Definition
Customs EPCG and Duty Drawback
EPCG and duty drawback are export-promotion schemes that let exporters import capital goods duty-free or reclaim duties paid on inputs used in exports.
To keep exports competitive, the government offers schemes that relieve them of import duties. Under the Export Promotion Capital Goods (EPCG) scheme, exporters can import machinery at zero or concessional duty against an obligation to export a multiple of the duty saved. Duty drawback refunds the customs and other duties embedded in inputs used to make exported goods.
These measures ensure that, in line with the principle that taxes should not be exported, Indian goods compete abroad on a duty-neutral basis. They sit alongside zero-rated GST treatment for exports as part of the export-promotion architecture.
Related terms
- Customs DutyCustoms duty is the tax levied on goods imported into, or in some cases exported from, India, administered under the Customs Act.
- Zero-Rated Supply (GST)A zero-rated supply under GST is one taxed at a nil rate while still allowing the supplier to claim input tax credit, applied mainly to exports and SEZ supplies.
- Special Economic Zone (SEZ)A Special Economic Zone is a designated enclave treated as foreign territory for trade and duties, offering tax and regulatory benefits to boost exports.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.