#Complete Analysis of EPCG Scheme# By SN Panigrahi

EPCG Scheme
@ Zero Basic
Customs Duty
Under Section 12 of
Customs Act, 1962
Notification No. 16/
2015 – Customs;
Dt 1 st April, 2015.
Para 5.01(a) of
FTP 2015-20
IGST
Exempted
Compensation
Cess
Exempted
Sec 3.7 of
Customs Tariff
Act, 1975
Sec 3.9 of
Customs Tariff
Act, 1975
Allows Import Except those
specified in
negative list in
Appendix 5 F
For Pre-
Production
For
Production
For Post
Production
IGST & Compansation
Cess Exempted only upto
31-03-2020
DGFT Notification : No.
57/2015-20; Dated
20.03.2019
Customs Notification :
08/2019-Cus, dt. 25-03-2019

2
SN Panigrahi is a Versatile Practitioner, Strategist, Energetic Coach, Learning Enabler & Public Speaker.
He is an International-Corporate Trainer, Mentor & Author
He has diverse experience and expertise in Project Management, Contract
Management, Supply Chain Management, Procurement, Strategic
Sourcing, Global Sourcing, Logistics, Exports & Imports, Indirect Taxes –
GST etc.
He had done more than 150 Workshops on above
Published more than 500 Articles
He is an Engineer + MBA +PGD ISO 9000 / TQM with around 29 Yrs of
Experience
He is a certified PMP® from PMI (USA) and become PMI India
Champion
Also a Certified Lean Six Sigma Green Belt from Exemplar Global
Trained in COD for 31/2 Yrs. on Strategy & Leadership
GST Certified – MSME – Tech. Dev. Centre (Govt of India)
ZED Consultant – Certified by QCI – MSME (Govt of India)
Member Board of Studies, IIMM
Co-Chairman, Indirect Tax Committee, FTAPCCI
Empanelled Faculty in NI MSME
He has shared his domain expertise in various forums as a speaker & presented a number of papers in various national and
international public forums and received a number of awards for his writings and contribution to business thoughts.
SN Panigrahi
9652571117
snpanigrahi1963@gmail.com
Hyderabad

3
Objective The objective of the EPCG Scheme is to facilitate import of capital goods for
producing quality goods and services and enhance India’s manufacturing
competitiveness.

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Para 5.01
EPCG Scheme allows import of capital goods (except those specified in negative list in Appendix 5 F)
for pre-production, production and post-production at zero customs duty.
Capital goods imported under EPCG Authorisation for physical exports are also exempt from IGST
and Compensation Cess upto 31-03-2020 only
Capital goods for the purpose of the EPCG scheme shall include:
(i) Capital Goods as defined in Chapter 9 including in CKD/SKD condition thereof;
(ii) Computer systems and software which are a part of the Capital Goods being imported;
(iii) Spares, moulds, dies, jigs, fixtures, tools & refractories; and
(iv) Catalysts for initial charge plus one subsequent charge.
Import of capital goods for Project Imports notified by Central Board of Excise and Customs is
also permitted under EPCG Scheme.

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Chapter 5 of
FTP
Export
Promotion
Capital Goods
(EPCG)
Scheme
Objectives
The objective of the EPCG Scheme
is to facilitate import of capital
goods for producing quality goods
and services and enhance India’s
manufacturing competitiveness.
Duty Exemption
EPCG Scheme allows import of
capital goods (except those
specified in negative list in
Appendix 5 F) for pre-production,
production and post-production at
zero customs duty.
Two
Options
Import
Validity : 24 months from the
date of issue of Authorisation.
No Revalidation permitted.
Customs Duty + GST Exempted
Domestic Procurement
Supplies are Treated as Deemed
Exports.
GST First Payable, then can be
Claimed as Refund
Actual User Condition
Imported CG shall be subject to
Actual User condition till export
obligation is completed and
EODC is granted.
Export Obligation
6 times of Duties, Taxes and Cess saved To
be fulfilled in 6 years reckoned from date of
issue of Authorisation.
Conditions &
Export
Obligation

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Capital Goods
include
Capital
Goods as
defined in
Chapter 9
including in
CKD/SKD
condition
Computer
systems and
software
which are a
part of CG
Spares,
Moulds,
Dies, Jigs,
Fixtures,
Tools &
Refractories
Catalysts for
initial charge
plus one
subsequent
charge
Para 9.08 of FTP : "Capital Goods" means any plant, machinery, equipment or accessories required for
manufacture or production, either directly or indirectly, of goods or for rendering services, including those
required for replacement, modernisation, technological up-gradation or expansion. It includes packaging
machinery and equipment, refrigeration equipment, power generating sets, machine tools, equipment and
instruments for testing, research and development, quality and pollution control.
Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry,
floriculture, horticulture, pisciculture, poultry, sericulture and viticulture as well as for use in services
sector.
Note 1: Meaning of CG in GST
As per Sec 2(19) of CGST Act
“capital goods” means goods, the
value of which is capitalised
in the books of account of
the person claiming the input tax credit
and which are used or intended to be
used in the course or furtherance of
business
Note: 2
As per Para 5.01(b) of FTP
Import of capital goods for Project
Imports notified by Central Board of
Excise and Customs is also permitted
under EPCG Scheme.
Para 5.01 (a) of
FTP 2015-20

