Export Promotion Capital Goods Scheme (EPCG)
  • This is one of the popular schemes utilized extensively by importers to minimize the impact of customs duty on import of Capital Goods.  The objective is to enhance productivity by reducing the customs duty on imported capital goods to just 3 % with an obligation on the exporter to generate exports equal to 8 times the duty saved within a period of 8 years.
  • EPCG authorisaton (licence) is issued by the DGFT (Director General of Foreign Trade) for import of new as well as 2nd hand capital goods to both existing as well as new exporters.  However, new units need to execute 100% Bank Guarantee for the amount of customs duty saved.
  • Inspite of the declining customs duty levels, this Scheme is attractive since only a flat rate of 3% customs duty needs to be paid and prescribed levels of exports generated.  However, the cost of establishing the Bank Guarantee (especially for new units) and actually completing the export obligation within the 8 year period has to be considered before opting for the EPCG authorization scheme.
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