Understanding the EPCG Scheme: A Simple Guide for Indian Export Businesses
Let’s understand the EPCG Scheme in brief and see how it helps businesses import machinery at lower cost.
If you are planning to import capital goods, machines, spare parts or consumables for manufacturing of a product or services, out of which some portion of such product or services will also be utilized for exports, then in such cases you can opt for EPCG scheme (Export Promotion Capital Goods) Scheme. This government scheme helps exporters save money by allowing them to import capital goods at zero import duties (IGST is also exempted), provided they agree to export certain production of resultant product in a period of 6 years.
Now let’s see the Benefits of the EPCG Scheme
The biggest advantage of EPCG is the duty saving. Importing machinery is expensive, and customs duty increases the cost further. EPCG reduces this burden and makes it easier for businesses to upgrade or expand. It is not limited to manufacturing—service businesses like hotels, hospitals, logistics companies, and IT service providers can also benefit. Export obligations can even be completed through third-party exports, which gives exporters more flexibility.
If in case the export obligation is not fulfilled, then there are no penalties. The importer just have to repay the duty saved amount along with 15% per annum simple interest. Partial export obligation fulfilment is also allowed. Moreover, the export obligation period can be extended up to 8 years with payment of nominal composition fees on unfulfilled portion of export obligation.
The EPCG scheme is also available for local procurement of capital goods. In such case the GST amount paid on such procurement will be refunded back to the recipient of capital goods.
Who Can Apply Under EPCG
EPCG can be applied by manufacturers, traders tied to supporting manufacturers and also by service providers. EPCG is a great support scheme for manufacturers and service providers who plans to do export business in future.
