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Foreign Trade Policy to Revamp EPCG Scheme

India
30 Apr 2013
The Government of India has announced several measures in Foreign Trade Policy (FTP) for FY 2013-14. Among other objectives, these measures are aimed at increasing the technology intensity of exports from India through the revamp of the Export Promotion Capital Goods (EPCG) scheme.

Taxand India investigates what this revamp will entail.

  • Zero percent EPCG scheme has been expanded to all industries and sunset clause (of 31 March 2013) for the Zero percent EPCG scheme has been removed.
  • Import of cars and other vehicles will not be allowed under the new zero duty scheme. However, hotel and travel industry will be allowed to import motor cars under Served From India Scheme (SFIS)
  • Export Obligation (EO) has been reduced from eight times to six times of duty saved.
  • Period of EO has been reduced to 6 years, irrespective of the amount of duty saved.
  • EO allowed to be reduced further by 10% in cases where capital goods are sourced domestically.
  • Going forward, second hand capital goods cannot be procured under EPCG Scheme.
  • For EPCG licenses issued after April 2013, clubbing of EPCG licenses is allowed. This facility was only available to Advance Authorisations.
  • Regularisation of default in EO allowed subject to payment of customs duty and interest. Customs duty component can be paid using duty credit scrip.

Discover more: Foreign Trade Policy to increase technology exports through EPCG Scheme


Your Taxand contact for further queries is:
Rajeev Dimri
T. +91 11 3081 5000
E. rajeev.dimri@bmradvisors.com

 

 

 

Taxand's Take

Changes in the FTP lay emphasis on greater technological intensity of exports and higher value addition in export of manufactured goods from India. Changes in the EPCG scheme like extending zero duty EPCG scheme to all sectors and making the administration of scheme more flexible can be seen as part of a larger policy initiatives of the Government to support the manufacturing sector.

Zero duty EPCG scheme being extended to all the sectors would also help in reducing the cash cost of acquisition of capital goods. This would also be a great benefit to a business which has export potential but the intensity of export is not that significant for the business to be able to avail EOU benefits.

Taxand's Take Author