In a move that will come as a relief to exporters, the government has decided to make the rules for meeting of export obligation under the popular Export Promotion Capital Goods (EPCG) scheme more flexible.

“The excess exports done towards the average export obligation fulfilment of an EPCG authorisation during a year can be used to offset any shortfall in the average export obligation done in other year of the export obligation period or the block period as the case may be….” a notification from the Directorate-General of Foreign Trade said on Tuesday.

The decision comes at a time when exporters are struggling to meet the challenges posed by the Goods and Services Taxes (GST) regime and labour-intensive sectors such as leather, readymade garments, handicrafts, gems & jewellery and agricultural products are posting a fall in exports.

The EPCG scheme allows import of capital goods including spares for pre production, production and post production at zero duty subject to an export obligation of six times of duty saved on capital goods imported under the scheme, to be fulfilled in six years from authorisation issue date.

“Condonation from non-maintenance of annual average in some years offset by excess exports in other year(s) in respect of EPCG authorisations has been granted,” the notification further explained.

Under the new dispensation, an exporter has to ensure that the average export obligation imposed is maintained on an overall basis, within the block period or the export obligation period as applicable.

“Exporters have been seeking flexibility in meeting their export obligation for a long time as their performance could fluctuate from one year to the other due to a number of factors including global demand. Now they can be excused for not meeting export obligation in a particular year, if the shortfall is off-set by excess exports in previous or subsequent years (of the period under consideration),” a government official told BusinessLine .

The Commerce Ministry, in March, notified exemption from IGST (Integrated Goods and Service Tax) and compensation cess for procurement under advance authorisation and EPCG scheme till October 1, 2018.

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