The Export Promotion Capital Goods Scheme (EPCG) allows eligible exporters to import specified capital goods at zero customs duty, subject to fulfilment of prescribed export obligations and other conditions under India's Foreign Trade Policy.
For a manufacturer or service provider planning a substantial investment in machinery, equipment or technology, EPCG can materially reduce the upfront customs-duty cost. The benefit, however, comes with a six-year compliance cycle involving DGFT, Customs, export-document mapping, installation certification, block-wise export obligation monitoring and final redemption.
What Is the EPCG Scheme?
The Export Promotion Capital Goods Scheme is administered by the Directorate General of Foreign Trade under Chapter 5 of the Foreign Trade Policy and Handbook of Procedures.
Its objective is to facilitate the import of capital goods required for producing quality goods and services and to improve the international competitiveness of Indian exporters.
Subject to the applicable policy, customs notification and authorisation conditions, eligible capital goods may be imported at zero customs duty. Capital goods imported for physical exports may also receive exemption from Integrated GST and Compensation Cess where the applicable customs exemption notification permits it.
In return, the authorisation holder must ordinarily fulfil a specific export obligation equal to 6 times the duties, taxes and cess saved on the capital goods within six years from the date of issue of the EPCG authorisation. An annual average export obligation may also apply.
EPCG in One View
| Particular |
General position under FTP 2023 |
| Principal benefit |
Import of eligible capital goods at zero customs duty i.e. Basic Customs Duty, Social Welfare Surcharge (SWS), GST, Anti-Dumping Duty, Countervailing Duty, Safeguard Duty etc. |
| Specific export obligation |
Six times the duties, taxes and cess saved |
| Export obligation period |
Six years from the date of issue of authorisation |
| First block |
Years 1 to 4: minimum 50% of specific export obligation |
| Second block |
Years 5 and 6: balance export obligation |
| Import validity |
24 months from the date of issue; revalidation is not permitted |
| Actual-user condition |
Continues until export obligation is completed and EODC is granted |
| Indigenous sourcing |
Permitted through Invalidation Letter or Advance Release Order; specific EO is generally 25% lower |
| Final closure |
Online application for EODC in ANF 5B, followed by Customs closure of bond/BG as applicable |
Key Benefits of the EPCG Scheme
1. Lower upfront capital cost
The customs-duty exemption can significantly reduce the immediate cash outflow on eligible imported machinery and equipment.
2. Access to advanced technology
Exporters can invest in modern production systems, automation, testing equipment and other eligible capital goods required to improve quality, capacity and productivity.
3. Benefit for both goods and service exporters
The scheme is available to eligible manufacturer exporters, merchant exporters tied to supporting manufacturers and service providers.
4. Domestic procurement option
An EPCG authorisation holder may source capital goods from an Indian manufacturer through an Invalidation Letter or Advance Release Order. For qualifying indigenous procurement, the specific export obligation is generally reduced by 25%.
5. Multiple routes for fulfilling export obligation
Subject to the applicable conditions, export obligation may be fulfilled through direct exports, eligible third-party exports, deemed exports and certain other recognised supplies or receipts. Exports under schemes such as Advance Authorisation, DFIA, Duty Drawback, RoSCTL and RoDTEP may also qualify for EPCG export-obligation fulfilment.
6. Reduced export obligation in specified cases
FTP 2023 provides a reduced specific export obligation for eligible green technology products and for manufacturing units located in the North Eastern Region and the Union Territories of Jammu & Kashmir and Ladakh.
Who Can Apply for an EPCG Authorisation?
The scheme generally covers:
- Manufacturer exporters, with or without supporting manufacturers
- Merchant exporters tied to supporting manufacturers
- Eligible service providers
- Eligible Common Service Providers in notified locations, subject to additional conditions
- Eligible EOU or relocated SEZ units converting to the Domestic Tariff Area, subject to the prescribed procedure
Eligibility must be assessed with reference to the applicant's IEC, RCMC, constitution, manufacturing or service activity, proposed capital goods, installation location, export product or service, past export performance and the nexus between the capital goods and the proposed exports.
What Capital Goods Can Be Covered?
Subject to the negative list and applicable import policy, the EPCG Scheme may cover capital goods required at the pre-production, production and post-production stages, including:
- Machinery and equipment, including eligible capital goods in CKD or SKD condition
- Computer systems and software forming part of the capital goods
- Spares, moulds, dies, jigs, fixtures, tools and refractories
- Catalysts for the initial charge and one subsequent charge
- Eligible capital goods procured from domestic manufacturers
The description, technical specifications, quantity, value, ITC(HS) classification, installation location and nexus with the proposed export product or service should be reviewed before filing. Errors at this stage can create difficulties during Customs registration, import clearance, installation certification or EODC closure.
