Indian Fiscal Budget 1997-98: EXIM POLICY 1997-2002
EXPORT PROMOTION CAPITAL GOODS SCHEME
6.1Capital goods, both new and second hand, may be imported under the Export Promotion Capital Goods (EPCG) Scheme. The import of second hand capital goods under the scheme shall be subject to such conditions as prescribed in the Handbook (Vol.1). Import of computer systems may also be imported under the EPCG Scheme.
Import on concessional duty
6.2Capital goods (CG), including spares upto 20% of the CIF value of the capital goods, may be imported at a concessional rate of customs duty subject to an export obligation to be fulfilled over a period of time as per table given below. The period for fulfilment of the export obligation shall be reckoned from the date of issue of the import licence. For calculation of NFE, the provision of paragraph 12.6 of the Policy shall apply.
|CUSTOMS DUTY||EXPORT OBLIGATION FOB Basis||EXPORT OBLIGATION NFE Basis||PERIOD|
|10%||4 times cif value of CG||Not applicable.||5 years|
|Zero duty (in case CIF value is Rs.20 crores or more)||6 times cif value of CG||5 times cif value of CG||8 years|
|Zero duty in case CIF value is Rs.5 crores or more for agriculture, aquaculture, animal husbandry, floriculture, horticul-ture, piscicul-ture, viticulture, poultry and sericulture||6 times cif value of CG||5 times cif value of CG||6 years|
(a)Under the Scheme, manufacturer exporters, merchant exporters tied to supporting manufacturer(s) and service providers are eligible to import capital goods.
(b)If the licence issued under the zero duty scheme has actually been utilised for import for a value less than Rs. 20 crores or Rs. 5 Crores as the case may be, such imports shall not be covered under the zero duty scheme and the importer shall be liable to pay full customs duty with 24% interest immediately to the customs authorities and produce evidence to that effect to the Director General of Foreign Trade within a period of one month.
Conditions for import of Capital goods
6.4 Import of capital goods, both new and second hand, shall be subject to Actual User condition till the export obligation is completed.
6.5 The following conditions shall apply to the fulfilment of the export obligation:
(i) The export obligation shall be fulfilled by the export of goods manufactured or produced by the use of the capital goods imported under the scheme;
(ii) The exports shall be direct exports in the name of the EPCG licence holder. However, the export through third party(s) is also allowed provided the name of the EPCG Licence holder is also indicated on the shipping bill. If a merchant exporter is the importer, the name of the supporting manufacturer shall also be indicated on the shipping bill. At the time of export, the EPCG licence No. and date shall be endorsed on the shipping bill which are proposed to be presented towards discharge of export obligation.
(iii)Export proceeds shall be realised in freely convertible currency;
(iv)Exports shall be physical exports. However, deemed exports as specified in paragraph 10.2 (a), (b), (d), (e), and (f) of Policy shall also be counted towards fulfilment of export obligation, but the EPCG licence holder shall not be entitled to claim any benefit under paragraph 10.3 of this Policy in respect of such deemed exports;
(v)The export obligation shall be, in addition to any other export obligation undertaken by the importer, except the export obligation for the same product under the duty exemption scheme as specified in paragraph (vi) below. The export obligation shall be over and above the average level of exports of the same product achieved by him in the preceding three licensing years. If the exporter achieves an export of 75% of the annual value of the production of the relevant export product, the export obligation against the EPCG licence shall be subsumed under that export, provided, however, that the aggregate value of such exports during the specified period shall not be less than the aggregate value of the export obligation fixed under paragraph 6.2 of this Policy;
(vi)Where the manufacturer exporter has obtained licences for the manufacture of the same export product both under EPCG and the Duty Exemption Scheme, the physical exports made under the Duty Exemption Scheme including the Passbook Scheme shall also be counted towards the discharge of the export obligation under this scheme;
(vii)In case of export of computer software, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, viticulture, poultry and sericulture, the export obligation shall be determined in accordance with paragraph 6.2 of the Policy, but the licence holder shall not be required to maintain the average level of exports as specified in sub- paragraph (v) above.
Clearance of goods from Customs
6.6 The licence issued under this scheme shall be valid for the goods already shipped/ arrived provided customs duty has not been paid and the goods have not been cleared from Customs.
Import of Components and goods in SKD/ CKD condition
6.7 A person may apply for a licence under the EPCG scheme to import the capital goods in SKD/CKD condition or components of such capital goods to assemble or manufacture the capital goods. This facility shall not be available for replacement of parts.
Indigenous sourcing of capital goods
6.8 A person holding an EPCG licence, may source the capital goods from a domestic manufacturer instead of importing them. In the event of a firm contract between the parties for such sourcing, the domestic manufacturer may apply under the scheme for the import of components required for the manufacture of the said capital goods, at a rate of duty at which EPCG licence for capital goods is issued. The domestic manufacturer may also replenish the components after supply of capital goods to the EPCG licence holder. However the export obligation relating to an EPCG licence, shall be reckoned with reference to the CIF value of the licence, actually utilised.
Benefits to domestic supplier
6.9 The domestic manufacturer supplying capital goods to EPCG licence holders shall be eligible for deemed export benefit under paragraph 10.3 (a) (Special Imprest licence) or 10.3 (b) in respect of supplies to Zero Duty EPCG licence holder and 10.3 (b) in respect of supplies to 10% EPCG licence holder. In addition, deemed export benefits under paragraph 10.3 (c) and (d) would also be available to such supplies against both 10% and zero duty EPCG licence.
LUT and/ or Bank Guarantee
(a)The licencee shall give to the licensing authority an undertaking for the fulfilment of the export obligation in accordance with the procedures specified in this behalf:
(b)The licencee shall also be required to execute, with the customs authorities, a bond with surety/security as may be prescribed by them.
(c)In case of indigenous sourcing of capital goods, the EPCG licence holder shall furnish bank guarantee (BG)/legal undertaking(LUT) to the licensing authority in accordance with the procedure specified in this behalf.
Compliance with Policy
6.11 Exports made against licences issued under this scheme shall be subject to the provisions of Chapter 11 of the Policy and Chapter 11 of the Handbook (Vol.1).
6.12If an EPCG licence holder violates any condition of the licence or fails to fulfill the export obligation, he shall be liable to action in accordance with the Act, the Rules and Orders made thereunder, the Policy and any other law for the time being in force.
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