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Coverage of EPCG Scheme
 Manufacturer exporters with or without supporting manufacturer(s),
 Merchant exporters tied to supporting manufacturer(s) and service providers.
 Name of supporting manufacturer(s) shall be endorsed on the EPCG Authorisation before installation
of the capital goods in the factory / premises of the supporting manufacturer (s).
 Export Promotion Capital Goods (EPCG) Scheme also covers a service provider who is designated
/ certified as a Common Service Provider (CSP) by the DGFT, Department of Commerce or State
Industrial Infrastructural Corporation in a Town of Export Excellence subject to provisions and
conditions of Foreign Trade Policy 2015-2020.

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Export Obligation
Export Obligation equivalent to 6 times of duties, taxes and cess saved on capital goods,
to be fulfilled in 6 years reckoned from date of issue of Authorisation.
Para 5.01(c) of FTP
In case Integrated Tax and Compensation Cess are paid in cash on imports under EPCG,
incidence of the said Integrated Tax and Compensation Cess
would not be taken for computation of net duty saved
provided Input Tax Credit is not availed.
Para 5.01(e) of FTP
Period from the date of issue of Authorisation Minimum export obligation to be fulfilled
Block of 1st to 4th year 50%
Block of 5th and 6th year Balance EO
Block-wise Fulfilment of EO
Para 5.04 of FTP
EO under the scheme shall be, over and above, the average level of exports achieved
by the applicant in the preceding three licensing years
for the same and similar products
Para 5.14 of HB

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Para 5.14 of HBP
…………………… ……… ………….
(b) The Authorisation holder would intimate the Regional Authority on the fulfilment of the export
obligation, as well as average exports, within three months of completion of the block, by
secured electronic filing using digital signatures.
(c) Where EO of the first block is not fulfilled in terms of the above proportions, except in cases
where the EO prescribed for first block is extended by the Regional Authority subject to payment of
composition fee of 2% on duty saved amount proportionate to unfulfilled portion of EO pertaining to
the block, the Authorization holder shall, within 3 months from the expiry of the block, pay duties
of customs (along with applicable interest as notified by DOR) proportionate to duty saved amount
on total unfulfilled EO of the first block.
Intimation of Blockwise Fulfiment
of Export Obligation

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Conditions for
Export Obligation
Para 5.04 of FTP :
Following conditions shall apply to the fulfilment of EO:-
(a) EO shall 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.
(b) EO under the scheme shall be, over and above, the average level of exports achieved by the
applicant in the preceding three licensing years for the same and similar products within the overall
EO period including extended period, if any; except for categories mentioned in paragraph 5.13(a) of
HBP. Such average would be the arithmetic mean of export performance in the preceding three licensing
years for same and similar products.
(c) In case of indigenous sourcing of Capital Goods, specific EO shall be 25% less than the EO
stipulated in Para 5.01.

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(d) Shipments under Advance Authorisation, DFIA, Drawback scheme or reward schemes
under Chapter 3 of FTP; would also count for fulfillment of EO under EPCG Scheme.
(e) Export shall be physical export. However, supplies as specified in paragraph 7.02 (a), (b), (e),
(f) & (h) of FTP (Deemed Exports) shall also be counted towards fulfillment of export obligation,
along with usual benefits available under paragraph 7.03 of FTP.
(f) EO can also be fulfilled by the supply of ITA-I items to DTA, provided realization is in free foreign
exchange.
(g) Royalty payments received by the Authorisation holder in freely convertible currency and foreign
exchange received for R&D services shall also be counted for discharge under EPCG.
(h) Payment received in rupee terms for such Services as notified in Appendix 5D shall also be
counted towards discharge of export obligation under the EPCG scheme.
Conditions for
Export Obligation

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Para 5.08 of FTP
In case of direct imports, EO shall be reckoned with reference to actual duty
saved amount.
 Value of Customs Duty Saved (Say) = X, then Export Obligation shall be 6X
In case of domestic sourcing, EO shall be reckoned with reference to notional
Customs duties saved on FOR value.
Calculation of
Export Obligation

