As of September 1, 2024, India’s export-import (EXIM) landscape changed significantly. The Central Board of Indirect Taxes & Customs (CBIC) automated the Import of Goods at the Concessional Rate of Duty (IGCR) system for Export-Oriented Units (EOUs). This automation shifts traditional customs clearance to the ICEGATE portal, permitting businesses to register their bonds and get an IGCR Identification Number (IIN) for importing goods at reduced duties.
This blog will overview the IGCR scheme, highlight eligible goods, and explain how the updated process supports India’s import-export efficiency. We’ll also explore how automation improves compliance, simplifies procedures, and helps Indian businesses stay competitive.
What is the IGCR Scheme?
The IGCR scheme lets businesses import specific goods at reduced duty rates if those goods are used for manufacturing or export purposes. This scheme was developed to reduce costs for manufacturers and exporters, particularly relevant for sectors that import a significant amount of machinery, raw materials, or components.
Previously governed by the 2017 Rules, the 2022 update introduces automation for smoother operations. With the recent changes, businesses can now file bills of entry and monitor their imports online.
Why the IGCR Scheme is Important for India
The IGCR scheme is critical in reducing the costs of importing necessary goods. Doing so enables Indian manufacturers to produce goods more affordably and remain competitive in the global market. This cost-saving measure is a core part of India’s Make in India initiative, encouraging domestic manufacturing while ensuring exporters can access high-quality inputs without excessive duty costs.
Key benefits include:
- Lower Import Costs: Concessional duty rates allow businesses to minimize expenses when importing high-value goods like raw materials and machinery.
- Boost to Domestic Manufacturing: Businesses can invest in technology and infrastructure by reducing the financial burden on imports and boosting local production capacity.
- Efficient Compliance: Automation removes the bottlenecks of manual processing, making it easier for businesses to comply with the rules without delays.
Goods Eligible for Concessional Duty Under IGCR
Many goods are eligible for concessionary duty rates under the IGCR scheme, with electronics being the primary ones. Indian electronics manufacturers, who heavily rely on imports of high-technology components, raw materials, and machinery, benefit from this.
Goods eligible for concessional rates include:
- Electronic Components: Manufacturers can lower production costs by importing components like semiconductors, circuit boards, and microchips at concessionary rates.
- Machinery and Equipment: Used across multiple sectors, including electronics manufacturing, machinery imports at lowered duty rates enable companies to upgrade technology while controlling expenses.
- Raw Materials: In industries such as chemicals, textiles, and electronics, concessional rates on raw materials enable manufacturers to produce competitively priced products for domestic and international markets.
Automation and Its Impact on EXIM
The automation introduced in 2024 streamlines customs clearance for businesses, minimizing paperwork and speeding up the process. The ICEGATE portal allows businesses to register for the IGCR Identification Number (IIN) and handle customs procedures online. This makes the process faster, more transparent, and easier to track.
Key updates include:
- IIN Registration: Businesses now obtain their IGCR IIN through ICEGATE to access concessional duty benefits.
- SEZ Clearances: The automation extends to clearances from Special Economic Zones (SEZs) to EOUs, further simplifying trade processes.
- Compliance Monitoring: CBIC’s automated system ensures proper tracking of goods and their specified uses, reducing the risk of non-compliance.
Comparison: IGCR vs EPCG Scheme
Feature | IGCR Scheme | EPCG Scheme |
|---|---|---|
Purpose | Reduced duty rates for goods used in manufacturing or exports. | Duty-free imports of capital goods to produce export goods. |
Goods Covered | Machinery, raw materials, components. | Capital goods (machinery, equipment). |
Duty Savings | Concessional import duties. | 100% duty exemption on capital goods imports. |
Export Obligation | No specific obligation. | Export obligation typically 6x duty saved. |
Best Suited For | Manufacturers looking to lower costs without binding export conditions. | Exporters investing in capital goods for production. |
Financial Impact of the IGCR Scheme
To understand the financial benefits of the IGCR scheme, let’s look at a practical example:
Case Study Example:
A business imports machinery worth $1 million.
Without the IGCR scheme, they would face a 30% import duty, totaling $300,000.
Under the IGCR scheme, with a 10% concessional duty, the business would pay only $100,000 in duty, saving $200,000.
For high-value imports like machinery and critical components, such savings can dramatically improve the business’s profit margins and allow more capital to be allocated to infrastructure and technology upgrades.
Financial Impact of the IGCR Scheme
Industries across various sectors can use the IGCR scheme to enhance operational efficiency and reduce import costs, ultimately driving growth.
In electronics manufacturing, businesses often face high costs when importing essential components like semiconductors and printed circuit boards (PCBs). By utilizing the IGCR scheme's concessional duties, companies can significantly lower these input costs, which enables them to price their products more competitively in global markets. This is especially beneficial for consumer electronics, IT hardware, and telecommunications industries, where margins are tight, and competition is fierce.
Importing expensive machinery for production lines can be a substantial financial burden for the automotive industry. The IGCR scheme helps automotive manufacturers reduce the cost of machinery imports, allowing for more affordable automation of assembly lines. This cost reduction is crucial in improving manufacturing efficiency and maintaining competitive pricing in the automotive sector.
In the pharmaceutical industry, specialised equipment used in drug manufacturing can be costly to import. Leveraging the IGCR scheme, pharmaceutical companies can lower their setup costs for these critical pieces of equipment, enabling faster production scaling. This improves the company's capacity to meet market demand and enhances profitability through reduced capital expenditure.
In all these cases, the IGCR scheme provides a practical solution for managing high import costs, allowing industries to reinvest their savings into growth and innovation.
Economic Impact of IGCR Automation on India’s Trade Competitiveness
The automation of IGCR not only benefits individual businesses but also has a broader economic impact on India’s trade competitiveness:
- Increased Export Efficiency: With reduced costs for manufacturers, India can offer competitively priced goods in the global market, helping to boost export volumes.
- Enhanced Production Capacity: By lowering the financial burden on businesses, particularly in sectors like electronics, pharmaceuticals, and automotive, the IGCR scheme helps increase domestic production, contributing to India’s goal of becoming a global manufacturing hub.
- Job Creation: Increased manufacturing and exports lead to more jobs in both production and supply chain management.
Compliance: What You Need to Know
To benefit from the IGCR scheme, businesses must comply with the following requirements:
- Register on ICEGATE: Eligible businesses must register and obtain their IIN to access concessional rates.
- Monitor Usage: The CBIC tracks the usage of goods to ensure they are used as specified and not diverted for domestic sales.
- Stay Updated: The list of goods eligible for concessional duties can change. Stay informed to avoid penalties.
