Redemption of EPCG License

Export Promotion Capital Goods (EPCG) Scheme is one of the star initiatives by the Government of India under the Foreign Trade Policy (FTP). It permits import of capital goods at zero or concessional customs duty, subject to the condition that the importer has to meet an export obligation. After satisfying the export obligation, the exporter must undertake the process for redemption of EPCG license to bring closure to the obligations with the Directorate General of Foreign Trade (DGFT) and Customs.

Understanding EPCG and Its Importance

The EPCG scheme provides Indian exporters with the benefit of importing capital goods necessary for manufacturing at zero or lower customs duty. These goods are to be employed for the manufacture of exportable products, and the exporter has to discharge an export obligation of six times the duty saved in six years.

The EPCG license is granted by Directorate General of Foreign Trade (DGFT) and has to be registered with customs for use. When the export obligation is completed, the license has to be redeemed through a regular procedure with both the DGFT and the customs authorities.

Important Points Regarding EPCG License

1. Zero/Concessional Duty Imports: Capital goods import at lower duty.

2. Export Obligation: Export obligation to be completed within 6 years.

3. EPCG License Registration with Customs: Compulsory registration of the license at the import port.

4. Monitoring by DGFT and Customs: Both keep EO compliance under monitoring.

5. Redemption of EPCG License in India: Last step of compliance to close the license formally.

EPCG License Procedure – Step by Step

The EPCG License procedure involve the following principal steps:

1. Application for EPCG License

• The company applying submits an application to DGFT using the online DGFT portal.
• Information of the capital goods, machinery specifications, and exports intended are provided.
• The EPCG license is issued once approved.

 

2. EPCG License Registration Process with Customs

• The EPCG license is required to be registered at Customs where imports are being made prior to clearance of imported goods.
• Bond/BG (Bank Guarantee) is done based on the exporter's performance record.
• Registration guarantees duty benefits are utilized.

 

3. Use of Imported Capital Goods

• The imported machinery is installed in the factory/unit.
• It must be utilized for the production of export merchandise, as stated in the license.

 

4. Export Obligation (EO) Fulfillment

• The obligation is met by export of the goods produced with the assistance of imported machinery.
• EO = 6 times of duty saved, to be met within 6 years.
• Annual monitoring is undertaken by DGFT in the form of annual reports.

 

5. Annual Return Filing

• Exporters are required to file Annual Reports with DGFT on EO progress.
• This helps avoid show cause notices and penalties.

 

6. Redemption Procedure for EPCG License in India

• After EO is completely fulfilled, the exporter makes an application to DGFT for redemption.
• Documents to be submitted are:

(a) Copy of EPCG License

(b) Installation Certificate of machinery

(c) EODC application (Export Obligation Discharge Certificate)

(d) Documents of customs clearance

(e) Chartered Accountant certificate for EO fulfillment

7. Grant of EODC (Export Obligation Discharge Certificate)

• Upon document and export data verification, DGFT grants the EODC.
• It verifies that the export requirement has been fulfilled and the EPCG license is redeemed.

 

EPCG License Validity and Renewal

An EPCG license has strict time frames, both for imports and for export obligation discharge.

1. License Validity for Imports

• An EPCG license is valid for 18 months from the issuance date.
• Importer needs to register the license with Customs and make imports within this period.

 

2. Export Obligation Period

• Exporter has 6 years after imports to complete the EO (six times the duty saved).

 

3. Extension of License Validity

• Importer may be allowed extension up to 6 months beyond 18 months in case imports cannot be made if DGFT so permits.
• Application to be made before expiry with valid reasons coupled with payment of composition fee.

 

4. Extension of Export Obligation Period

• 6-year EO period may be extended by a further 2 years in genuine cases.
• Extension requests should be submitted in advance along with supporting evidence.

 

5. Importance of Monitoring

• Failure to meet import deadlines or EO timelines may attract penalties and demand notices.
• Proper monitoring of license validity and EO completion is significant to ensure redemption.

 

Documents needed for Redemption of EPCG License in India

• Original DGFT issued EPCG license.
• EPCG license registration documents submitted with Customs.
• Chartered Engineer's Installation Certificate.
• Export invoices and shipping bills.
• E-BRCs (Bank Realization Certificates).
• Chartered Accountant Certificate for export information.
• Self-certified proof of customs bill of entry copy.
• Export obligation fulfillment statement certified by self.
• Annual returns filed with DGFT copies.

 

Challenges in EPCG License Redemption

1. Export Data Mismatch: Inconsistency between DGFT and Customs databases can hinder EODC.

2. Incomplete Installation Certificates: Lack of certification by a Chartered Engineer results in rejection.

3. Filing Annual Returns Delayed: Non-filing is penalized.

4. Incorrect Documentation: Invoice, shipping bill, or license information errors cause delays.

5. Outstanding Dues at Customs: Non-closure at Customs end could lead to complications.

Advantages of Timely EPCG License Redemption

Redemption of EPCG license in India has numerous benefits:

• Avoidance penalties and interest
• Release of guarantees through banks
• Eligibility for future issuance of EPCG licenses
• Increased credibility with DGFT and customs
• Better financial planning and duty conservation

Timely redemption indicates the exporter's commitment towards compliance and makes them stronger as a global trader.

How SKMC Global Can Assist in EPCG Redemption?

At SKMC Global, we are experts in offering end-to-end services for exporters under the EPCG scheme. We offer:

• EPCG License Application: Support for applying and getting an EPCG license from DGFT.
• EPCG License Registration procedure with Customs: Facilitating customs registration to ensure hassle-free clearance.
• Monitoring of Export Obligation: Periodic monitoring of EO compliance to prevent lapses.
• Documentation Support: Preparation and submission of all essential documents for redemption.
• Filing of EODC Application: Professional processing of the Redemption of EPCG License in India to acquire EODC with ease.
• Liaison with DGFT & Customs: Personal coordination with the authorities to clarify questions and obviate delay.
• Advisory Services: Advisory on policy changes, notifications, and compliance issues.

Our professionalism facilitates smooth Redemption of EPCG License in India, saving time and avoiding penalties.

Conclusion

The process of redemption of EPCG license in India is the last step to effectively claim advantages under the EPCG scheme. It comprises compliant imports, EO compliance, reporting on time, and documentation accurately.

A redeemed EPCG license not only avoids penalties but also enhances a company's compliance record, facilitating easier approvals in future schemes. Skilled assistance from experienced professionals such as SKMC Global facilitates the process with ease, with exporters free to concentrate on business development while technical compliance is managed efficiently.