What is the Export Promotion Capital Goods (EPCG) Scheme?

As an exporter based in India, it is essential to understand and capitalize on all the export promotion schemes and benefits the government offers. This article will focus on the Export Promotion Capital Goods (EPCG) scheme.

The government of India started the EPCG initiative to help Indian exporters import capital goods at zero or reduce customs duties. The aim is to strengthen the technical infrastructure of exporters to produce high-quality goods at economical rates for export purposes. This way, exporters can offer goods that meet international standards at competitive rates in the international market.

• Also Read: What Are the Different Types of Export Payment Terms?

For example, imagine you are in the business of exporting knit garments internationally. However, the buyer is requesting a certain quality of stitching that will not be possible using local machinery, at least not at scale and the speed at which the buyer expects it. This is where you can leverage the EPCG scheme to import machines that will help you produce quality knit garments quickly and of the required quality to meet international standards.

By following the process prescribed under the Export Promotion Capital Goods (EPCG) scheme, one of India's export promotion schemes, you can seek relief from the customs duties and other charges levied on this purchase.

What are the key features of the EPCG scheme?

Zero or reduced Customs duty

Under the EPCG scheme, you can import machinery to help your export business at zero customs duties. You have to commit to using the equipment for export purposes.

Applies to all export-related businesses

This scheme is not limited to direct exporters. If you provide job work or ancillary services for an exporter, you can also benefit from this scheme by importing relevant machinery.

Commitment to add export value

When you avail this scheme you must commit to export products worth a certain multiple of the duty amount you saved on the imported goods. Exporters and other associated businesses must complete this obligation over six years.

Apart from the primary export obligation, the beneficiaries of this scheme must commit to a specific level of exports based on their previous export performance.

Coverage of Capital Goods in EPCG Scheme

1. All aspects of production: The capital goods you can import under this scheme include all aspects like the machinery that could be used for production, quality control, and packaging. It can cover any machinery or equipment that will be used at various stages, from the production planning to inventory management

2. Local options: To promote the ‘Make in India’ initiative, exporters can choose to go with local capital goods under the export promotion capital goods (EPCG) scheme

3. Technology upgrade: Exporters have the option to leverage the EPCG scheme to modernize their manufacturing processes to establish themselves as quality suppliers in the international markets, offering competitive prices

What are the benefits of the EPCG scheme?

The EPCG scheme will help you, as an exporter competing in the international market, establish yourself as a reliable supplier who meets global quality standards. The duty relief you get under this scheme, which can be substantial, will also help you optimize production costs.

• Also Read: What are the challenges of international logistics?

The export promotion capital goods (EPCG) Scheme can also act as an initiative for any business in the chain of stakeholders in the export business to take the next step towards improving their operations by providing some relief.

How do I apply for EPCG benefits, and what documents should I submit?

Apply through the Directorate General of Foreign Trade (DFGT) by submitting the following documents:

Documents required for the EPCG license

To obtain the EPCG license, you will need these documents:

• Include your Import Export Code (IEC)
• Pan Card of the business or sole proprietor
• The Proforma Invoice for the equipment you intend to import
• Digital signature of the authorized signatory
• GST Registration Certificate
• Excise registration (if registered)
• Registration certificate from the Tourism Department
• Brochure for the equipment you intend to purchase with all specs
• Registration and Membership Certificate (RCMC)
• Self-certified copy of the Certificate of Chartered Accountant and Chartered Engineer
• Include a bond or bank guarantee for compliance with the export obligation

Since the EPCG scheme is offered by the government and is subject to changes and updates, keep checking for these to keep abreast of the latest rules.

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