Export Obligation period for an EPCG Authorization holder is six years from the date of issue of the Authorization.

This six years is broken in 2 Blocks .First block of 4 years and second block of 2 years.Required to fulfill Minimum 50% of EO in the First and balance in the second.

It is possible that there are periods in the International Trade when an exporter faces increasing competition or demand is sluggish and, therefore, is unable to fulfill the export obligation within the stipulated period under Authorizations.DGFT has allowed in such situations “Extension in Export Obligation Period.”

Two extensions of one year each in export obligation period is allowed.

Composition Fees/Enhancement in EO

For getting the first extension of one year the Authorization Holder has following 2 options:-

  1. He has to pay a composition fee of 5% of proportionate duty saved amount on unfulfilled export obligation or
  2. An enhancement in export obligation imposed to the extent of 10% of the total export obligation imposed under the Authorization.

To Illustrate:-

  1. Export Obligation is Rs. 6 Crores under an EPCG Authorization.(6 times duty saved of Rs.1 Crore).
    Export Obligation Period is 6 years from the date of issue.Export Completed is Rs.5.40 Crores.Shortfall is Rs.0.60 Crores.Proportionate duty saved on the shortfall is 0.10Crore.Therefore,composition fee is 5% of Rs.10 lacs=Rs.50,000.
  2. 10% enhancement in Export obligation is Rs.0.60 Crores.( 10% of Rs.6 Crores).
For getting second extension of one year the the Authorization Holder has following 2 options:-

  1. He has to pay a composition fee of 10% of proportionate duty saved amount on unfulfilled export obligation or
  2. An enhancement in export obligation imposed to the extent of 20% of the total export obligation imposed under the Authorization.
Block-wise Fulfilment of EO
Where an Authorization has not fulfilled EO of the first block he can get extension by paying 2% composition fees on the duty saved amount proportionate to the unfulfilled portion of the EO pertaining to the first Block.
Relief in Average Export Obligation
Those sectors where exports have declined by more than 5% compared to the previous year average export obligation may be also reduced.
In this connection DGFT has issued Public Notices where relaxation has to be given to those sectors/product groups.They are :-
1.04/2015-2020 dated 16/12/2015 and
2.03/2015-2020 dated 21/11/2017.
Flexibility of offsetting excess exports of any year against shortfall in other year is allowed,provided overall average is maintained.

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