The EPCG (Export Promotion Capital Goods) scheme allows import of capital goods for manufacturing products for export without paying customs duty. Importers must export goods worth 6 times the duty saved within 6 years. Capital goods allowed include machinery, tools, and second-hand goods. The scheme promotes technological upgrades and exports. STPI (Software Technology Parks of India) and SEZ (Special Economic Zones) offer tax exemptions and infrastructure to boost software and overall exports. EPZs (Export Processing Zones) generate economic activity and jobs through fiscal incentives for export-oriented industries.

1. EPCG Scheme
■ EPCG (Export Promotion Capital Goods) Scheme helps in facilitating the import of capital
goods for manufacturing quality goods and to augment the competitiveness of India’s export.
■ EPCG scheme enables the import of capital goods that are used in the pre-production,
production, and post-production without the payment of customs duty.
What is EPCG Scheme (Export Promotion Capital Goods Scheme)?
■ This is a Scheme which enables an importer (being an export-oriented business) to import
capital goods at zero rates of customs duty. However, the scheme is subject to an export value
equivalent to 6 times of duty saved on the importation of such capital goods within 6 years
from the date of issuance of the authorization.
■ In simple words, there is a compulsion on the business to bring in foreign currency which is
equal to 600 percent of duty saved on such importation measured in domestic currency.This is
to be done within six years from availing the Export Promotion CapitalGoods scheme.

2. What are Export Promotion Capital Goods?
■ Export Promotion Capital Goods are capital goods used in the
which are exported to other countries. It includes machinery as well as
to qualify as Export Promotion Capital Goods, the commodity
must be exported outside India.
What are the Capital Goods allowed under Export Promotion Capital Goods
Scheme?
■ The capital goods allowed under Export Promotion Capital Goods
include spares (including reconditioned/ refurbished), fixtures, jigs, tool,
dies. Further, second-hand capital goods may also be imported without
on age under the EPCG Scheme.
■ Under this scheme of Foreign Trade Policy (FTP), importation of capital
for the manufacturing of export-oriented product specified in the Export
Capital Goods Authorization is permitted at concessional/nil rate of
under Foreign Trade Policy allows technological up-gradation of the
industry. Export Promotion Capital Goods (EPCG) Authorizations are
licensing authority – Director General of Foreign Trade (DGFT) based on
issued by an Independent chartered engineer.

3. Who would benefit from this Scheme?
■ EPCG is intended for promoting exports and the Indian Government with the help
of this scheme offers incentives and financial support to the exporters. Heavy
exporters could benefit from this provision. However, it is not advisable to go ahead
for this scheme for those who don’t expect to manufacture in quantity or expect to
sell the produce entirely within the country, as it could become almost impossible to
fulfill the obligations set under this scheme.
How to obtain an EPCG License?
■ In order to obtain a License under EPCG scheme, it is a primary requirement to file
an application with the licensing authority of Director General of Foreign Trade. The
application shall be attached with the required documents along with the company
and personal details.

4. What is the export obligation under the scheme?
■ The Importation of capital goods under the scheme of EPCG is subject to an
export obligation which is equal to six times of duty saved, to be satisfied within
6 years from date of issue of EPCG authorisation. If a holder of the EPCG
authorisation is unable to meet the stipulated export obligation, the importer of
the capital goods is required to pay customs duties along with interest on it as
prescribed.

5. Free Trade Zones (FTZ)
■ Several FTZs have been established at various places in India like Kandla,
Noida, Cochin, etc.
■ No excise duties are payable on goods manufactured in these zones provided
they are made for export purpose.
■ Goods being brought in these zones from different parts of the country are
brought without the payment of any excise duty.
■ No customs duties are payable on imported raw material and components used
in manufacture of such goods being exported.
■ If entire production is not sold outside the country, the unit has the provision of
selling 25% of their production in India. On such sale, excise duty is payable at
50% of basic plus additional customs or normal excise duty payable if the goods
were produced elsewhere in India, whichever is higher.

6. Benefits of Free Trade
■ Theory of comparative advantage
– This explains that by specializing in goods where countries have a lower
opportunity cost, there can be an increase in economic welfare for all countries.
– Free trade enables countries to specialise in those goods where they have a
comparative advantage.
■ Increased Exports
– Free trade helps to increase the exports of the country
■ Economies of Scale
– If countries can specialise in certain goods they can benefit from economies of
scale and lower average costs, this is especially true in industries with high
fixed costs or that require high levels of investment.
– The benefits of economies of scale will ultimately lead to lower prices for
consumers.

