Having decided to present a non-reformist Foreign Trade Policy, Commerce Minister Anand Sharma has managed to get quite a few incentives for exporters from the finance ministry. The major one among these is the zero-duty Export Promotion Capital Goods scheme.
The zero-duty EPCG scheme is in addition to the 3 per cent EPCG scheme that was introduced last year. The zero-duty scheme is available only for exporters of engineering and electronic products, basic chemicals and pharmaceuticals, apparels and textiles, plastics, handicrafts, chemicals and allied products, and leather and leather products.
However, this scheme is not available for units which are currently availing any benefits under the Technology Upgradation Fund Scheme administered by the Ministry of Textiles and those which avail in that year, the benefit of the Status Holder Incentive Scheme under Paragraph 3.16 of FTP.
The scheme allows import of capital goods for pre-production, production and post-production (including CKD/SKD thereof as well as computer software systems) but does not allow goods covered under Chapters 1 to 24, 25 to 27, 31, 40, 43, 44, 45, 47 to 49, 68 to 70, 71, 81 (metals in primary and intermediate forms only), 89, 93, 97, 98 and headings 7,201 to 7,212, 7,218 to 7,220, 7,224 to 7,226, 7,401to 7,406, 7,501 to 7,504, 7,601 to 7,603, 7,801, 7,802, 7,901 to 7,903, 8,001, 8,002 and 8,401. However, the zero-duty EPCG scheme will be available for handicraft exporters under Chapters 5, 44, 68, 97.
The export obligation under the zero-duty scheme is only six times the duty saved to be fulfilled in six years, whereas the export obligation under the 3 per cent EPCG scheme is eight times the duty saved in eight years. The validity period of zero duty EPCG authorisations will be only nine months, whereas that of 3 per cent EPCG authorisations will be 36 months.
The Handbook of Procedures, Vol. 1 (HB-1) says that all other provisions pertaining to the concessional 3 per cent EPCG scheme shall be applicable to the zero-duty schemes also.
The special dispensations for units in agro, cottage, tiny and small-scale sectors seem restricted to the 3 per cent EPCG scheme. Clarity is required on the availability of zero-duty scheme in cases where duty saved is more than Rs 100 crore (Rs 1 billion), where the countervailing duty is paid in cash and where imports are covered under Project Import Regulations.
Spares (including refurbished/reconditioned spares), moulds, dies, jigs, fixtures, tools, refractory for initial lining and catalyst for initial charge for existing plant and machinery (imported earlier, under EPCG or otherwise) are allowed under the zero-duty scheme but the export obligation will be 50 per cent of the prescribed normal export obligation.
But, the value of spares will be limited to 10 per cent of the value of plant and machinery imported under the EPCG scheme. In case spares for plant and machinery not imported under the EPCG scheme, spares import will be limited to 10 per cent of the book value of the plant and machinery.
The Policy is categorical that shipments under incentive schemes under Chapter 3 of the FTP would also count for fulfilment of EPCG export obligation, but the Customs notification for 3 per cent EPCG scheme does not allow this.
The FTP now allows wastage at the time of installation. The incentive for accelerated fulfilment of export obligation is available under the zero-duty EPCG scheme also.
