GOVERNMENT OF
MINISTRY OF COMMERCE & INDUSTRY
DEPARTMENT OF COMMERCE
DIRECTORATE GENERAL OF FOREIGN TRADE
Policy
Circular No. 14
(RE-2006)/ 2004-09 Date: 25.07.2006
Subject: Regarding payment of 5% customs duty against EPCG
licence/Authorisation where the capital goods are procured domestically in
terms of para 5.6 of the Foreign Trade Policy.
Attention is invited to para 5.1 of the Foreign Trade
Policy which provides for import of capital goods at a concessional rate of 5%
customs duty subject to the fulfillment of the applicable corresponding export
obligation on duty saved amount.
2. Attention is also invited to para 5.6
of the Foreign Trade Policy which permits such capital goods etc. to be sourced
domestically and provides for deemed export benefits as per para 8.3 of the
Foreign Trade Policy to the domestic supplier.
3. Clarification has been sought whether
this 5% customs duty is payable in case these capital goods are sourced
domestically by the EPCG Authorisation holder.
The matter was deliberated upon in the Policy Interpretation Committee
in its meeting No.02/AM07 held on 20.06.2006 where it was observed that EPCG
scheme is based upon clearance of capital goods etc. at a concessional rate of 5%
customs duty. It was further observed
that exempting domestic procurement of capital goods from this component of
duty would make the benefits under the scheme as prohibited subsidy as per ASCM
Agreement. To that extent 5% duty under
EPCG Scheme has to be paid even in cases of domestic procurement.
4. It is clarified that 5% applicable
customs duty on notional basis shall be charged before EPCG Authorisation is
invalidated for direct import and EO shall be calculable at the reduced duty
saved amount accordingly. These
instructions will be implemented prospectively and shall be applicable in all
such cases where Authorisations have to be issued henceforth or where
Authorisation/licence has already been issued but invalidation has not been
allowed so far.
This issues with the approval of the Competent Authority.
Sd/-
( M.K. Parimoo )
Joint Director General of Foreign Trade
To
All the Regional Authorities
(Issued From F.No.01/94/180/EPCG-FIEO/AM07/PC-I)