Understanding EPCG Export Obligation
Specific Export Obligation
The specific export obligation is ordinarily six times the actual duties, taxes and cess saved on the imported capital goods. It must generally be completed within six years from the date of issue of the authorisation.
Illustration: If the duty saved under EPCG is ?1 crore, the normal specific export obligation would be ?6 crore. The obligation is linked to the duty saved, not merely to the invoice value of the machinery.
Average Export Obligation
Where applicable, the exporter must also maintain the average level of exports achieved during the preceding three licensing years for the same and similar products. Only exports over and above the prescribed average are counted towards the specific export obligation.
Certain sectors, including specified agriculture, handicraft, handloom, aquaculture, animal husbandry, dairy, floriculture, horticulture, poultry, carpet, coir and jute activities, may be exempt from maintenance of average export obligation, subject to the policy conditions.
Block Period
| Block |
Period from issue of authorisation |
Minimum specific EO requirement |
| First block |
Years 1 to 4 |
At least 50% |
| Second block |
Years 5 and 6 |
Remaining balance |
The authorisation holder is required to intimate the Regional Authority regarding fulfilment of the block obligation and average exports within the prescribed period. Following the DGFT's 2024 compliance simplification, EO fulfilment reporting begins after expiry of the first four-year block and continues until expiry of the valid export-obligation period, rather than being treated as an annual filing from the first year.
Early redemption benefit
Where an authorisation holder fulfils at least 75% of the specific export obligation and 100% of the average export obligation, if applicable, in half or less than half of the original export-obligation period, the remaining specific export obligation may be condoned and the authorisation may be redeemed by the Regional Authority, subject to satisfaction of all prescribed conditions.
EPCG Application and Compliance Process
Step 1: EPCG feasibility assessment
We examine the proposed import or domestic procurement, applicable customs duties, estimated duty saving, export projections, average export obligation, installation location and technical nexus. This assessment helps determine whether EPCG provides a commercially viable benefit after considering the long-term export commitment.
Step 2: Document and technical review
The machinery description, ITC(HS) classification, supplier quotation or proforma invoice, export product or service, capacity and installation details are reviewed. A nexus certificate in Appendix 5A is obtained from an independent Chartered Engineer in the appropriate technical domain.
Step 3: Online application to DGFT
The EPCG application is filed online in ANF 5A with the jurisdictional Regional Authority, along with the required declarations, certificates and supporting documents.
Step 4: DGFT authorisation and Customs registration
After issue, the EPCG authorisation is registered with the specified Customs port. The applicable bond, Bank Guarantee, LUT and supporting documents are completed in accordance with the authorisation and Customs requirements.
Step 5: Import or indigenous procurement
The approved capital goods are imported within the 24-month validity of the authorisation or procured domestically through the prescribed Invalidation Letter or Advance Release Order route. EPCG authorisation is not revalidated, so procurement planning is essential.
Step 6: Installation certification
The EPCG authorisation holder must submit an installation certificate to the concerned Regional Authority within three years from the date of completion of import. The certificate may be issued by the jurisdictional Customs Authority or an independent Chartered Engineer.
Step 7: Export obligation tracking
Exports are mapped authorisation-wise, with attention to the endorsed export product or service, shipping bill or GST invoice, EPCG authorisation particulars, e-BRC or realisation evidence, third-party export documents and average export obligation.
Step 8: Block reporting, extension or regularisation
Performance is reviewed before the end of the first block and the overall export-obligation period. Where a shortfall is anticipated, extension, clubbing, regularisation or proportionate duty payment options should be evaluated before the applicable deadline.
Step 9: EODC and Customs closure
After fulfilment of the export obligation, an online EODC application is filed in ANF 5B with the prescribed evidence. Upon satisfaction, DGFT issues the EODC and transmits it electronically to ICEGATE for further action by the jurisdictional Customs authority, including closure of the bond or Bank Guarantee, as applicable.
How Osgan Consultants Can Assist
Osgan Consultants supports the complete EPCG lifecycle, including:
- EPCG eligibility and financial-benefit assessment
- Customs-duty saving and export-obligation calculation
- Review of ITC(HS) classification and machinery description
- Coordination for Chartered Engineer nexus certification
- Preparation and filing of ANF 5A application
- Representation and response to DGFT deficiency letters or queries
- Amendment, enhancement and invalidation or ARO support
- Customs registration, bond and Bank Guarantee advisory
- Installation certificate compliance
- Authorisation-wise export-obligation monitoring
- Review of shipping bills, invoices, e-BRCs and third-party export records
- First-block and subsequent EO reporting support
- EPCG extension, clubbing and regularisation
- EODC or EPCG redemption application in ANF 5B
- Coordination for Customs bond or Bank Guarantee closure
- Advisory for legacy EPCG authorisations and policy-period-specific issues
- Representation before the EPCG Committee and DGFT authorities in complex matters
Our approach is not limited to obtaining the licence. We assess the transaction from authorisation through redemption so that the machinery description, customs treatment, export documentation and closure records remain aligned throughout the EPCG lifecycle.
