EPCG Scheme explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The Export Promotion Capital Goods (EPCG) Scheme, under Chapter 5 of the Foreign Trade Policy 2023, lets exporters import capital goods at zero customs duty. In return, the holder must fulfil a specific export obligation of six times the duty saved within six years, while also maintaining its average export obligation.
Overview
Where Advance Authorisation covers inputs, EPCG covers capital goods — machinery, equipment and tools used to produce export goods. It is designed to modernise Indian production capacity and enhance export competitiveness by removing the upfront duty cost of importing plant and machinery.
Legal Basis
The scheme is contained in Chapter 5 of the Foreign Trade Policy 2023 and its Handbook of Procedures, administered by the DGFT under the Foreign Trade (Development and Regulation) Act 1992. Duty exemption is delivered through customs notifications; goods are cleared on a Bill of Entry quoting the EPCG authorisation, backed by a bond and bank guarantee/LUT with customs.
Core Parameters
| Parameter | EPCG requirement |
|---|---|
| Duty on capital goods | Zero BCD (IGST exemption per notification, or ITC route) |
| Specific export obligation | 6 × duty saved |
| Obligation period | 6 years from issue of authorisation |
| Average export obligation | Maintain average of last 3 years' exports of that product |
| Installation certificate | Required within the prescribed time from import |
Step-by-Step Process
- Apply to DGFT: File the EPCG application (ANF 5A) with capital goods details, nexus with export product and a chartered engineer certificate.
- Authorisation issued: DGFT issues the EPCG with the duty saved and the export obligation.
- Import & install: Import capital goods at zero duty; install at the declared premises and obtain an installation certificate.
- Produce & export: Manufacture and export the resultant product, quoting the EPCG on Shipping Bills.
- Fulfil EO: Meet both the specific EO (6× duty saved) and the average EO within six years.
- Redemption/EODC: Apply to DGFT for closure with proof of exports; the customs bond is discharged.
Worked Example
An exporter imports machinery on which the BCD (duty) saved is ₹10,00,000.
- Specific export obligation = 6 × ₹10,00,000 = ₹60,00,000 of exports (in FOB, of the resultant product)
- To be achieved within six years from the authorisation date
- Plus maintenance of the average export obligation based on the last three years
If domestic sourcing of the capital goods were used instead, the specific EO would be reduced by the notified percentage as an incentive for indigenous procurement.
Common Pitfalls
- Failing to maintain the average EO even while meeting the specific EO — both must be satisfied.
- Not obtaining the installation certificate within the prescribed time.
- Shortfall in EO at the end of the period, triggering proportionate duty with interest.
- Shifting capital goods to a non-declared unit without DGFT permission.