export promotion:
- Less Capital Costs: Import equipment at little or no custom duties.
- Increased Competitiveness: Availability of new technology increases quality and efficiency.
- Promotes Development: Allows Indian exporters to achieve the global standard and market expansion.
- Employment Creation: Increased exports create more production and employment.
- Streamlined Tracking: Your compliance and records stay linked to your IEC, making verification easy.
The EPCG Scheme for Exporters provides a strategic tool that allows business to reduce the expenditure on the machinery drastically and utilize the funds to invest in the innovation and market development.
Compliance under EPCG Scheme for Exporters
To keep the compliance and prevent punishment:
- Record the exports done in favor of your IEC.
- Meet your export requirements within 6 years, otherwise you may face fines.
- Use the imported goods only for their intended purpose.
- Periodic filing with DGFT with IEC.
- After meeting the obligations, you can request a DGFT redemption certificate to close the authorization.
Lapse in fulfilling the obligations of the export may lead to repaying the interest-free saved customs duty and even prosecution in some instances.
Why the EPCG Scheme for Exporters Matters?
- The EPCG Scheme for Exporters is not merely an instrument to save duties, it is an effective instrument of stimulating the growth of Indian businesses.
- It allows exporters to manufacture the world-class products at a reduced cost as it utilizes high-level technology in the world.
- In the case of Small and Medium Enterprises (SMEs), the scheme will provide them with a chance to enter into international markets and establish long-term relationships with other countries.
- The IEC (Importer Exporter Code) ensures accountability, transparency, and systematic monitoring under the scheme.
- Stated differently, the EPCG Scheme would make a game-changer when applied properly and allow the businesses to increase their presence and competitiveness in the international arenas.
Conclusion
EPCG Scheme for Exporters is significant in the acceleration of the export-based growth of India. It is not only encouraging modernization but also the businesses are expected to think about the world. This government initiative can be maximized with a full potential by understanding the process, applying your IEC effectively, and following the obligations.
Being a manufacturer, service provider, or merchant exporter, this scheme offers a good base to expand internationally with low costs and competitiveness.
The EPCG Scheme can make your experience of exporting goods and services not only enjoyable in your home country, but also globally, should you have the right planning and adherence.
FAQs
Q1. What is the primary goal of the EPCG Scheme for Exporters?
It gives the exporters the opportunity to import capital goods at zero customs duty in exchange to a given obligation of export in six years.
Q2. Is an IEC a requirement of the EPCG Scheme?
Yes. Valuable IEC (Importer Exporter Code) is mandatory because it recognizes the exporter and keeps record of all the importation and exportation activities.
Q3. Will service providers be entitled to the benefits under the EPCG Scheme for Exporters?
Yes. Hotels, logistics companies, and even healthcare providers are also service exporters.
Q4. What would be the case when the export obligation is not met?
In cases where an exporter does not fulfill the obligation, he or she will be refunding the custom duty saved and interests.
Q5. Are EPCG authorization transfers possible?
No. The authorization is non-transferable and remains linked to the IEC under which it was issued.
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