7. ■ Increased Competition
– With more trade domestic firms will face more competition from abroad
therefore there will be more incentives to cut cists and increase efficiency.
– It may prevent domestic monopolies from charging too high prices.
■ Trade is an engine of growth
– World trade has increased by an average of 7% since the 1945, causing
this to be one of the big contributors to economic growth.

8. Software Technology Parks of India
(STPs)
■ For the promotion of Software exports from the country, the Software Technology Parks
of India was set up in 1991 as an autonomous society under the department of
Electronics and Information Technology.
■ The services rendered by STPI for the software exporting community have been
statutory services, data communications servers, incubation facilities, trainings and
value added services.
■ STPS has played a key developmental role in the promotion of software exports with a
special focus on SMEs and start up units.
■ The STP scheme which is a 100% export oriented scheme has been successful in
fostering the growth of the software industry.
■ STP scheme allows software companies to set up operations in convenient and
inexpensive locations and plan their investment and growth driven by business needs.
■ Over 4000 units are registered under STP scheme.

9. Benefits of STPI:
■ Customs Duty Exemption in full on imports
■ Central Excise Duty Exemption in full on indigenous procurement
■ Central Sales Tac Reimbursement on indigenous purchase
■ All relevant equipment/goods including second hand equipment can be imported
(except prohibited items)
■ Equipment can also be imported on loan basis/lease
■ 100% FDI is permitted through automatic route.
■ Sales in the DTA (domestic tariff area) up to 50% of the FOB value of exports
permissible

10. Special Economic Zones (SEZ)
■ In 2005, the department of commerce, ministry of commerce & industry,
government of India has enacted the Special Economic Zone (SEZ) Act.
■ SEZ objective was to provide an internationally competitive and hassle free
environment for exports.
■ A SEZ is defined as a “specifically demarked duty-free enclave and shall
deemed to be foreign territory (out of customs jurisdiction) for the purpose of
trade operations and duties and tariffs”.
■ It provides drastic simplification of procedures and a single window clearance
policy on matters relating to central and state governments.
■ Scheme is ideal for bigger industries and has a significant impact of future
Exports and employment’

11. ■ The SEZ policy aims at creating competitive, convenient and integrated zones
offering world class infrastructure, utilities and services for globally oriented
businesses.
■ State government has a key role in export promotion and creation of related
infrastructure for Special Economic Zones.
■ The main objectives of the SEZ scheme are generation of additional economic
activity, promotion of exports of goods and services, promotion of investment from
domestic and foreign sources, creation of employment opportunities along with the
development of infrastructure facilities. All laws of India are applicable in SEZs
unless specifically exempted as per the SEZ act.
■ The units in the SEZ have to be net foreign exchange earners but they are not
subjected to any predetermined value addition or minimum export performance
requirements.

12. Salient features of SEZ schemes are as under:
■ Duty free import/domestic procurement of goods for development, operation and
maintenance of SEZ units.
■ 100% Income Tax Exemption on export profits available to SEZ units for 5
years, 50% for next 5 years and 50% of ploughed back profits for 5 years
thereafter.
■ Exemption from Central Sales Tax
■ Exemption from Service Tax
■ Single window clearance for central and state level approval.

13. Export Processing Zones (EPZs)
■ Meaning of Export Processing Zones can be defined as an area enjoying
special government of India support with respect to fiscal incentives, tax rebates
and other exclusive benefits for the growth of export.
■ EPZs also encompasses pre-defined infrastructural facilities and regulations
pertaining to establishment of such zones and environmental stipulations,
respectively.
■ These Export Processing Zones of India were established to help the growth of
Indian export commodities, especially from the fast growing sectors,

14. Objectives of setting up of EPZs
■ Encourage and generate the economic development.
■ Encourage Foreign Direct Investment (FDI)
■ To channel the sources of foreign exchange within the system in a phased
manner
■ Foster the establishment and development of industrial enterprises within the
said zones.
■ Encourage and generate wider economic activities by encouraging foreign
investments for the development of the zones.
■ To channel the foreign exchange earnings for the further development of these
zones and explore new areas for the development of Indian exports.

15. ■ Encourage establishment and development of Indian industries and business
enterprises and facilitate with proper infrastructure
■ Generate employment opportunity
■ Upgrade labor and management skills
■ Acquire advanced technology for increased productivity
■ Ensure world class quality of products.

16. Prominent Indian Export Processing
Zones
■ Santa Cruz Electronic Export Processing Zone (SEEPZ) – Maharashtra
■ Cochin Export Processing Zones (CEPZ) – Kochi
■ Falta Export processing Zones ( FEPZ) – West Bengal
■ Madras Export Processing Zones ( MEMPZ) – Tamil Nadu
■ Noida Export Processing Zones (NEPS) – UP
■ Visakhapatnam Export Processing Zones (VEPZ) - AP