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EPCG Scheme | Export Promotion Capital Goods Scheme for Pharmaceutical products

The government and non-government agencies of India and customs department identify your product on the basis of this 8-digit Indian Trade Classification (ITC). 8-digit ITC is a code used for product classification used in India. It is a modified HTS Harmonized Tariff Schedule (HS) 6-digit code used all over the world for product classification. This ITC code helps to import and export Pharmaceutical Products from India. Export obligation extension will be provided in handbook (HBPv) separately, for import of capital goods and provision.

Indian Drug Manufacturers’ can obtain EPCG License to export Pharmaceutical products, in order to obtain license, you need to understand the whole EPCG License procedure

Pharmaceutical products and medicines should meet the necessary standard rules and law passed by the International Safety standards. Export of pharma products from India need special requirement of documentation and a quality control inspection certificate from the export inspection agency, also some products may require health certificate.  

Lets have a look below for the detailed procedure to obtain EPCG license to carry out export of Pharmaceutical products and medicine.    

Eligibility Criteria for applying under EPCG Scheme?

EPCG Scheme can be applied by any Exporter irrespective of his turnover. EPCG License can be issued to the following category of Exporters:

  1. Manufacturer Exporter.
  2. Merchant Exporter with a supporting manufacturer.
  3. Service Provider (who is exporting services) For Example. Indian Drug Manufacturers

Duties Exempted under EPCG Scheme?

Capital Goods under EPCG Scheme can be imported at zero customs duty. However, it must be noted that IGST and Compensation cess is exempted only up to 31.03.2020. The Government may extend the date through a notification issued from time to time.

Capital Goods under EPCG Scheme can also be procured from indigenous sources (i.e from domestic suppliers). In such cases, applicable GST for the supply would be exempted.

Export Obligation under EPCG Scheme

Export Obligation under EPCG Scheme is of two types i.e. Average Export Obligation & Specific Export Obligation.

  • Export Obligation under EPCG Scheme should only be fulfilled by the export of goods manufactured from the Imported Machinery.
  • What is the Average Export Obligation? – It is the most important of the two export obligation under the EPCG Scheme. It basically means that the Average turnover maintained in past 3 years before obtaining the license should be maintained for each FY until the specific export obligation is not completed. It is imposed with a view that after upgradation and induction of new machinery, the overall export should not fall below the past average of turnover achieved i.e. there should be a continuous rise in the export turnover with the help of new machinery. It is to be maintained over and above the specific export obligation.
  • What is Specific Export Obligation? – Goods manufactured from the imported machinery to be exported worth 6 times of the duties, taxes, and cess saved on the capital goods within 6 years from the date of issue of EPCG Authorisation. In the case of indigenous sourcing of Capital Goods, specific EO shall be 25% less than the above Export Obligation.
  • If the required Export Obligation is not fulfilled in 6 years, one extension of 2 years can be obtained, based on case to case basis. If the EPCG Authorisation holder fails to achieve the Export Obligation (even after extension), the Organisation has to pay all the Custom Duties, Cess, taxes, saved plus 15% annual interest to the Customs Authority.
  • The Export obligation can be fulfilled by direct exports, deemed exports, supply to SEZ, EOU Units, etc., Third Party exports, service exports in case of service providers.

Documents Required for EPCG License

The following documents will be required for EPCG Online Application:

  1. Proforma Invoice/Purchase order of the Capital Goods/Machinery.
  2. Copy of IEC, RCMC, MSME & Central excise registration & GST Certificate.
  3. Details of Capital Goods sought to be imported with HSN code/Name, Model Number and Technical Description.
  4. List of Product to be exported using above machinery with HSN code.
  5. Chartered Engineer Certificate showing the nexus between the Capital Goods and the products to be Exported.
  6. CA Certificate indicating Last three financial year turnover in USD & INR only for the above-mentioned Export Products.
  7. Factory Address where the machine will be installed.
  8. Stepwise Process/Flow Chart indicating the stages where the capital goods are to be used.
  9. End-use of Capital Goods for Export products and stage where and how to be used. (Detailed Explanation)

About author

Olivia Wilson is a digital nomad and founder of Todays Past. She travels the world while freelancing & blogging. She has over 5 years of experience in the field with multiple awards. She enjoys pie, as should all right-thinking people.
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