Focus and Objectives:
EPCG Scheme: This scheme prioritizes capital goods. It allows manufacturers and certain exporters to import machinery, equipment, and computer systems at minimal or zero customs duty. The goal is to encourage investment in advanced technology, ultimately leading to increased production efficiency and improved product quality for export goods..
Advance Authorization Scheme: This scheme concentrates on duty-free import of inputs. These inputs can be raw materials, components, consumables, fuels, or packaging materials that are physically incorporated into the final export product. The primary aim is to reduce production costs for export-oriented goods, thereby enhancing their global market competitiveness.
Eligibility:
EPCG Scheme: The scheme is open to:
- Manufacturer-Exporters: Businesses that produce and export their own products.
- Merchant Exporters: Businesses that source products from supporting manufacturers and then export them (valid tie-up agreement required).
Advance Authorization Scheme: This scheme caters to a broader range of exporters, including:
- Manufacturer-Exporters (similar to EPCG)
- Merchant Exporters (similar to EPCG)
- Service Exporters: Businesses that provide export-oriented services, such as software development or engineering services.
Nature of Duty Exemption:
EPCG Scheme: The duty exemption applies to the entire cost of the imported capital goods. This can lead to significant cost savings, especially for high-value machinery and equipment.
Advance Authorization Scheme: The duty exemption applies only to the customs duty component of the imported inputs. Other import-related charges, such as countervailing duties or special additional duties, might still be applicable.
Export Obligation:
EPCG Scheme: Exporters availing the scheme must fulfill a specific export value obligation within a stipulated timeframe (typically 6 years). This export value is generally calculated as a multiple (usually 4-6 times) of the customs duty saved on the imported capital goods.
Advance Authorization Scheme: The export obligation is based on the net foreign exchange earning. This refers to the value of the final export product minus the value of the duty-free imported inputs. The export obligation needs to be fulfilled within a specified timeframe (typically 12-36 months).
Choosing the Right Scheme: powering up exports a comprehensive guide to the epcg scheme in india 2024
The choice between EPCG and Advance Authorization Scheme depends on your specific export needs:
For businesses seeking to invest in advanced technology and improve production capabilities and product quality, the EPCG scheme might be a better fit.
For businesses looking to reduce production costs for export-oriented goods by minimizing import duty on raw materials and other inputs, the Advance Authorization scheme could be more suitable.
Additional Considerations:
Record Keeping: Both schemes require meticulous record-keeping of import licenses, customs clearances, and export documents for verification by the DGFT when fulfilling the export obligation.
Compliance: Failure to comply with the regulations and fulfill the export obligation can result in penalties and cancellation of scheme benefits. In the case of EPCG, this might involve paying the applicable customs duty along with interest on the imported capital goods.
Conclusion:
The EPCG and Advance Authorization schemes offer valuable tools for Indian exporters to navigate the global market. By understanding the key differences and eligibility criteria, businesses can make informed decisions to leverage these initiatives effectively. Consulting with a customs broker or international trade advisor can provide valuable guidance throughout the application process and ensure smooth implementation of the chosen scheme.
Remember, both schemes aim to empower Indian exporters by reducing costs and enhancing competitiveness. By strategically utilizing these initiatives, businesses can contribute to the overall growth of the nation's export sector.