DGFT

How does the EPCG scheme work?

Import capital goods at zero duty. 6x export obligation, eligible machinery, block-year fulfillment, and DGFT application process.

By Aaryan Kakani · · 3 min read

What is the EPCG scheme?

EPCG (Export Promotion Capital Goods) lets exporters import capital goods (machinery, equipment, tools, computer hardware, and technology) at zero customs duty . In return, you commit to an export obligation of 6 times the duty saved within 6 years.

EPCG at a glance

Governed by

FTP 2023, Chapter 5

Duty exemption

Zero customs duty (BCD, IGST, Compensation Cess)

Export obligation

6× duty saved, within 6 years

Who can apply

Manufacturer-exporters, merchant-exporters, service providers

Domestic procurement

Capital goods from domestic sources also eligible (deemed export benefits to supplier)

What goods can I import under EPCG?

Eligible capital goods

  • Production machinery and equipment
  • Computer hardware and software systems
  • Testing and quality control equipment
  • Packaging machinery
  • Refurbished / reconditioned capital goods (with 5-year residual life certificate)
  • Moulds, dies, jigs, fixtures, and tools
  • Spares (up to 20% of CIF value of capital goods)
  • Technology and R&D equipment for exportable goods/services

Not eligible

  • Raw materials, consumables, and inputs (use Advance Authorisation)
  • Motor vehicles (except electric vehicles used for specific export services)
  • Office furniture (unless directly used in export production)
  • Items on the DGFT restricted/prohibited list

How does the export obligation work?

EPCG export obligation formula

EO = 6 × (Duty saved on imported capital goods)

Fulfilled within 6 years from date of authorisation

Worked example

CNC machine CIF value

$200,000 (approx. Rs 1.68 crore)

Normal BCD + IGST

~Rs 50 lakh (30% effective rate)

Duty saved

Rs 50 lakh

Export obligation

Rs 3 crore (6 × 50L) in 6 years

Block-year fulfillment

The 6-year EO period is divided into two blocks. Minimum export in each block:

BlockPeriodMinimum EO
Block 1Years 1. 3 (from date of authorisation)50% of total EO
Block 2Years 4. 6Remaining 50%

How do I apply for EPCG?

Application steps

  1. Login to DGFT portal with IEC and DSC
  2. Select Services → EPCG → New Application
  3. Enter capital goods details. Description, HS code, quantity, CIF value, supplier details
  4. Enter export product details. What you'll produce and export using these capital goods
  5. Declare average export performance. Last 3 financial years
  6. Upload documents. Proforma invoice from supplier, RCMC, self-declaration, CA certificate
  7. Pay application fee. Rs 1,000
  8. Submit. Processed by Regional Authority

Documents required

  • Valid IEC
  • RCMC from relevant EPC
  • Proforma invoice for capital goods (from foreign supplier)
  • CA certificate of average export performance (3 years)
  • Self-declaration of end-use and installation address
  • Factory/premises address proof
  • Previous EPCG redemption status (if applicable)

Timeline

Application to authorisation

5. 10 working days

Import validity

24 months from date of authorisation

Installation

Within 6 months of import (must install at declared premises)

How do I fulfill and redeem the EO?

Fulfillment and redemption

  1. Export goods/services manufactured using the EPCG capital goods
  2. Maintain records. Link shipping bills to the EPCG authorisation number
  3. Obtain eBRCs for all export proceeds
  4. Annual reporting. Submit ANF-5A (Annual EPCG Report) on DGFT portal
  5. After completing EO. Apply for EODC (Export Obligation Discharge Certificate)
  6. Submit : EPCG authorisation, shipping bills, eBRCs, import Bills of Entry, CA certificate
  7. DGFT issues EODC. Customs bond/BG released

Should I use EPCG or buy locally?

Decision factors

Use EPCG when

Duty saving is significant (20%+ of machine cost), you're confident of meeting 6x EO, and the imported machine has no viable domestic alternative.

Buy locally when

Domestic alternative exists at competitive price, you're unsure about 6x EO commitment, or the hassle of customs clearance and compliance outweighs duty savings.

Domestic EPCG option

Capital goods sourced from domestic manufacturers also qualify. The supplier gets deemed export benefits (advance license, deemed export drawback). You still get the EO obligation.

Sources & citations

  • Foreign Trade Policy 2023, Chapter 5. EPCG Scheme.
  • Handbook of Procedures, Chapter 5..
  • Customs Notification 16/2015-Customs (as amended) for EPCG duty exemption..
  • DGFT Public Notices on EPCG modifications and relaxations..

Update history

  • First published.