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Validity for Import
Validity for Import
24 months from the date of issue of Authorisation.
No Revalidation permitted.
Para 5.01(d) of FTP
Vide Public Notice No. 47/2015-20
Dated the 16th November, 2018
Validity period has been extended
from 18 months to 24 months.
Imported CG shall be subject to Actual User condition
till export obligation is
completed and EODC is granted.
Para 5.03 of FTP
Actual User Condition

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Public Notice No. 31/2015-20, Dated 29th August, 2018; Dated the 29th August, 2018
Para 5.04(a) of HBP:
Authorization holder shall produce, within six months from date of completion of import, to the
concerned RA, a certificate from the jurisdictional Customs authority or an independent Chartered
Engineer, at the option of the authorisation holder, confirming installation of capital goods at
factory / premises of authorization holder or his supporting manufacturer(s).
The RA may allow one time extension of the said period for producing the certificate by a
maximum period of 12 months with a composition fee of Rs.5000/-.
Where the authorisation holder opts for independent Chartered Engineer’s certificate, he shall
send a copy of the certificate to the jurisdictional Customs Authority for intimation/record.
Para 5.04(b) of HBP
In the case of import of spares, the installation certificate shall be submitted by the Authorization
holder within a period of three years from the date of import.

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Public Notice No. 31/2015-20, Dated 29th August, 2018; Dated the
29th August, 2018
Para 5.04(a) of HBP:
The authorization holder shall be permitted to shift capital goods during
the entire export obligation period to other units mentioned in the IEC and
RCMC of the authorization holder subject to production of fresh installation
certificate to the RA concerned within six months of the shifting.

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Indigenous Sourcing of CG:
Benefits to Domestic Supplier
Para 5.07 of FTP
A person holding an EPCG authorisation may source capital goods from a domestic
manufacturer. Such domestic manufacturer shall be eligible for deemed export benefits under
paragraph 7.03 of FTP and as may be provided under GST Rules under the category of
deemed exports.
Such domestic sourcing shall also be permitted from EOUs and these supplies shall be
counted for purpose of fulfilment of positive NFE by said EOU as provided in Para 6.09 (a) of
FTP.

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Indigenous
Sourcing of CG
Domestic Supplier
of CG
EPCG Authorization
Holder
Supply on
Payment of GST
Treated as Deemed Exports
Notification No. 48/2017-Central Tax
Dated 18th Oct’ 2017
Refund of Deemed Exports supply
can be claimed by either
Recipient or Supplier
Notification No. 47/2017–Central Tax
Dated 18
th
Oct’ 2017
Para 5.07 of FTP
Note: ARO facility shall not be available for sourcing of Capital Goods
manufactured indigenously

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Evidences Required - to be produced by the Supplier of
Deemed Export Supplies for Claiming Refund
Notification No. 49/2017-Central Tax, 18th October, 2017
Evidence to be
Produced by
Supplier
Acknowledgment by the jurisdictional Tax officer of the Export
Promotion Capital Goods Authorisation holder, that the said deemed
export supplies have been received by the said Export Promotion
Capital Goods Authorisation holder.
An undertaking by the recipient of deemed export supplies that
no input tax credit on such supplies has been availed of by him
An undertaking by the recipient of deemed export supplies that he
shall not claim the refund in respect of such supplies and the
supplier may claim the refund.

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Para 5.09 of FTP
With a view to accelerating exports, in cases where Authorisation
holder has fulfilled 75% or more of specific export obligation and 100%
of Average Export Obligation till date, if any, in half or less than half the
original export obligation period specified, remaining export obligation
shall be condoned and the Authorisation redeemed by RA concerned.
Incentive for early EO fulfilment

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Para 5.10 of FTP
For exporters of Green Technology Products, Specific EO shall be 75% of EO as stipulated in Para
5.01. There shall be no change in average EO imposed, if any, as stipulated in Para 5.04.
The list of Green Technology Products is given in Para 5.29 of HBP.
Para 5.29 of HBP : Green Technology Products
The Export Products covered under Paragraph 5.10 of FTP which provides for reduced export
obligation of 75% for green technology products are:
Reduced EO for Green Technology
Products
(i) Equipment for Solar Energy decentralized and grid
connected products,
(ix) Solar Collector and Parts thereof,
(ii) Bio-Mass Gassifier, (x) Water Treatment Plants,
(iii) Bio-Mass/Waste Boiler, (xi) Wind Mill, Wind Mill Turbine / Engine,
(iv) Vapour Absorption Chillers, (xii) Other Generating Sets - Wind powered,
(v) Waste Heat Boiler, (xiii) Electrically Operated Vehicles – Motor Cars,
(vi) Waste Heat Recovery Units, (xiv) Electrically Operated Vehicles - Lorries and Trucks,
(vii) Unfired Heat Recovery Steam Generators, (xv) Electrically Operated Vehicles – Motor
Cycles/Mopeds, and
(viii) Wind Turbine, (xvi) Solar Cells.

