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EPCG Export Obligation

EPCG Export Obligation

EPCG Export Obligation

EPCG scheme facilitates import of capital goods for producing quality goods and services to enhance India’s export competitiveness. Under the EPCG scheme, capital goods imported at zero customs duty must fulfil EPCG export obligation equivalent to 6 times of duty saved on the capital goods. In this article, we review the EPCG export obligation requirement in detail.

EPCG Export Obligation Requirement

Import of capital goods under EPCG scheme is subject to an export obligation equivalent to 6 times of duty saved on capital goods, to be fulfilled in 6 years reckoned from date of issue of EPCG authorisation. The following are some of the conditions are applicable for the fulfillment of export obligation:

  • Export obligation must be fulfilled by the authorisation holder through export of goods which are manufactured by him or his supporting manufacturer/services rendered by him, for which the EPCG authorisation has been granted.
  • Export obligation under the scheme shall be, over and above, the average level of exports achieved by the preceding three licensing years for the same and similar products within the overall export obligation period including extended period.
  • Shipment under Advance Authorisation, DFIA, Drawback scheme or reward schemes would also count for export obligation fulfilment.

Calculating Export Obligation

For direct imports, export obligation is calculated with reference to the actual duty saved. In case of domestic sourcing, export obligation is calculated with reference to notional customs duties saved on FOR value.

Incentive for Early Export Obligation Fulfilment

If an authorisation holder has fulfilled 75% or more of specific export obligation and 100% of the average export obligation till date, if any, in half or less than half the original export obligation period, remaining export obligation shall be condoned and the authorisation redeemed. The incentive for early export obligation fulfilment was introduced to accelerate exports.

Incentive for Green Technology Products

Incentive of reduced export obligation of 75% is application for green technology products such as:

  1. Equipment for solar energy decentralized and grid connected products
  2. Bio-mass gassifier
  3. Bio-mass or waste boiler
  4. Vapour absorption chillers
  5. Waste heat boiler
  6. Wast heat recovery units
  7. Unfired heat recovery steam generators
  8. Wind turbine
  9. Solar collector and parts
  10. Water treatment plants
  11. Wind mill
  12. Wind mill turbine
  13. Wind mill engine
  14. Wind powered generating sets
  15. Electrically operated vehicles
  16. Solar cells

Incentive for North East Regions

Businesses located in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Jammu & Kashmir are eligible for reduction of export obligation by 25%.