What is the purpose of EPCG license?

The EPCG Scheme allows the import of capital goods (pre-production, production, and post-production) at zero customs duty. For physical exports, Integrated Goods and Services Tax (IGST) and Compensation Cess are also exempted.

What is the validity of EPCG license

For Imports: 24 months from the issue date. No revalidation is allowed. For Exports: 6 years, extendable up to 8 years under specific conditions.

What is the export obligation under the EPCG Scheme?

The Specific Export Obligation is set at six times the duties, taxes, and cess saved on the imported capital goods. For instance, if the duty saved is ₹10 lakhs, the EO will be ₹60 lakhs. Additionally, the Average Export Obligation (AEO) is the mean of the export performance over the previous three financial years for similar products.

What is FDI?

FDI is defined as an investment by a non-resident entity into equity instruments of an unlisted Indian entity or a listed Indian company, amounting to 10% or more of the listed company's equity capital.

Key Regulations:

The primary legislation regulating foreign investments in India includes:

Foreign Exchange Management Act (FEMA): Along with its rules and regulations, particularly the NDI Rules 2019 and the FDI Policy.
Press Notes and Releases: Issued by the DPIIT and consolidated into the FDI Policy. Changes from these press notes come into effect upon incorporation into FEMA rules and regulations.

These regulations outline the sectors where FDI is permitted, the applicable limits, and the procedures to be followed.

RBI (FEMA/FDI)

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Regulatory Framework

The framework governing foreign investment in India is encapsulated in the Consolidated FDI Policy, framed by the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry. This policy outlines two routes for FDI:

Automatic Route: No prior approval is required.
Approval Route: Prior approval from the central government is required.

The applicable route depends on the sector and the extent of shareholding intended. While 100% FDI is allowed in several sectors, others may impose caps on foreign shareholding or conditions for FDI. Some sectors, such as the Lottery Business and real estate, prohibit FDI entirely. Potential investors need to determine the appropriate route and sectoral limits for their proposed investments.

Press Note 3 (2020)

Press Note 3, issued by the Government of India in 2020, introduced a significant amendment to the FDI policy. It mandates that all investments in India by entities from countries sharing land borders with India, or whose beneficial owners are situated in or are citizens of such countries, require prior government approval. This affects investments from Afghanistan, Bangladesh, Bhutan, China (including Hong Kong), Myanmar, Nepal, and Pakistan. Investors must confirm compliance with this press note to determine whether FDI is permissible without government approval.

Approval Process

For foreign investment requiring approval, the investment is allowed upon receiving approval from the relevant government department or ministry. The DPIIT’s Standard Operating Procedure for Processing FDI Approvals requires that applications be processed within 12-14 weeks, although this timeframe may extend in practice. The proposal for FDI under the Government route are submitted under the National Single Window System Portal. Once a proposal is filed online, DPIIT identifies the concerned Administrative Ministry/Department based on the activity of investee company and e-transfers the proposal to the concerned Administrative Ministry/Department (Competent Authority) for processing and disposal of the case. DPIIT monitors overall progress and timely disposal of FDI proposals across all administrative Ministries/Departments.

Sector-Specific Regulations

Certain sectors have additional conditions for foreign investment. For example, while 100% FDI is permitted in single-brand retail, foreign investments exceeding 51% must meet domestic sourcing requirements, with at least 30% of the value of goods purchased sourced from India. Investors should be aware of any sectoral requirements to anticipate additional costs.

Reporting and regulatory filings

Foreign investments in equity instruments are required to be reported to the RBI within prescribed time periods. The regulatory filings for the purpose of reporting of foreign investments are to be made on a unified online RBI portal referred to as the Foreign Investment Reporting and Management System (FIRMS). Transactions among non-residents are exempt from these reporting obligations.

Additionally, every Indian company that has received FDI is required to file an annual return with the RBI by 15 July each year.

India has liberalized and simplified FDI norms significantly in recent years. For sectors under the automatic route, no prior approval is needed, and only certain post facto filings are required. Key regulatory filings such as Form FC-TRS and Form FC-GPR are now available online on FIRMS Portal.

CCC Services

Regulatory filings- FC-GPR, FC-TRS, FLA

Proposal for FDI under the Government route on the National Single Window System Portal.

Coordination with AD Bank