EPCG,MOOWR: Duty Exemption for Capital Goods:
Home> EPCG,MOOWR: Duty Exemption for Capital Goods:

Looking to enhance your export capabilities and gain a competitive edge in the global market? The Export Promotion Capital Goods (EPCG) scheme is here to help. In this comprehensive guide, we'll delve into the benefits, eligibility criteria, and obligations associated with the EPCG scheme. Discover how this government initiative can revolutionize your export business and drive your growth.

    What is EPCG Scheme? 

    EPCG stands for Export Promotion Capital Goods Scheme. It is an export incentive program introduced by the Government of India to promote the export of goods manufactured in India. The scheme provides importing capital goods such as machinery, equipment, and components at reduced customs duty rates to upgrade their production capabilities and enhance their export competitiveness.

    To avail of the benefits of the EPCG scheme, exporters need to fulfil certain eligibility criteria and comply with specific export obligations. They are required to achieve a specific export performance within a certain time frame, typically a period of six years from the date of issuance of the authorization.

    Benefits of the EPCG Scheme:

    The EPCG scheme offers a plethora of advantages for Indian exporters. By availing the scheme, you gain access to cutting-edge capital goods at concessional rates, enabling you to upgrade your manufacturing capabilities. This leads to improved product quality, enhanced productivity, and compliance with international standards – factors crucial for success in today’s competitive export landscape.

    Eligibility Criteria:

    The eligibility criteria for the EPCG scheme may vary based on the exporter profile. However, if the exporter has a good track record of at least one year it will save him from submitting the BG. This means that the exporter should have a history of engaging in export activities for a specified period before applying for the scheme.

    Export Obligations:

    Participating in the EPCG scheme requires exporters to fulfil certain export obligations. Typically, you are required to achieve a specific export performance within a designated timeframe, usually around six years from the date of authorization. 

    It’s important to note that the specific procedures and requirements for applying for the EPCG scheme may be subject to updates and changes by the government. Therefore, it’s advisable to seek Andees team advice or assistance for timely submitting the redemption application.

    Andees stands as an expert in the intricacies of the Export Promotion of Capital Goods (EPCG) scheme. Our proficiency extends beyond the initial licensing process and covers critical aspects such as extensions in the Export Obligation Period and adept representation at both the EPCG committee in the DGFT and Court levels.

    Redemption or EODC

    Redemption or EODC (Extension of Date for Redemption/Discharge) are terms associated with the Export Promotion Capital Goods (EPCG) scheme. Let’s understand what they mean: 

    1. Redemption: In the context of the EPCG scheme, redemption refers to the completion of the export obligation by an exporter. The export obligation is the requirement for exporters to achieve a specified level of exports relative to the import value of capital goods obtained under the EPCG scheme. Once an exporter fulfils their export obligation within the prescribed timeframe, they can apply for redemption.

    To seek redemption, exporters need to submit relevant export documentation and proof to the government authorities, such as shipping bills, invoices, and foreign exchange realization certificates. After verifying the export performance and ensuring compliance with the scheme’s requirements, the authorities issue a redemption certificate, acknowledging that the exporter has successfully discharged their export obligation.

    1. EODC (Extension of Date for Redemption/Discharge): Sometimes, an exporter may face challenges in meeting their export obligations within the specified timeframe due to various reasons such as market conditions, unforeseen circumstances, or business difficulties. In such cases, exporters can apply for an EODC, which stands for Extension of Date for Redemption/Discharge. 

    The EODC allows exporters to request an extension of the redemption period beyond the original timeframe to fulfill their export obligations. The exporter needs to submit a formal application to the relevant government authority, providing valid reasons for the extension and supporting documentation. The government authorities will review the application and may grant an extension based on their assessment of the exporter’s circumstances.

    It’s important to note that the specific procedures, documentation requirements, and conditions for redemption and EODC may vary based on the prevailing government policies and guidelines. Exporters are advised to refer to the latest notifications and consult with the Directorate General of Foreign Trade (DGFT) or relevant authorities for accurate and up-to-date information regarding redemption and EODC under the EPCG scheme.


    MOOWR Scheme: Promoting Self-Reliance in Indian Manufacturing | Benefits & Eligibility

    The Manufacturing & Other Operation in Warehouse Regulation (MOOWR) scheme is a pivotal initiative that offers substantial advantages to businesses involved in manufacturing or other operations by deferring import duties on raw materials and capital goods. In alignment with the ‘Atmanirbhar Bharat’ plan, the scheme aims to foster self-reliance and enhance competitiveness in Indian manufacturing.

