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Export promotion capital goods — Simplified scheme set to benefit service providers

K.R. Srivats

New Delhi , March 4

SERVICE providers are to gain from the latest procedural simplification brought about by the Director General of Foreign Trade (DGFT) in the export promotion capital goods (EPCG) scheme.

The DGFT has now allowed service providers to submit a certificate from an independent chartered engineer to confirm the installation, at their premises, of the immovable capital goods imported under the EPCG scheme.

Prior to this simplification, an EPCG licence holder (whether registered with a Central Excise authority or not) was required to produce to the concerned regional licensing authority a certificate from the jurisdictional excise authority confirming the installation of capital goods at the factory of the licence holder or supporting manufacturers/vendors within six months from the date of completion of imports.

"Service providers had made representations stating that they were facing difficulties in getting such certificate from the jurisdictional excise authority. So we have said that they can give a certificate either from the jurisdictional excise authority or from an independent chartered engineer," Mr L. Mansingh, DGFT, told Business Line.

Industry observers see service providers such as telecom and hotels benefiting from such a procedural simplification.

A similar facility (obtaining chartered engineer's certificate) has also been given to service providers on import of spares (including consumables) under the EPCG scheme.

Under the scheme, exporters are allowed to import capital goods, including computer software systems, at a concessional 5 per cent duty. Prior to the 2003-04 Exim Policy, these concessional imports were allowed subject to their fulfilling an export obligation amounting to five times the c.i.f (cost, insurance and freight) value of imported capital goods over a period of eight years from the date of issuance of licence.

In the 2003-04 Exim Policy, the export obligations were linked to the value of duty saved, which in turn, was computed against the normal import duty applicable on the imported capital good. The export obligation itself was set at eight times the duty saved amount and to be fulfilled over an eight-year period.

The Government had in January this year made the EPCG scheme more attractive by further easing export obligation norms under the scheme and extending the "duty-saved" formula to EPCG licences issued prior to the current fiscal.

It had also granted exporters the flexibility to fulfil their export obligations by exporting any other product manufactured or services rendered by them. Thus, if a potato chips manufacturer were to import machinery under the EPCG, he could discharge his export obligation by shipping basmati rice produced by him.

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