Closure of EPCG authorizations in case of supplies to SEZ units where exports proceeds have not been realized through Foreign Currency Account (FCA)
PARA 5.7.2 of HBP 2004-09 (RE 2008) and the relevant Paras of the earlier policies stipulates that:
"Export proceeds shall be realized in freely convertible currency except for deemed exports. Exports to SEZ units/Supplies to developers / Co-developers, irrespective of currency of realization would also be counted for discharge of Export obligation".
Para 5.7.2 of HBP 2009-14 read with relevant Paras of earlier policies did not stipulate that DTA units supplying goods under EPCG scheme to SEZ units had to realise payment from Foreign Currency Account (FCA) of SEZ unit, for discharge of Export Obligation. Moreover, Rule 30(8) of SEZ Rules, 2006 do not stipulate that it is mandatory for SEZ units to make payment to EPCG authorisation holders from Foreign Currency Account (FCA) of the unit.
DGFT has decided that closure/redemption/EODC may be allowed in cases where EPCG authorisation holder has made supplies to SEZ units and has not realised the proceeds from the Foreign Currency Account (FCA), in case of supplies which have been made prior to 1.4.2015.
However, DGFT further clarifies that Para 5.11 of HBP 2015-20 under the current FTP provides that exports to SEZ units / supplies to developers / co-developers shall be taken into account for discharge of EO provided payment is realised from Foreign Currency Account of the SEZ unit. The para reads as:
Export proceeds shall be realized in freely convertible currency except for deemed exports. Exports to SEZ units /Supplies to developers/ co-developers irrespective of currency of realization, would also be counted for discharge of Export Obligation. Realization in case of supplies to SEZ units shall be from foreign currency account of the SEZ unit .
Hence, DGFT clarifies that condition of Para 5.11 of HBP 2015-20 shall have to be complied in respect of EPCG authorisations issued under FTP 2015-20 . Para 5.11 of HBP shall also be applicable in respect of EPCG authorizations issued under the earlier policies but where exports have been made on or after 1.4.2015 or payments have been realised after 31.03.2015.
Please also see:
1. Export Products to SEZ - Payment by Foreign Currency Account - DDT 2736 02 12 2015.
2. Export to SEZ units from DTA - Receipt in Indian Rupees - DDT 2784 11 02 2016
DGFT Trade Notice No. 10/2016., Dated July 20, 2016