EPCG Scheme Updates to enhance the Ease of Doing Business

A major procedural relief has been announced in the EPCG Scheme on 25.07.2024 to enhance the Ease of Doing Business. This relief has been announced vide Public Notice No.15/2024-25 dt.25.07.2024 issued by the office of Directorate General of Foreign Trade (DGFT).

The key procedural relief pertain to the following:-

1. Submission of installation certificate,

2. Extension of export obligation period of first block,

3. Extension of export obligation period beyond 6 years and

4. Composition fees to be levied at the time of implementation of Policy Relaxation Committee (PRC) Cases.

These are major procedural reliefs which have been announced in the EPCG Scheme and these changes substantially reduce the compliance burden and enhance the ease of doing business.

Now we will understand all the changes introduced in detail.

1. PROCEDURES FOR SUBMISSION OF INSTALLATION CERTIFICATES(IC) SIMPLIFIED.

OLD PROVISION- PARA 5.04(a) of the Hand Book of Procedures (HBP)

• The existing provision allows the Authorization holder to submit the Installation Certificate within a period of 6 months from the date of completion of import.

• This period can be extended by 12 months by seeking a specific permission from the Regional Authority on payment of a composition fee of Rs.5000/-

REVISED PROVISION PARA 5.04(a) of HBP

As per the new provision the installation certificate can now be submitted within 3 years from the date of completion of imports both for Capital Goods and Spares.

This period of 3 years may be further extended up to the entire period of validity of the Export Obligation period of the Authorization by obtaining specific permission from the Regional Authority and on payment of composition fee of Rs.10,000/- per year for each year of extension beyond 3 years.

2. PROCEDURAL SIMPLIFICATION ALLOWED UNDER THE NEW PROVISION

Thus, the following procedural simplification has been done under the new Procedures for Para 5.04(a) Notified vide Public Notice No.15 dt.25.07.2024

• Time period for submission of installation Certificate has been extended from 6 months to 3 years.

• Extension of time period for submission of installation certificate beyond 3 years has been allowed up to the validity of the Export Obligation period of the EPCG Authorization on payment of composition fee of Rs.10,000/- per year for each year of extension beyond 3 years.

APPLICABILITY –

This provision should apply to EPCG Authorizations issued during 2009-14, 2015-20 and the current Policy viz. FTP 2023. However, the new Public Notice No. 15/2024-25 dt.25.07.2024 is silent on this provision and a clarification in this regard is likely to be issued.

3. Extension in First Block Export Obligation Period – Reduction of Fees Structure

OLD PROVISION – Para 5.13(c) of HBP

Request for extension of export obligation period for first block must be filed within 6 months from the date of expiry of first block along with a composition fee of 2% on the duty saved value in proportion to the unfulfilled Export obligation pertaining to the block.

NEW PROVISION- Para 5.13(c) of HBP

Request for extension of export obligation period for first block must be filed within 6 months from the expiry of the first block along with a composition fee as per the new prescribed slab based on the Duty Saved value of the EPCG Authorization.

Composition Fees for First Block EO Extension Applied within 6 months from the date of expiry of First Block –

Duty Saved value of EPCG Authorization issued	Composition fees to be levied (in Rupees)
Upto Rs. 2 Crores	5,000
More than Rs. 2 crores to 10 Crores	10,000
Above Rs. 10 Crores	15,000

In case of application filed beyond 6 months but within 6 years from the date of issuance of the Authorization the composition fee structure prescribed is as under:-

Duty Saved value of EPCG Authorization issued	Composition fees to be levied (in Rupees)
Upto Rs. 2 Crores	10,000
More than Rs. 2 crores to 10 Crores	20,000
Above Rs. 10 Crores	30,000

Composition Fee Has Also Been Prescribed for Applications Filed Beyond 6 Years For Regularization Purpose As Per Fee Structure Below:-

Duty Saved value of EPCG Authorization issued	Composition fees to be levied (in Rupees)
Upto Rs. 2 Crores	15,000
More than Rs. 2 crores to 10 Crores	30,000
Above Rs. 10 Crores	45,000

Above fee structures are also applicable for authorizations issued under Foreign Trade Policy 2015-20. However, fees already paid as per old provisions will not be refunded.

4. PROCEDURAL SIMPLIFICATION ALLOWED UNDER THE NEW PROVISION

The new provisions have accorded the following simplification: -

The composition fee has been substantially reduced by fixing a flat rate instead of linking it with the shortfall in the value of Export Obligation.

5. Extension in Export Obligation Period beyond 6 years – Simplification of Fees Structure

OLD PROVISION- PARA 5.16(b) of the HBP

In case of extension of Export Obligation period beyond 6 years, two extensions, from the date of expiry, of one year each will be allowed by RA concerned on payment of composition fee equal to 2% of proportionate duty saved value corresponding to unfulfilled export obligation for each year of extension subject to a minimum composition fee of Rs.10,000/-

New Provision- Para 5.16(b) of the HBP

Now the Authorization holder can apply for extension in export obligation period for two years in one go or two extensions of one year each. The fee structures have been revised and made simpler.

Duty Saved value of EPCG Authorization issued	Composition fees to be levied for each year (in Rupees)
Upto Rs. 2 Crores	20,000
More than Rs. 2 crores to 10 Crores	30,000
Above Rs. 10 Crores	60,000

Any composition fee paid as per earlier provision will be refunded.

6. PROCEDURAL SIMPLIFICATION ALLOWED UNDER THE NEW PROVISION

• The composition fee has been reduced by introducing a flat fee structure related to the Duty Saved Value of Authorization.

• An option of seeking extension of 2 years in the export obligation period has been introduced instead of 2 extensions of 1 year each.

7. Implementation of PRC Decisions

A new provision has been introduced and Para 5.16 (e) have been inserted in the Handbook of Procedures 2023 regarding implementation of all PRC decisions.

A uniform composition fees based on the duty saved value of EPCG Authorizations have been prescribed for implementation of all PRC decisions involving levy of composition fees for the matters related to block-wise extension, EO Extension or regularization of exports already made.

The Compositions Fees prescribed under the new provision is as under -

Duty Saved value of EPCG Authorization issued	Composition fees to be levied for each year (in Rupees)
Upto Rs. 2 Crores	30,000
More than Rs. 2 crores to 10 Crores	60,000
Above Rs. 10 Crores	1,00,000

Composition fee if any already paid will not be refunded.

Conclusion

In summary, the recent amendments introduced in the EPCG Scheme by the Directorate General of Foreign Trade through Public Notice No. 15/2024-25 on 25.07.2024 aim to streamline various processes and enhance the ease of doing business. The key changes include extending the submission period for installation certificates, simplifying the fee structure for extending export obligation periods, and standardizing composition fees for Policy Relaxation Committee cases. These amendments are designed to reduce compliance burdens and provide more flexibility to authorization holders, thereby promoting a more business-friendly environment.

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