    Understanding the MOOWR Scheme:

    The MOOWR scheme enables businesses to conduct manufacturing processes or other operations in a bonded warehouse while deferring the payment of import duties on the imported raw materials and capital goods until the finished goods are cleared for the domestic market. Some key features and benefits include:

    • Deferred Duty: Import duties on raw materials and capital goods are deferred until clearance of finished goods. For exported goods, the duty on imported inputs is exempted.
    • Seamless Transfer: Warehoused goods can be transferred between bonded facilities without paying duty, and the deferred duty liability is transferred to the new facility’s owner.
    • No Export Obligation: Businesses can sell 100% of the goods manufactured in the bonded warehouse in the domestic market without any export obligation.
    • Warehouse Keeper: The responsibility of overseeing warehouse operations is assigned to a self-appointed warehouse keeper.

    Eligibility & Application Procedure:

    Any business engaged in manufacturing or other operations as per the MOOWR rules can apply for the scheme. The application is to be submitted to the Principal Commissioner of Customs or the Commissioner of Customs along with certain undertakings and a bond in the specified format.

    Duty Benefits and Taxation:

    The MOOWR scheme is a duty deferment scheme, not an exemption scheme. Import duties on capital goods and inputs are deferred until clearance from the warehouse. For availing under the MOOWR scheme, businesses can seek assistance from Andees. Clearance of capital goods to the domestic market incurs deferred duties, while clearance of finished goods attracts GST and import duties on imported inputs.

    Frequently Asked Questions (FAQs):

    • Eligibility: All businesses engaged in manufacturing or other operations as per MOOWR rules can apply for the scheme.
    • Validity: Once granted, the license remains valid until surrendered or cancelled, eliminating the need for frequent renewals.
    • Benefits: Deferred duty payment, no export obligation, seamless warehouse transfers, and lesser compliance requirements.
    • Domestic Market Sales: There is no export obligation, but customs duty is payable in case of sales to the Domestic Tariff Area.
    • Sourcing from SEZ/FTWZ: Businesses have the flexibility to source capital goods and inputs from imports, the domestic market, or SEZ/FTWZ.

    Suitability for MSMEs: The scheme is MSME-friendly, offering flexibility and no minimum investment or location requirements.

    The MOOWR scheme introduced by the Indian Government promotes local manufacturing and attracts investments by providing deferred import duties. Its simplified procedures and MSME-friendly approach make it an appealing option for businesses, supporting India’s journey towards becoming a global manufacturing hub and fostering self-reliance in the manufacturing sector.

Role of Andees Team

It is very important to note in the above process, that foresight and experience can play a big role in not only getting an optimum license issued, but also in monitoring the export obligation and documentation at each point. Further in case of delay in exports, timely actions can save a lot of problems and liability in future. Finally a proper documentation and representation at the time of redemption can ensure a smoother and optimum closure, taking into account other EPCG, and also other schemes, compliances etc.

Andees has been assisting clients for the whole process of EPCG for the last more than 20 years. Sound knowledge of Policy & Procedures along with a very qualified and experienced team, Andees has handled hundreds of complicated matters related to EPCG, saving thousands of crores for clients that are MNCs, Indian Corporates, or PSUs. While proper planning during the entire life cycle has helped smooth operations, several complicated matters even at the last stage have been saved by Andees team from substantial liabilities.

The scheme is quite beneficial to Manufacturer exporters as they can import their CG without basic customs duty and IGST. The manufacturers can use the capital goods not only for export but also for domestic manufacturing, provided the Export Obligations are met in time.

Tied with the supporting manufacturers can also utilize the scheme for concessional duty import of Capital Goods to be installed at the supporting manufacturers.

EPCG can be taken for the projects where exports of goods or services can be envisaged by the use of the project or alternative products. EPCG can be taken along with Project Import scheme in case of new Projects.

Various service providers/exporters can take EPCG route to reduce their Capital Cost. Service Providers like Hotels, Tour Operators, Taxi Operators, Construction Companies, Logistics companies can utilize the scheme to import/procure from domestic market, their capital goods at a substantially reduced costs. The EO can be fulfilled by Forex Earnings through providing services, like that of Foreign Guests staying in the hotel, medical tourism etc.

Certain other sectors like BPO, Port Projects etc. can also utilize EPCG scheme to their advantage.

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