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foreign exchange by exporting the goods or by rendering services. The amount of foreign
exchange to be earned and the period allowed are stipulated in the Foreign Trade Policy and
the Customs notifications.
This scheme has been framed by the Ministry of Commerce, Government of India as
a part of Foreign Trade Policy. In the Foreign Trade Policy and in the Hand Book of
Procedures, the details of the scheme and the procedure to be followed are stipulated. The
Foreign Trade Policy envisages import of capital goods etc at nil rate of duty or at
concessional rate of duty under this scheme. When the goods are imported under this
scheme, they are allowed clearance by Customs authority at nil rate of duty or at
concessional rate of duty as per the notifications issued by the Ministry of Finance,
Government of India.
A person intending to operate under the EPCG scheme, an application has to be
made to the Regional Licensing Authorities functioning under the Directorate of Foreign
Trade, Ministry of Commerce, New Delhi. The application must be made in the prescribed
format to the Jurisdictional Regional Office of the Directorate of Foreign Trade. The
application must be properly filled in and furnished detailed information that may be
required indicating the value, quantity and the description of the goods to be imported and
the details of the goods to be manufactured or providing services and foreign exchange that
may be earned. The Regional Licensing Authority, after scrutiny of the application made
may issue EPCG Authorization which indicates the details of the goods permitted to be
imported. A person who obtained the EPCG Authorization has to execute a legal
undertaking with the License Issuing Authority undertaking to fulfill the export obligation
within the specified period.
After obtaining the EPCG Authorization, the holder of authorization may import the
goods at nil rate of duty or at concessional rate of duty under the EPCG Scheme. At the time
of import, the importer has to execute a bond undertaking to use the imported goods for
manufacture and export of goods or rendering services like Tourist Hotels; golf clubs etc. and
earn foreign exchange as prescribed within the stipulated time.
In some cases, the export obligations must be fulfilled within a period of six years
and the export obligation is to earn foreign exchange to the tune of six times of the amount
of duty saved. (Duty saved is the differential amount of duty between the duty paid under
the scheme and the duty payable in the case of normal imports) In other words, the foreign
exchange earned should be six times of the difference in duty between the concessional rate
of duty allowed under the scheme and the normal rate of duty. In some cases, the export
obligation is eight times of the duty saved within a period of eight years from the date of
import. In some other cases, the export obligation is twelve times of the duty saved within a
period of twelve years. The period of six years, eight years and twelve years is divided into
two blocks. In each block, 50% of the export obligation fixed has to be fulfilled.
The Regional Licensing Authority may extend the period of export obligation on the
basis of the applications made and the reasons given for such an extension.
The goods imported under the EPCG scheme cannot be sold or otherwise disposed
of by the importer till the entire export obligation is fulfilled.
After the entire export obligation is completed, the Regional Licensing Authority
will issue export obligation discharge certificate to the importer. Based on this certificate,
the Customs authorities shall redeem the bond and bank guarantee executed with them.
Thereafter, the importer has got the liberty to use the imported goods in any manner he
likes.

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