Export Promotion Capital Goods (EPCG) Scheme

What is the EPCG Scheme?

The Export Promotion Capital Goods (EPCG) Scheme is a Foreign Trade Policy instrument administered by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry. According to the DGFT, the EPCG Scheme allows the "import of capital goods for pre-production, production and post-production at zero customs duty." The idea is to help Indian exporters modernise their machinery so that they can produce more competitive goods and services for the international market.

In simple terms, an exporter is allowed to bring in machinery, plant and related capital goods without paying the customs duty that would normally apply. In exchange, the exporter promises to export finished goods or services worth a fixed multiple of the duty that was waived. The scheme therefore trades an upfront tax concession for a future export commitment, aligning private investment with the national goal of growing exports.

EPCG is not a cash subsidy and it is not a citizen welfare benefit. It is a duty-exemption facility aimed squarely at businesses that export, or intend to export, on a sustained basis.

Who is eligible for the EPCG Scheme?

The EPCG Scheme covers three broad categories of applicants:

• Manufacturer exporters, with or without a supporting manufacturer.
• Merchant exporters who are tied to a supporting manufacturer.
• Service providers, including designated Common Service Providers who serve a group of exporters.

Every applicant must hold a valid Importer Exporter Code (IEC) issued by the DGFT, be registered under GST, and hold a Registration cum Membership Certificate (RCMC) from the relevant Export Promotion Council.

Who cannot apply: individual citizens cannot apply for a personal benefit under EPCG, because it is a trade-facilitation scheme, not an individual entitlement. A firm that does not export, or does not intend to take on an export obligation, is also not a suitable applicant, since failure to export triggers recovery of the duty saved with interest. Units that only sell in the domestic market gain nothing from EPCG.

How much benefit does the EPCG Scheme provide?

There is no fixed rupee cap on the benefit. The value of the concession depends entirely on the customs duty that would otherwise have been payable on the capital goods being imported. The larger the machinery investment, the larger the duty saved.

Against that saving, the exporter takes on an export obligation equal to six times the duty saved, to be completed within six years from the date the authorisation is issued. As one summary of the scheme puts it, "there is a compulsion on the business to bring in foreign currency which is equal to 600 per cent of duty saved."

This specific export obligation is in addition to the average export obligation. The exporter must also maintain, in each year, the average level of exports of the same product achieved over the preceding three licensing years. The two obligations run in parallel.

What capital goods are covered?

The scheme covers capital goods as defined in the Foreign Trade Policy, including:

• Capital goods used for pre-production, production and post-production.
• Spares, moulds, dies, jigs, fixtures, tools and refractories.
• Computer systems and software that are part of the capital goods.
• Catalysts for the initial charge plus one subsequent charge.

The imported goods must have a clear nexus with the export product to be manufactured or the service to be rendered, which is why a chartered engineer's certificate is required.

How to apply for an EPCG authorisation

1. Obtain an Importer Exporter Code (IEC) from the DGFT if you do not already hold one, and ensure your GST registration and RCMC are in place.
2. Log in to the DGFT portal at dgft.gov.in and open the EPCG application under the services menu.
3. Fill in application form ANF-5B, entering details of the capital goods to be imported, the export product or service, and the duty-saved calculation.
4. Attach the supporting documents, chartered engineer certificate, chartered accountant certificate, proforma invoice and RCMC — and pay the application fee online.
5. Submit the application. The DGFT issues the EPCG authorisation electronically, after which the capital goods can be imported at zero customs duty.
6. Report fulfilment of the export obligation online on the DGFT portal, for both the specific and the average export obligation, and apply for redemption once the obligation is complete.

What are the compliance obligations?

Holding an EPCG authorisation is a continuing commitment, not a one-time concession. The holder must:

• Fulfil the specific export obligation of six times the duty saved within six years.
• Maintain the average export obligation each year over the block period.
• Install the capital goods at the location declared in the authorisation and produce an installation certificate.
• Submit periodic reports to the DGFT and apply for redemption of the authorisation on completion.

If the export obligation is not met, the exporter must pay the proportionate customs duty saved along with interest of 15 per cent per annum, and may face further action under the customs and foreign trade laws. Because of these consequences, EPCG suits firms with a genuine, sustained export pipeline rather than one-off importers.

Domestic sourcing option

The scheme also permits sourcing capital goods from domestic manufacturers instead of importing them. Where an EPCG holder procures capital goods indigenously, the domestic supplier is treated as having made a deemed export, and the EPCG holder's export obligation is reduced. This provision is intended to encourage demand for Indian-made capital goods while still supporting the exporter's modernisation.

How EPCG fits with other export incentives

EPCG is one of several schemes under the Foreign Trade Policy, and it works differently from most of the others. Schemes such as the Remission of Duties and Taxes on Exported Products (RoDTEP) or duty drawback reimburse taxes after an export takes place. EPCG, by contrast, gives an upfront concession on the import of capital goods and then requires exports to justify it over the years that follow.

This makes EPCG most suitable for a firm that is about to make a substantial investment in new machinery and is confident of exporting at scale for several years. A trader importing finished goods for the domestic market, or a firm with uncertain export prospects, gains little from EPCG and takes on real risk, because an unmet obligation converts the concession into a duty liability with interest.

