Bank Guarantee Exclusion Under EPCG scheme – Everything you Need to Learn

As we all know, a Guarantee term is a term used for security purposes. A Bank guarantee is a guarantee that a bank gives to a customer in order to fulfill their business obligations according to certain regulations.

The EPCG Scheme defines Bank Guarantee to be the financial instrument/guarantee a bank gives the customs for the account holder. It is a guarantee by the applicant that payment will be made in default. BG entails that the lender assumes liability for payment if an account holder fails to make the due payments.

Export Promotional Capital Goods

Export Promotional Capital Goods are capital goods that are used in the production and export of goods. It includes both spares and machinery. Export Promotion Capital Goods can only be granted to Indian-made commodities.

Capital goods are allowed under the EPCG Scheme

Export Promotion Capital Goods Scheme will allow capital goods that include spares (including those that have been reconditioned/refurbished), fixtures and tools as well as jigs. You can also import second-hand capital products without age restrictions under the EPCG Scheme.

Under the Foreign Trade Policy (FTP), the importation of capital goods for the manufacture of export-oriented products is allowed at a concessional/nil tariff of duty. This Foreign Trade Policy program allows technological upgrading of the indigenous industry.

Export Promotion Capital Goods, (EPCG), authorizations are issued in the name of the Director-General for Foreign Trade (DGFT), based upon a certificate issued by an independent chartered engineer.

Execution BG in the EPCG Scheme

An EPCG scheme license is issued to allow the importation of capital goods/machinery throughout the production, pre-production, and post-production phases. The EPCG Scheme reduces custom duties making goods and services more attractive on the international market.

The EPCG Licence outlines the conditions for satisfying the export obligation of (EO) six times the duty saved value within six years.

Customs can ask for Bond execution and interest if the export is not completed within a time frame stated in the EPCG Sche license.

In some instances, they may also request a guarantee from the bank. The standard practice in Govt. It is customary to sign the Bond or provide a Bank Guarantee. Similar works

EPCG: The significance of BG

BG is responsible for making the payment commitment to the customs department on behalf of the license holder. If the License holder fails the export obligation, they are responsible for the penalty. It protects both of them from any type of default or risk.

Bank Guarantee Exemption Under EPCG Program

The Bank will issue an exemption if certain criteria have been met. These include a certain level of export performance, payment in duty, or DGFT-issued export house certificates.

All BG exemptions granted will be subject to these conditions

The License holder is not in breach of the Export Obligation under EPCG Scheme on any license issued in the previous. BG exemptions will be revoked if DGFT/Customs detects such a default in Export Obligation.

The EPCG License holder should not be penalized for violating these provisions in the three previous financial years:

• The Customs Act 1962
• 1944 Central Excise Act
• Foreign Exchange Management Act (FEMA), 1999. 
• Foreign Trade (Development and Regulation) Act (92).

The BG exclusion is available only to license holders who can produce a certificate proving export performance/payments duty/GST if they are members of an Export Promotion Council.

If the license holder isn’t a member of EPC he will need to produce a certificate that has been signed by a practicing Chartered Accountant and duly authenticated for payment GST. The CA must include his GSTIN along with other details in the certificate.

Benefits from EPCG Scheme

EPCG scheme is intended to promote exports. With the support of this scheme, the Indian government offers financial support as well as incentives to exporters. This provision could prove to be of benefit to heavy exporters. This provision sometimes proved as a boon to heavy exporters. However, it’s not advised to proceed with the scheme if you don’t plan to manufacture large quantities of produce or to sell it entirely in the country.

Many Import Export consultants offer a wide variety of services. Their support is provided by highly qualified professionals that can provide solutions for all matters related to DGFT/Customs. They work closely together with clients to devise strategies and implement plans to bring tangible savings to their bottom lines. With their extensive industry experience, they bring a business-oriented mindset to the table. We have extensive experience in Customs Procedures & DGFT.

Authors Bio:

Mr. Mehul Goyal is a professional DGFT Consultant – EPCG scheme with experience of more than 30 years and specialized in the field and is offering DGFT Consulting Services all over India.  He is working with many importers and exporters even before DGFT was instigated in the markets.