TaxTMI 
TaxTMI 
TaxTMI 
Commerce ministry has reintroduced capital goods import @ 0 % duty scheme w.e.f. 18.04.2013 along with other changes in Foreign Trade Policy 2009-14 offered to all sectors of products. Now only one scheme is operative : Import @ 0% duty with export obligation : six times duty saved. The scheme is prevailing without benefit of 1% to status house holder scheme.
Prior to 18.04.2013, there existed two types of schemes. For reference purpose, it is essential to know these two schemes mentioned as under :
The exporter can import their capital goods at concessional rate of duty. The scheme is named as EPCG ( Export Promotion Capital Goods Scheme) As compared to normal duty, the exporter has to pay 3 % duty under the scheme subject to undertaking specific amount of export obligation to be completed in eight years as specified in the scheme. The detailed scheme is mentioned at Chapter 5 of Foreign Trade Policy 2009-14. It is in real sense export promotion scheme and offers various financial benefits to the exporter. The scheme was offered to all sectors of products.
An additional modified scheme was introduced in the year 2012 wherein exporter had to pay NIL duty for import of capital goods provided he undertakes export obligation @ 6 times of duty saved to be completed within 6 years of issuing the licence. At present normal import duties for capital goods is 25 .61 % / 22.7 % as per the type of capital goods. The exporter does not have to pay ANY duty to customs and can clear the capital goods by submitting necessary undertaking. The scheme ( 0% duty) was discontinued on 31.03.2012 and re- introduced w.e.f. 05.06.2012 with modified and more attractive features.
Both the Schemes( 0% & 3% duty) are pre import schemes i.e. one has to take licence with either benefit and then clear the capital goods from customs. The scheme is operated vide customs notification no. 102/2009 . EPCG scheme is also available for EOU ( 100 % export oriented units ) units which propose to converts their units into DTA units(normal unit).
The exporter saves substantial amount of fund by way of duty and has direct financial benefit on his working capital. The scheme 0%duty) is available for certain sectors of industries which are manufacturing value added manufactured items and covers most of the items.
We have to take reference of another export incentive scheme known as SHIS(Status House Incentive Schemes ) as it has impetus on 0% duty EPCG scheme. SHIS benefit offers duty licence ( duty scrip ) @ 1 % of FOB value of Physical export. The said scheme is not available to the exporter who opt for 0 % EPCG Scheme.
While adopting % duty EPCG scheme, the exporter has to carry out a critical comparative analysis of this scheme with respect to SHIS benefit. For the particular financial year. The exporter, holding Status house certificate, has to work out projected benefit under both the the scheme i.e . export projection & projected import of capital goods to be cleared under 0 % duty scheme.
SHIS benefit scheme and 0 % duty scheme are mutually exclusive and hence it is important to carry out this exercise.
As a further modification to above scheme, the import policy offers the same scheme ( EPCG Scheme) as a post import capital goods scheme. After import of capital goods the exporter has to undertake necessary export obligation. A duty Scrip for the equivalent amount of duty paid at the time of import, is issued which can be utilized for import of various goods. Its serves as replenishment of duty paid by the exporter while import of machines.
The regular EPCG scheme -- import of capital goods @ 3 % duty is also equally popular and beneficial. The exporter has to pay duty @ 3 % only irrespective of duty prevailing for particular capital goods item. He has to under take export obligation for 8 times of duty saved amount ( i.e normal duty leviable of an item less 3 % ) and export obligation is to be completed within 8 years from the date of issuance of licence. This scheme is scrapped off w.e.f.18.04.2013.
That is : the EPCG scheme offers two types of options. :- (a) Pre-Import : Duty payable @ 0 % at the time of import (b) post Import - duty licence available after import of any capital goods.
As usual, export made by the firm under any of the duty exemption scheme will be sub assumed for fulfillment of export obligation under this scheme i.e. export made under any of scheme will also be consider under this scheme as fulfillment of export obligation .
The scheme ( 0% duty) has proved to be export incentive scheme in real sense and exporters are availing benefit in a big way.
B.B.PUROHIT, VADODARA