An important design feature is that the scheme allows the capital goods to be sourced either from abroad, at zero customs duty, or from domestic manufacturers. Encouraging the second option is deliberate: it channels demand towards Indian capital-goods makers while still supporting the exporter's modernisation, and it comes with a reduced export obligation for the EPCG holder.

Validity and the export-obligation period

An EPCG authorisation comes with defined timelines. Broadly, the authorisation carries a validity period for importing the capital goods, and a longer period for fulfilling the export obligation. The specific obligation of six times the duty saved is to be met within six years of issue. Extensions of the export-obligation period can be sought in defined circumstances, usually against a composition fee, and the exact rules are set out in the Handbook of Procedures.

Because these periods, fees and any relaxations are revised from time to time through public notices, an exporter should read the current Handbook of Procedures alongside the authorisation, and track the running balance of both the specific and the average export obligation on the DGFT portal so that the redemption application can be filed on completion.

Help and where to verify

• DGFT toll-free helpline: 1800-111-550 or 1800-572-1550
• DGFT portal: dgft.gov.in, for the EPCG application, the Foreign Trade Policy 2023 and the Handbook of Procedures

Because the precise export-obligation rules, duty rates and procedural forms are revised from time to time through the Foreign Trade Policy and public notices, exporters should confirm the current position on the DGFT portal or with a licensed customs and foreign trade consultant before committing to an authorisation.

How to check your application status

An EPCG authorisation is not a one-time approval; it stays "live" on the DGFT system for the full six-year export obligation period, so applicants need to track it at more than one stage.

1. While the application is under process (before authorisation is issued)

1. Log in to the DGFT portal at dgft.gov.in with the credentials linked to your Importer Exporter Code (IEC).
2. Go to the "My Dashboard" or "Track Application Status" section under Services.
3. Enter the file number or application reference number generated when ANF-5B was submitted.
4. The portal shows whether the application is pending with the Regional Authority, sent back for clarification (a query raised), or approved and ready for authorisation issuance.

2. After the authorisation is issued (tracking export obligation)

1. Log in to the same DGFT dashboard and open the EPCG authorisation record using its authorisation number.
2. The record shows the duty saved, the specific export obligation (six times duty saved), the average export obligation, and the balance still to be fulfilled.
3. Export obligation discharge is reported through Export Obligation Discharge Certificate (EODC) filings and shipping bill linkages, which are also visible on the same record once they are processed.

3. If the online status does not update or a query is unclear

• Call the DGFT toll-free helpline at 1800-111-550 or 1800-572-1550 and quote the file number or authorisation number.
• Approach the jurisdictional Regional Authority of DGFT that issued the authorisation, since queries and physical verifications (such as installation certificate scrutiny) are handled at that office even though the filing itself is online.
• For redemption or export obligation discharge status specifically, the same DGFT login shows whether the redemption application has been processed or is pending with the Regional Authority.

Common reasons for rejection

EPCG applications and later redemption claims are turned down or delayed for a specific set of reasons, most of which trace back to the documentation and nexus requirements built into the scheme.

• No demonstrable nexus between the capital goods and the export product or service. The Chartered Engineer certificate must clearly establish that the machinery being imported (or sourced domestically) will actually be used to produce the declared export product. A generic or loosely worded certificate is a common ground for the Regional Authority to raise a query or reject the application. Fix: get the Chartered Engineer certificate drafted with specific reference to the machine's function in the exporter's declared production process.
• Mismatch in the duty-saved or export obligation calculation. Errors in the Chartered Accountant certificate, or in the value declared for the capital goods versus the proforma invoice, lead to a recalculated (and often disputed) export obligation figure. Fix: reconcile the CA certificate, the proforma invoice value and the ANF-5B entries before submission, since the six-times multiple is computed directly from the duty-saved figure.
• Incomplete or expired prerequisite registrations. Applications are rejected or held up when the IEC, GST registration or RCMC is inactive, expired, or does not match the applicant's name and address exactly as filed. Fix: verify all three registrations are current and that names/addresses are identical across IEC, GST and RCMC before filing ANF-5B.
• Applicant profile does not fit an eligible category. A trader with no genuine export intent, a purely domestic-market unit, or an individual applying without a registered business entity does not meet the scheme's manufacturer-exporter, merchant-exporter or service-provider categories, so such applications are rejected outright.
• Export obligation not fulfilled within the timeline, or fulfilled but not reported. Even after authorisation, a redemption or EODC application is rejected if the specific export obligation (six times duty saved) or the average export obligation for the block period has not actually been met, or if it has been met but the corresponding shipping bills have not been linked and reported on the DGFT portal. Fix: track the running balance of both obligations on the DGFT dashboard continuously, not just at the time of filing for redemption, and file EODC promptly once the obligation is complete.
• Missing installation certificate. Capital goods must be installed at the location declared in the authorisation and an installation certificate submitted; failure to do so, or installing the machinery at an undeclared site, is a recorded compliance gap that blocks closure of the file.