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What is EPCG License?

What is EPCG License?

Bringing foreign currency plays an important part in building a strong economy in any country and the government tries to do so by introducing various schemes to push exports. EPCG scheme is a part of it. EPCG stands for Export Promotion Capital Goods which means Promotion of exports with the help of Capital Goods(machinery in case of manufacturing and materials in case of service industry). Capital Goods plays the most important part in any industry to produce a good or service and its sourcing can be either domestic or international.

EPCG Scheme

This scheme provides benefit in both domestic and international sourcing of capital goods. In India, the import of goods attract Customs Duty and GST(Sales Tax). This schemes allows you to import capital goods duty free in with a condition that is to export goods made out of the machine sought to be imported under EPCG scheme. Here’s the calculation under this scheme: Supposedly, you are planning to import capital goods under EPCG worth X and Customs duty charged on it is Y then you have to export goods made out of that machinery worth 6Y under 6 years period in 2 block periods. 50% value of export should be done in First Block which is for 4 years and the remaining 50% can be done in the remaining 2 years.

Let’s try with an example

You are/or planning to be a t-shirt manufacturer and you wish to import it’s capital goods which can be stitching machine and Iron worth Rs. 5 Lacs and it may attract an additional 10% customs duty i.e Rs. 50,000. After getting the EPCG license for the capital goods, the customs duty will be waived off at Indian customs during clearance.

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