EPCG Scheme – Compliance to be met after obtaining an EPCG licence

In this blog we will cover a very important topic which is mostly ignored and overlooked by many of the exporters ie. what compliances should be followed after taking an EPCG authorization/licensing so that the company does not attract any unwanted penalties from the government department.

Watch this short introductory video on the EPCG scheme, which explains the complex concept of EPCG in an easy to understand way. It describes the EPCG scheme and the requirements that must be met after receiving the licence.

We will divide this blog into 5 separate sections for easier understanding.

Issuance of excess duty saved value

If you have obtained EPCG license from DGFT and registered it with Customs by executing a bond or BG. One important thing is, don't forget to keep a copy of the bond and bank guarantee for future reference purposes. You are ready to import machines now.

Suppose the duty saved value (DSV) mentioned on the license is 10 lakh, but at the time of actual import and as per registration list submitted, it increases to 10.5 lakh. ie an increase of 50K. Customs will allow an increase of up to 10% of DSV, but after the import takes place, you will have to pay an additional charge to DGFT on the excess amount of DSV used ie. 50K. The charges payable to DGFT will be 0.1% of Rs. 50,000 ie 50,000 divided by 1000 which equals Rs. 50.

For licenses obtained before 01.04.2015, these fees should be paid within 1 month from the date of import, otherwise it will attract a penalty of Rs. 5,000/-. The maximum limit for paying these fees is 2 years.

For licenses obtained on 01.04.2015, the Government has relaxed this condition, and in such cases the fees of Rs. 50 to be paid at the time of EODC/Redemption.

Submission of installation certificate to DGFT & Customs.

Once the machine is installed, the exporter must obtain an installation certificate from either a jurisdictional customs authority or an independent licensed engineer.

This installation certificate must be submitted to DGFT within 6 months of completion of importation. Failure to do so will attract a penalty of Rs. 5000/-. The maximum limit for submission is 12 months.

If the licensee obtains installation certificate from CE, a copy of the installation certificate shall be sent to the jurisdictional customs authority for intimation/record.

Mention of EPCG license number on shipping bills.

Based on the previous status, the machines were imported and installed. Now production starts and exports will take place to fulfill the export obligation. Here while exporting Make sure to submit the freight bills as per EPCG schedule and enter correct EPCG license number and date.

Also ensure that the description and HS code of the export item in the waybills match the EPCG license.

Annual reporting of export compliance.

At 30^Th In June every year, the licensee has to submit a report detailing EO compliance to DGFT RA through online. This report will contain details of specific and average EO compliance for the specific year.

This reporting will start from 22-23 years onwards. Last date of filling for 22-23 has been extended to 30.09.2022 after which there will be a penalty of Rs. 5000/-

From FY 23-24, the last date would be 30^Th June and penalty of Rs. 5000 for every year will be applicable if the compliance is not followed.

Block wise fulfillment of EO

EPCG license comes with 6 year period; of which 1^St to 4^Th The year is 1^St Block & 5^Th to 6^Th The year is 2^n.d Block. As per policy, at least 50% of specific EO must be fulfilled in the first block itself.

The permit holder would inform the regional authority of the fulfillment of the export obligation, as well as the average export, within three months of the completion of the block.

If the block-wise EO is not met, the licensee must apply for a block-wise extension within a certain time frame.

For licenses obtained before 01.04.2015, the application must be submitted within 3 months after the end of the block.

For licenses obtained after 01.04.2015, application should be submitted within 6 months of expiry of Block, Post which late fees will be applied as per this image.

Note that similar late fee provisions apply for extension of EO period, the same is also explained in the image.

LATE FEES PROVISIONS FOR BLOCKWISE EXTENSION

Where extension is applied	Composition fee/ Late fee
Within 6 months from the end of the first block	Composition fee of 2% would be charged
After the said 6 months but up to 6 years from the date of authorization *	Composition Fee + Late Fee Rs. 10,000 per authorization
6 years ahead	Composition Fee + Late Fee Rs. 10,000 per authorization + additional late fee Rs. 5,000 per year per authorization

LATE FEES PROVISIONS FOR EXTENSION OF EO PERIOD

Where extension is applied	Composition fee/ Late fee
Within 6 months from the end of the EO period	Composition fee of 2% would be charged
After the said 6 months but up to 8 years from the permit date *	Composition Fee + Late Fee Rs. 10,000 per authorization
8 years ahead	Composition Fee + Late Fee Rs. 10,000 per authorization + additional late fee Rs. 5,000 per year per authorization

How can we help you?

We at Afleo Group are a team of DGFT and customs experts who have a rich experience of 10+ years in Exim Consultancy & International logistics [Freight Forwarding]. With our vast knowledge and experience in this field, we can represent your case for all activities pertaining to the EPCG system and get it done in a hassle-free manner.

So contact us for your needs and our team will be happy to assist you.

Let us know if you have any doubts in the section below.

We request you to share this blog with your other industry friends, industry associations as this information may help them as well.

Thanks.

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