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Para 5.11 of FTP
Reduced EO for North East Region and Jammu & Kashmir For
units located in Arunachal Pradesh, Assam, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Jammu &
Kashmir, specific EO shall be 25% of the EO, as stipulated in
Para 5.01. There shall be no change in average EO imposed, if
any, as stipulated in Para 5.04.
Reduced EO for Green Technology
Products

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Post Export EPCG Duty Credit Scrip(s)
Par 5.12 of FTP
(a) Post Export EPCG Duty Credit Scrip(s) shall be available to exporters who intend to import capital
goods on full payment of applicable duties, taxes and cess in cash and choose to opt for this scheme.
(b) Basic Customs duty paid on Capital Goods shall be remitted in the form of freely transferable duty
credit scrip(s), similar to those issued under Chapter 3 of FTP.
(c) Specific EO shall be 85% of the applicable specific EO under the EPCG Scheme. However, average
EO shall remain unchanged.
(d) Duty remission shall be in proportion to the EO fulfilled.
(e) All provisions for utilization of scrips issued under Chapter 3 of FTP shall also be applicable to Post
Export EPCG Duty Credit Scrip (s).
(f) All provisions of the existing EPCG Scheme shall apply insofar as they are not inconsistent with this
scheme.

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Notification No. 54/2018 – Central Tax; Dated 9th October, 2018
Amendment to Rule 89(4B) of CGST Rules :
Where the person claiming refund of unutilised input tax credit on account of zero rated supplies
without payment of tax has ……….
(b) availed the benefit of Notification No. 79/2017-Customs, dated the 13th October, 2017
(Exemption under EPCG Scheme) refund of input tax credit can be claimed
Comment : Even when Benefit of Exemption of EPCG Scheme availed, Refund of Input Tax on
Export without Payment of Tax is allowed.
Export without Payment of GST
Claiming Refund of Input Tax Credit

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Notification No. 54/2018 – Central Tax; Dated 9th October, 2018
Amendment to Rule 96(10) of CGST Rules :
The persons claiming Refund of integrated tax paid on exports of goods or services should not have
…….. …….. ………
(b) availed the benefit under notification No. 79/2017-Customs, dated the 13th October, 2017
except so far it relates to receipt of capital goods by such person against Export Promotion
Capital Goods Scheme
Comment :
Refund of Integrated Tax Paid is available even when Exemption of EPCG benefit is availed
Export with Payment of GST
Claiming Refund of Integrated Tax Paid

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Para 5.15 of HBP
Authorisation holder shall submit to RA concerned by 30th April
of every year, report on fulfilment of export obligation by
secured electronic filing using digital signatures/ or hard copy
thereof.
Monitoring of Export Obligation

27
Title Notification No. Date
Exempt Integrated Tax / Cess on import of
goods under AA / EPCG schemes
Notification 16/2015- Customs
Notification No. 79/2017-Customs,
Notification No.66/2018-Customs
Notification No. 08/2019-Customs
01/04/2015
3/10/2017
26/09/2018
25/03/ 2019
Evidences required to be produced by supplier
of deemed export for claiming refund
Notification No. 49/2017-Central
Tax
18/10/2017
CBEC notifies certain supplies as deemed
exports under CGST Act, 2017
Notification No. 48/2017-Central
Tax
18/10/2017
GST Refund of deemed exports supply can be
claimed by either recipient or supplier
Notification No. 47/2017–Central
Tax
18/10/2017
Export Refund of : a) Input Tax Credit
b) Integrated Taxes Paid
Notification No. 54/2018 – Central
Tax;
19/10/2018

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https://www.youtube.com/channel/UCVZ
ScNa_leR8XbYINEwTFwQ/videos

Session - 1
Overview of
International
Trade
How to Start
Export Business
Session – 2
How to Identify
Export Product &
Customers
Product X Market
Selection
Session – 7
Packing, Labeling
& Quality
Standards;
Risks in
International
Business
Session – 4
Export Costing –
Pricing
How to Negotiate
International
Contracts
Session – 3
Export Logistics:
Air, Sea, Road
Transportation
INCOTERMS; Port
& Shipping
Formalities
Session - 6
Export
Procedures &
Documentation
Customs
Clearances
Export - Import
Session – 5
Introduction to
Foreign Trade
Policy; Export
Incentives &
Export Promotion
Schemes
Session – 8
Export Payment
Methods
Payment Risks
Export Finance :
Pre & Post Export
Finance
SN Panigrahi
Two Days Workshop on
Export – Import Management

Contact Details:
SN Panigrahi
9652571117
snpanigrahi1963@gmail.com 33

#Complete Analysis of EPCG Scheme# By SN Panigrahi

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#Complete Analysis of EPCG Scheme# By SN Panigrahi