Frequently Asked Questions
1. What is an EPCG licence?
An EPCG licence, formally called an EPCG authorisation, permits eligible capital goods to be imported at zero customs duty subject to prescribed conditions, including fulfilment of export obligations under the Foreign Trade Policy.
2. How is the EPCG export obligation calculated?
The normal specific export obligation is six times the duties, taxes and cess saved on the capital goods. It is calculated on the actual duty saved in a direct import and on the notional duty saved for eligible indigenous procurement.
3. What is the block period under EPCG?
The six-year export-obligation period is divided into two blocks. At least 50% of the specific export obligation must be completed during years 1 to 4, and the balance must be completed during years 5 and 6.
4. Is average export obligation compulsory?
It generally applies and is based on the average exports of the same and similar products during the preceding three licensing years. Certain sectors and specified cases are exempt under the Foreign Trade Policy.
5. Can a service provider apply under EPCG?
Yes. Eligible service providers may apply where the proposed capital goods have the required nexus with the export services and all policy conditions are satisfied.
6. Can a merchant exporter obtain EPCG authorisation?
Yes. A merchant exporter tied to one or more supporting manufacturers may apply. The supporting manufacturer and installation location must be properly declared and endorsed.
7. Can capital goods be purchased from an Indian supplier under EPCG?
Yes. Indigenous sourcing is permitted through an Invalidation Letter or Advance Release Order. The specific export obligation for eligible indigenous sourcing is generally 25% lower than the normal obligation.
8. Can exports through a third party count towards EPCG obligation?
Yes, subject to the prescribed conditions and documentary trail. The export documents, manufacturing evidence, movement records, payment trail and disclaimer from the third-party exporter must support the claim.
9. Can RoDTEP or Duty Drawback be claimed on exports counted for EPCG?
Exports under Advance Authorisation, DFIA, Duty Drawback, RoSCTL and RoDTEP may also be eligible for fulfilment of EPCG export obligation, subject to the applicable policy and scheme conditions.
10. What is the validity of an EPCG authorisation for import?
The authorisation is valid for import for 24 months from its date of issue. Revalidation is not permitted under FTP 2023.
11. When is the installation certificate required?
The EPCG authorisation holder must submit the installation certificate for imported capital goods or spares to the concerned Regional Authority within three years from the date of completion of import. The certificate may be issued by the jurisdictional Customs Authority or an independent Chartered Engineer.
The Regional Authority may permit an extension up to the valid Export Obligation period on payment of a composition fee of ?10,000 for each year of extension.
12. Can the export-obligation period be extended?
For authorisations governed by FTP 2023, the Regional Authority may consider two extensions of one year each beyond the original six-year period, subject to the prescribed application timeline, composition fee and conditions. The policy applicable on the date of issue remains important for older authorisations.
13. What happens if the export obligation is not fulfilled?
The authorisation holder may be required to pay proportionate customs duties, taxes and cess corresponding to the shortfall, along with applicable interest. Extension, clubbing, regularisation or voluntary exit options may be available depending on the facts and governing policy.
14. Can two or more EPCG authorisations be clubbed?
Clubbing may be permitted where the authorisations are held by the same authorisation holder, issued by the same Regional Authority and cover the same or similar export products, subject to the detailed conditions in the Handbook of Procedures.
15. What is EODC under EPCG?
The Export Obligation Discharge Certificate is issued by DGFT after it is satisfied that the prescribed export obligation and related conditions have been fulfilled. It is the principal document for completing the DGFT redemption process and progressing Customs closure.
16. How long does EPCG closure take?
DGFT is required to process a complete EODC application ordinarily within 2 month. The overall closure timeline depends on the completeness of export evidence, authority queries, reconciliation of authorisation data and subsequent Customs action.
17. Should an exporter apply for EPCG before the machinery is shipped?
Yes. Eligibility, classification, duty benefit, nexus, installation location and export obligation should be assessed before shipment. Importing first and attempting to regularise the benefit later can expose the transaction to avoidable duty and compliance risk.
Need Assistance With EPCG Authorisation or Closure?
Whether you are planning a new machinery import, responding to a DGFT query, approaching the end of a block period or seeking redemption of an old EPCG authorisation, Osgan Consultants can help assess the position and implement the appropriate compliance strategy.
Contact Osgan Consultants for professional assistance with EPCG authorisation, Customs registration, export-obligation management, extension, regularisation and EODC closure across India.
