EPCG scheme is introduced by the Government with a single objective to increase exports from India. Therefore, it allows duty-free import of capital goods, to make our products more competitive in the global market.
The government is assigning a task to you in return for the duty benefit. The task is to increase your export sales as compared to previous years with the help of the EPCG scheme. This job given to you to increase export sales is known as an export obligation.
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EPCG License Closure Procedure
EPCG scheme has two main components 1) EPCG License application 2) EPCG License Redemption. Hence all the licenses issued from DGFT have to be compulsorily redeemed/closed at DGFT. So after taking the EPCG license from DGFT, the following situation may arise.
- EPCG License was not used at all for duty-free Import – In that case surrender the EPCG License.
- Full Export Obligation completed – Apply for Redemption of EPCG license.
- Part Export Obligation completed – Pay applicable Duty + Interest and apply for Redemption / Closure of EPCG License.
[Want complete knowledge of Export obligation? Refer our article on “Export Obligation under EPCG scheme”]
What is EPCG Redemption?
EPCG Redemption or EPCG License closure procedure is a mechanism through which the DGFT monitors the fulfillment of the task (export obligation) given to you by the Government. In simple words, we can say that if our government is giving big relief in importing capital goods at zero customs duty, then they want to confirm that the exporter has imported capital goods or not? Installed in the mentioned factory premises or not? The introduction of new machinery has increased or decreased export sales? The export obligation is completed or not? Completed in a given time frame or not?
This process of monitoring is known as EPCG Redemption.
If the EPCG authorization holder has fulfilled all the conditions mentioned under the EPCG scheme, then the EPCG holder has to apply to the jurisdictional DGFT office for redemption/closure of the EPCG License. After careful checking, DGFT issues a Redemption Letter, which means that you have completed your obligation.
This redemption letter doesn’t mean that we have closed the license completely. We have to close at Customs also.
Now the question arises why we need to close at customs?
Answer:- At the time of registering the license at Port of registration, there is a need to execute a Bond/Bank Guarantee at Customs. Therefore, if the export obligation is completed it is also necessary to intimate the customs authority about the same and cancel the bond/B.G.
Hence EPCG License redemption procedure has to be done both at DGFT and Customs. Let us study each one in detail.
EPCG Redemption Procedure at DGFT
- After completion of export obligation, the EPCG authorization holder has to manually apply for redemption at RA DGFT with all supporting documents.
- The applicant can apply for redemption before the end of the EO period (i.e. 6 years) also if he/she has completed the obligation.
- The exporter has to maintain a record of Shipping Bills / Bill of Exports, ARE depends on the export i.e. Direct/ Third Party / Deemed Export with e-BRC.
- Shipping Bills containing details of Advance Authorisation, DFIA, MEIS, or any other reward scheme can be counted in EO fulfillment only if EPCG License details are mentioned on the shipping bill.
- Also, Shipping Bills mistakenly not filed under EPCG scheme but containing Drawback scheme can also be counted for EO fulfillment by submitting an Affidavit as per Policy Circular No. 7
- Free shipping bills cannot be considered in the EPCG scheme.
- Export Obligation can be fulfilled by direct export, third party export, Group Company, and deemed export.
Checklist of Documents required for EPCG Redemption
- Original EPCG License with all conditional sheets and amendment if any.
- Import ledger/Debit sheet from the port of import.
- ANF-5B: The authorization holder has to fill the application form for the redemption of EPCG license -ANF-5B
- Installation Certificate: The license holder has to submit the Original Certificate or if already submitted then acknowledgment received of the same.
- Bill of Entry: Imported capital goods details are mentioned in the Bill of Entry.
- Shipping Bills: The Authorisation holder has to maintain the shipping bills with E-BRC from the license issued date. For Example- if the license is received dated 15.05.2015 then the authorization holder has to maintain shipping bills from the financial year 2015-16 till the Export Obligation period.
- E-BRC: E-BRC against all shipping bills.
- Copy of Invoices, Bill of Lading / Airway Bill, and Packaging List.
After submitting the above documents:
- If all the documents are proper and DGFT RA is satisfied, then they will share the certificate of discharge of Export Obligation (EODC)/Redemption letter to the EPCG License holder, and also a copy is shared to customs where B.G. / Bond has been executed.
