EPCG
LICENSEES' EXPORT OBLIGATION CUT BY 40%
Exporters holding the export promotion capital goods (EPCG)
licences can rejoice. Thanks to re-fixation of the export obligation
under the EPCG scheme, licence holders' burden has come down
by an average rate of 40%.
According to the
new stipulation in the foreign trade policy, the export obligation
is eight times the duty saved on capital goods (CG) imports,
against five times the CIF value of CG imports. These exporters
can, therefore, avail of the EPCG benefit of concessional
import duty on capital goods with a lower export obligation.
Under the EPCG
scheme, exporters can import CGs at 5% duty. The total duty
forgone under the EPCG scheme was around Rs 3,500 crore in
'03-04.
The recent foreign
trade policy (FTP) had proposed to accord a zero customs duty
benefit to exporters of agricultural products and their value-added
variants under the EPCG scheme. This additional benefit for
agriculture exporters is, however, yet to be notified by the
finance ministry.
Normally, import
of CGs attracts a basic customs duty (BCD) of 20%, countervailing
duty (CVD) of 16% and a 2% education cess on BCD. Indeed,
there are a large number of CGs, particularly those used by
textile and garment industries, that are under a 5% concessional
duty regime, outside the EPCG purview.
The new stipulation
on export obligation corresponds to three times the CIF value
of CGs imported. This represents a 40% reduction in obligation,
compared to the previous obligation of five times the CIF
value of imports, officials said.
An exporter has
to fulfil his obligation under EPCG by exports of goods capable
of being manufactured or produced by the use of the capital
goods imported under the scheme. In case of EPCG licences,
where the application is made for re-fixation within two years
of its issuance, the export obligation shall be automatically
refixed based on eight times the duty saved on the date of
issuance of the licence, according to the new norm.
In case the CVD
is paid in cash on imports under the EPCG, the incidence of
CVD will not be taken for computation of net duty saved provided
the same is not modvated. The export obligation can be fulfilled
over a period of eight years reckoned from the date of issuance
of the licence
The EPCG scheme
allows import of capital goods for pre-production, production
and post-production (including CKD/SKD thereof, as well as
computer software systems) at the specified concessional customs
duty. The FTP had also allowed second hand capital goods without
any restriction on age under the EPCG scheme.
