What is EPCG Scheme and License? Explained

The EPCG Scheme is for the welfare and interest of indigenous businesses. These native/ indigenous businesses deal either in imports or export immensely to the companies situated in foreign. The EPCG Scheme was launched by the government of India in order to incentivize exports. It benefits companies and industries of all types in all sectors. It consists of renouncing the import duty on those products that are imported  in exchange for discharging an export necessity within the decided time.

The government deploys import duty usually at 3% of the specified charge which might have to be paid otherwise subject to conditions within 8 years of the export obligation of 8 times the Duty saved has been discharged satisfactorily. In some of the special or exceptional situations, the time for the fulfilment of this Saved Duty may end up being extended to up to a time period of 12 years. However, the EPCG Scheme is not easily available to even the Large-Scale Enterprises as it only applies to those export obligations that exceed Rs. 100 Cr.

Third Party Exports Under EPCG Scheme

The provision 5.7.1. Stated under the EPCG Scheme is related to Third Party Exports and states that “someone who has the Authorization of EPCG need to export either directly or via third party(ies). If the merchant exporter has the authorization  of EPCG, then the shipping bills should also contain the name of the supporting merchant. Also, the authorization number provided by EPCG  and date should also be mentioned on the shipping bills at the time of export, which need to be shown for the discharge of obligation of exports.”

Therefore, third party exports can be done under this scheme. However, the company can not show the discharge of the obligation of export on goods that are not related in any way to the goods manufactured by itself.

Who is benefited by the EPCG Scheme?

The EPCG scheme was aimed at promoting exports. Through this scheme, the government gives incentives and financial help to Exporters. This provision can be utilized by exporters who export in heavy amounts but those who manufacture small amounts or decide to sell their entire produce in the indigenous market can not use this provision. Each business should go through this provision with a written analysis that has details of the expected export amount.

What does the EPCG Scheme apply to?

EPCG scheme is mainly related to machine parts, machinery and some more similar goods. This scheme can be considered by any such company that deals with heavy production and wants to import machines for its factory from abroad. However, that is not the only entity to which this scheme applies. The government also intends to include  the service providers. The export obligation can also be filled by service providers by the same firm that possesses the EPCG Licence. The exporter who exports goods acn decide to get refixed the export obligation and the substitute service. In such a case, those bills that document the services that are charged to companies abroad are sufficient enough to comply with the export obligation.

How to get an EPCG Licence?

In order to acquire an EPCG Licence, the applicant needs to file an application along with the required documents, listing the cause for which he needs the EPCG Licence with the DGFT(Director General of Foreign Trade), which is the licensing authority of EPCG Licence. On the basis of the amount of the import duty exemption, the export obligation is filled accordingly and the value addition is fixed up. The period to get your export obligation permitted may be extended by the licensing authority if the cause of failure was genuine and acceptable. But if the export obligation has been finished, then all the goods can be sold in the local area or the domestic staff area. It is important for businesses to fulfil their obligations in the markets abroad.

The EPCG Scheme helps those exporters who earn foreign currency in different levels of exemption of import duty or financial assistance, etc. In this case, the machines that will be imported will be used for the manufacturing of goods which need to be exported in order to earn foreign exchange. But this process needs a note-worthy initial outlay of cash, also the benefits of the machine will vanish in the future years. Other than this, a total exemption from the import duty amount can also be granted in the import of such machines. When an applicant applies for an EPCG Scheme, then he will have to export the decided amount of goods within the specified time period. EPCG Scheme is a beneficial scheme for exporters and importers that is provided by the government for exemption of import duty amount.

The Penal Sections of EPCG Scheme

If someone tries to ignore a law, then no excuses can be tolerated. There should be heavy  penalties levied on the individual or organisation or company that violates the law. If someone has violated the law, then they will have to face various penal sections. If someone tries to earn money by illegal and illicit methods to earn money then, this suggests that the person is totally ignorant and a fool who will not get to enjoy the benefits and fruits of his labour. This is because earning money has been stated as easy if someone uses legal and ethical methods to earn it. If someone uses illegal means to earn money, then he has to live in the constant fear of being caught and may carry the guilt with him for a long period of time. It is better to be honest and lawful and rely on the profit that has been earned by hard labour. There are innumerable opportunities to perform such legal activities to earn money. So, if someone resorts to illegal means of earning money, then he is making his way towards admitting his defeat and lowering his expectations of himself. He definitely ends up having zero-faith in his merits, worth and talent. Therefore, in order to avoid any sort of penal sections under the EPCG Scheme, one should always stick to lawful methods to earn money.