[Analysis] Changes in EPCG Scheme under Foreign Trade Policy 2015-20

Taxmann’s Research and Advisory (Indirect Tax) Team

With the intent to reduce the compliance burden and enhance the ease of doing business, the DGFT has made a few amendments relating to the EPCG scheme under Foreign Trade Policy 2015-20. The relevant amendments made in this regard has summarized below for your kind reference:

Table of Contents

1. Changes relating to time limit for applying for the extension in fulfilling Export Obligation (EO) of first block
2. Extension in time limit for submitting Annual Report relating to fulfilment of export obligation
3. Payment of Additional Fees for deviation in import value up to permissible limit
4. Changes relating to applying for extension in Export Obligation Period
5. No option to use Duty Credit Scrips for paying Customs Duty for regularizing export obligation

1. Changes relating to time limit for applying for the extension in fulfilling Export Obligation (EO) of first block

The time limit for applying for the extension of the EO period for the first block of 50% has been changed. The revised time limits for applying such extension along with the applicability of the composition fee and late have been summarized as under:

*Extension of time limit beyond 6 months is subject to consideration by Regional Authority (‘RA’)

 2. Extension in time limit for submitting Annual Report relating to fulfilment of export obligation

The time limit for reporting the fulfilment of EO has been extended from April 30 to June 30. Further, late fees of Rs. 5000 per authorization for each financial year would be levied for delay in submission of such report.

3. Payment of Additional Fees for deviation in import value up to permissible limit

The Foreign Trade Policy permits deviation of 10% of the duty saved amount from the amount indicated in the authorization. In this regard, the exporter is required to furnish additional fees to cover excess imports affected in terms of duty saved amount.

The time limit for furnishing such additional fees has been changed. From now onwards the authorization holder is required to furnish the additional fees to cover excess imports affected at the time of application for the Export Obligation Discharge Certificate (‘EODC’). The export obligation would automatically stand enhanced proportionately.

4. Changes relating to applying for extension in Export Obligation Period

The Time limit for applying for an extension increased from 90 days to 6 months. Specific provisions are introduced to allow extension after 6 months from the date of expiry of the original EO period but up to 8 years on payment of late fees as under:

* Extension for fulfilling the export obligation beyond 8 years is not permitted. Extension of time limit beyond 6 months is subject to consideration by RA.

5. No option to use Duty Credit Scrips for paying Customs Duty for regularizing export obligation

Provision relating to furnishing duty credit scrips for paying the Customs Duty component in respect of export obligation has been omitted.

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