- If any shortfall, RA will issue a letter within 30 days and the license holder has to clear all the deficiencies and submit the documents to RA.
- If the application for EPCG redemption remains outstanding for a period of more than 60 days, the Authorisation holder can lodge a complaint online to EPCG Department at DGFT Headquarters with all details.
EPCG Redemption Procedure at Customs
- Kindly note: The closure at customs is not possible till the Authorisation holder receives the redemption Letter / EODC (Export Obligation Discharge Certificate) Letter against EPCG License from DGFT RA.
- Documents required for Redemption at Customs:
- Original Custom copy of Redemption Letter / EODC Letter from DGFT RA.
- Copies of All other documents submitted at DGFT RA for closure.
- Copy of Bond / Bank Guarantee submitted at Customs.
- After submission of the above documents and if the Customs is satisfied then Exporter will receive a letter from Customs regarding bond cancellation or cancellation of Bank Guarantee.
- Upon receiving the letter, the exporter has completed the redemption process against EPCG License.
How to check the EPCG License Redemption status?
To confirm that EPCG License has been closed or not, and to check the redemption status, the license holder or DGFT authorities or customs can also check online.
Procedure:
- Click on the website given - http://eodc.online/
- Enter the EPCG License No. and Click on Submit Button:
After entering the EPCG License No. and Clicking on Submit Button, the below screen will appear:
As you can see above, if the EPCG license is redeemed, then it will show as “EODC Granted” and “Redemption Letter” issued. In this way, you can come to know whether the EPCG License is closed/redeemed at DGFT or not.
How Afleo Consultant can help you?
Afleo Consultants can help you to close/redeem your EPCG License with DGFT & Customs. With more than 10+ Years of experience, we can also guide you with all the procedures related to the EPCG Scheme.
We are the leading Import Export Consultant (DGFT Consultant) having a client-base across India. We provide all the services related to DGFT which includes MEIS scheme, EPCG, SEIS, Advance Authorisation, DFIA, RoSCTL scheme, TMA scheme, RoDTEP scheme, etc.
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Sir,
EPCG can we mentain SEO & AEO both in throughout the 6 years. or SEO Full fillied within block period , if not achived AEO or short fall of AEO 8 to 10% . how to get EODC .
Respected Sir, Thanks for commenting. The completion of AEO is mandatory. Without AEO; DGFT will not consider Specific EO. If there is a shortfall in AEO of about 8 to 10%; then you can take the help of annual notification of DGFT in which they list all sectors that have seen a decline of more than 5% in global trade. If your sector has also faced a decline; then you can ask DGFT to reduce your Average EO and get EODC accordingly.
if average export obligation is completed in 5 year but documents submitted for EODC after 6 year. Then the exporter shall be liable for penalty three times of saved duty or not?
Respected Sir, If the Specific EO is completed in 6 years; then the Average Export Obligation should be maintained for all 6 years. Everything depends on the completion of Specific EO. If specific EO and Average EO both are completed then there is no penalty.
Can you share us the sheet how to maintain the data for the EPCG License record so that in case of redemption it helps. Further, as per my understanding all docs required by the DGFT for redemption
1. Original EPCG Licence
2. Copy of B/E.
3. Installation Certificate
4. Proof of Submission of same to jurisdictional Excise or GST Authority
5. Statement of Exports
Nice article. Very informative. May be, we need your sincere advice on some issues in future.
Regards
Respected Sir, Thanks a lot for your feedback. Comments like these keep us motivated to write more. Kindly get in touch whenever you need any consultation regarding DGFT matters.
Is it mandatory to show EPCG authorisation Nos. on the Shipping Bills.
Respected Sir, Thanks for commenting. It is necessary to show EPCG authorisation Nos. on the Shipping Bills. However, if you have missed it, still you can consider those shipping bills with the help of Policy Circular No. 7/2002, only if the Shipping bills are not free SB’s.
After redemption/Bond cancellation, can we sold the machine immediately ??
Respected Sir, Yes you can.
If Export obligation not fulfilled and want to pay duty with interest. what is proccedure?
Respected Sir, In that case, please pay the Duty+Interest at Customs and submit the original challan to DGFT office for Closure/Redemption of EPCG License.