The Indian government has implemented various schemes to promote exports and boost the economy.
Two of the most significant schemes are the EPCG scheme and the Advance License scheme.
Both schemes aim to provide incentives to exporters and enable them to import goods without paying customs duties.
The EPCG scheme, or the Export Promotion Capital Goods scheme, allows exporters to import capital goods at zero duty.
The scheme is designed to encourage exporters to upgrade their technology and equipment, which will help them to increase productivity and competitiveness.
On the other hand, the Advance License scheme allows exporters to import raw materials and inputs at zero duty, which they can use to manufacture products for export.
A comparative analysis of the EPCG scheme and the Advance License scheme reveals that both schemes have their advantages and disadvantages. While the EPCG scheme is more suitable for capital-intensive industries, the Advance License scheme is more suitable for labor-intensive industries.
Furthermore, the EPCG scheme requires exporters to export a certain percentage of their products, while the Advance License scheme does not have such a requirement. However, both schemes require exporters to comply with various regulatory bodies and procedures to ensure that they are not misusing the incentives provided by the government.
Overview of EPCG Scheme
The Export Promotion Capital Goods (EPCG) scheme is a government initiative that aims to encourage exports by providing duty-free import of capital goods.
The scheme helps exporters import capital goods required for production at zero customs duty. The EPCG scheme is one of the most popular export promotion schemes in India.
What is EPCG Scheme
The EPCG Full Form is Export Promotion Capital Goods. The scheme was introduced in the Foreign Trade Policy (FTP) on 1st April 1992.
The scheme allows import of capital goods at zero customs duty. The EPCG scheme enables Indian exporters to import capital goods for pre-production, production, and post-production at zero duty.
The scheme is valid for 6 years from the date of the authorization.
What is Advance License
An Advance License is a document issued by the Director General of Foreign Trade (DGFT) that permits duty-free import of inputs required for export production.
The Advance License is issued under the Advance License Scheme, which is designed to facilitate duty-free import of inputs required for export production.
Advance License Framework
The Advance License Scheme allows exporters to import duty-free inputs required for export production.
The scheme is available to manufacturers and service providers who export goods and services.
The scheme is also available to merchant exporters who procure goods from manufacturers for export.
EPCG Vs Advance License
| Parameters | Advance Authorisation Scheme | EPCG Scheme |
| Concept | Inputs can be imported Duty-free subject to actual user conditions under this scheme | Capital Goods can be imported duty- free under this scheme |
| Type | There are two types of Authorization: Advance Authorization Duty-free Import Authorization | There are two types of EPCG schemes: Zero duty Export Promotion Capital Goods Schemes Post Export EPCG Duty Credit Scrip |
| Applicable law | FTP, HBP, related Customs tariff notification | FTP, HBP, related Customs tariff notification |
| Customs Benefit | Upfront Exemption from BCD on import of inputs. | Upfront Exemption from BCD on import of capital goods. |
| IGST Benefit | Upfront Exemption from IGST on import of inputs. | Upfront Exemption from IGST on import of capital goods. |
| Eligibility & Investment Criteria | Only available for specific products based on rules under FTP and no Investment. | Only for capital goods with the export obligation and no Investment. |
| Need for a license/Registration | Yes, Advance Authorization from DGFT | Yes, EPCG Authorization from DGFT |
| Validity of License | 2 months for import & 18months for export | 18 months for import & 6 years for export |
| Who can avail themselves of the benefit of the scheme? | Manufacturer Exporter or Merchant Exporter | Manufacturer/Mer chant Exporter tied to Supporting manufacturer, Service providers |
| Export Obligation | Minimum 15% value addition in 18 months (about 1 and a half years) or such value addition has been given for specific categories of products/sectors | Export value equivalent to 6 times of duty saved in 6 years along with the average level of Exports in the preceding 3 licensing years for the same & similar Products |
| Trading is allowed? | Yes | Yes |
| Procurement from the Domestic Tariff area | Considered as deemed Export | Considered as deemed Export |
| Sales in the Domestic Tariff Area | Allowed, but duty needs to be proportionately paid | Allowed, if export obligation to be fulfilled |
| Job work/ Sub- Contracting | Allowed | Allowed |
| Separate Registration under GST Act | No | No |
| Import of Second- hand Capital Goods | Yes | No |
| Input-Output Norm | Yes, as per SION if prescribed otherwise based on ad-hoc norms ratified by the authorities. | Not applicable |
| Audits | Yes, may audit by the DGFT within 3 years from the date of issue of Authorization | Not provided |
| The benefit of Depreciation on the Sale of used Capital Goods | Not applicable | Not available but proportionate duty reduction will be allowed to the extent of EO fulfilled. |
| Opting for one or more schemes together | Yes, EPCG & AA can be opted together i.e., one for Capital Goods and the other for Raw Materials | Yes, EPCG & AA can be opted together i.e., one for Capital Goods and the other for Raw Materials |
| Points to consider while opting for the scheme | When there is sufficient Export to meet the Value addition and the requirement of Input is not constant | When there is sufficient Export to meet the EO and the requirement of Capital goods is not constant |
| Availability of Duty Drawback benefit | No, specifically excluded | Can be claimed |
| Requirement of Bond & Security | Bond required & there are certain exemptions from Security | Bond required & there are certain exemptions from Security |
| Availability of RODTEP benefit | Can be claimed | Can be claimed |
