Trade Notice no. 10/2016 which came last Tuesday, on July 19th 2016, brought some sigh of relief for all the exporters who have made supplies to SEZ units before 01.04.2015 against payment in INR and wanted to discharge their Export Obligation of EPCG licenses through these exports.

It was decided that Closure/Redemption/EODC may be allowed in cases where EPCG authorization holder has made supplies to SEZ units and has not realized the proceeds from the Foreign Currency Accounts (FCA), in case of supplies which have been made prior to 01.04.2015 only.

Basis of this decision was the statements from HBPs and SEZ rule books. Below is the excerpt from the Notice:

It was observed that Para 5.7.2 of HBP 2009-14 read with relevant paras of earlier policies did not stipulate that DTA units supplying goods under EPCG scheme to SEZ units had to realise payment from Foreign Currency Account (FCA) of SEZ units, for discharge of Export Obligation. Moreover, Rule 30(8) of SEZ Rules, 2006 do not stipulate that it is mandatory for SEZ units to make payment to EPCG authorization holders from Foreign Currency Accounts (FCA) of the unit.

However, para 5.11 of HBP 2015-20 clearly mentions that exports to SEZ units/supplies to developers/co-developers shall be taken in to account for discharge of EO provided payment is realized from FCA of the SEZ units.

So the conclusion is:

• Supplies made to SEZ prior to 01/04/2015 where payment realized was not from Foreign Currency Account (FCA) of SEZ may be counted for EODC against EPCG.
• Supplies made to SEZ on or after 01.04.2015 where payment was not from Foreign Currency Account (FCA) of SEZ will not be counted for EODC against EPCG. Counted only if payment is from FCA of SEZ.
• Supplies made to SEZ where payments were realized after 31.03.201 and from FCA of SEZ, will be counted for EODC against EPCG. This condition is applicable only for EPCG issued under 2009-14.