EPCG Scheme in India: Benefits, Process & Export Obligation

Introduction

Importing modern machinery and equipment can help Indian businesses improve production capacity, product quality and international competitiveness. However, customs duties on high-value capital goods can significantly increase the initial investment required by exporters. The EPCG Scheme helps eligible exporters reduce this cost while linking the benefit with future export performance.

 

EPCG stands for Export Promotion Capital Goods. The scheme is currently governed by Chapter 5 of the Foreign Trade Policy 2023 and the corresponding Handbook of Procedures. It allows eligible capital goods to be imported at zero customs duty, subject to the prescribed conditions and fulfilment of export obligations.

 

For businesses planning to use the EPCG Scheme, it is important to understand eligibility, capital goods coverage, export obligation, authorisation validity, installation requirements, reporting obligations and the EODC process before applying.

 

What is the EPCG Scheme?

The EPCG Scheme is an export promotion scheme that allows eligible exporters to import specified capital goods required for pre-production, production or post-production at zero customs duty, subject to the applicable conditions.

 

The scheme is intended to facilitate access to better machinery, equipment and technology so that Indian businesses can improve the quality and competitiveness of the goods and services they export.

 

Eligible capital goods may also be procured from indigenous sources in accordance with the Foreign Trade Policy. Depending on the applicable customs notification and conditions, certain imports under EPCG may also receive exemption from IGST and Compensation Cess.

 

The benefit, however, comes with an export commitment. The exporter receiving the duty benefit must fulfil the Export Obligation specified against the EPCG authorisation. Therefore, the EPCG Scheme should not be treated merely as a customs duty exemption. It is a trade facilitation mechanism where the duty saved is linked with future export performance.

 

Businesses exploring other government incentives can also read about export promotion schemes in India.

 

 

How Does the EPCG Scheme Work Under FTP 2023?

Under the current Foreign Trade Policy, an eligible exporter applies for an EPCG authorisation from the concerned DGFT Regional Authority. The authorisation contains details relating to permitted capital goods, duty saved amount, export products or services and the corresponding Export Obligation.

 

Under the general rule prescribed in Para 5.01 of FTP 2023, the specific Export Obligation is generally equal to six times the duties, taxes and cess saved on the capital goods. This specific Export Obligation is ordinarily required to be fulfilled within six years from the date of issue of the EPCG authorisation.

 

The authorisation is normally valid for import of capital goods for 24 months from the date of issue. FTP 2023 also provides that revalidation of an EPCG authorisation is not permitted. Exporters should therefore plan the timing of imports, installation and exports carefully before obtaining an authorisation.

 

 

Who is Eligible for the EPCG Scheme?

The EPCG Scheme is available to different categories of exporters.

 

Under FTP 2023, it covers:

• Manufacturer exporters, with or without supporting manufacturers
• Merchant exporters tied to supporting manufacturers
• Service providers

Certain Common Service Providers may also be covered where they satisfy the conditions prescribed under FTP and the Handbook of Procedures. An Importer Exporter Code is also required for carrying out import and export activities. Businesses that do not already have one can learn more about IEC Registration.

 

Eligibility should not be determined only on the basis of whether the applicant exports goods or services. The nature of the proposed capital goods, intended use, export activity, supporting manufacturer arrangement and other applicable DGFT conditions should also be reviewed.

 

 

What Capital Goods Are Covered Under the EPCG Scheme?

The scope of capital goods under the EPCG Scheme is not restricted only to large manufacturing machinery.

 

Eligible capital goods may include those required during pre-production, production and post-production activities.

 

Subject to applicable FTP conditions, the scheme can cover:

• Capital goods as defined under the Foreign Trade Policy, including eligible CKD or SKD condition
• Computer systems and software forming part of imported capital goods
• Spares, moulds, dies, jigs, fixtures, tools and refractories
• Catalysts for the initial charge and one subsequent charge

Capital goods appearing in the negative list under Appendix 5F are not eligible for the zero duty benefit.

 

Restricted items may also require approval from the competent DGFT authority before they can be imported under an EPCG authorisation.

 

Another important condition is the Actual User condition. Capital goods imported under EPCG generally remain subject to this condition until the prescribed export obligation is fulfilled and EODC is granted.

 

 

What Are the Benefits of the EPCG Scheme?

One of the main benefits of the EPCG Scheme is the reduction of the initial customs duty burden on eligible capital goods.

 

For businesses investing in modern machinery, advanced technology or specialised equipment, this can help reduce immediate capital expenditure.

 

The scheme may also help exporters:

• Modernise manufacturing operations
• Improve production capacity
• Enhance product quality
• Adopt advanced technology
• Improve cost efficiency
• Compete more effectively in international markets

The EPCG Scheme also permits eligible domestic procurement of capital goods.

 

Where capital goods are sourced from an indigenous manufacturer through the permitted mechanism, the specific Export Obligation is 25% lower than the Export Obligation normally prescribed under Para 5.01, while the applicable Average Export Obligation remains unchanged.

 

Businesses planning to expand internationally should also understand the overall process of starting an export business in India.

 

 

What is Export Obligation Under the EPCG Scheme?

Export Obligation is one of the most important compliance requirements under the EPCG Scheme.

 

Two concepts need to be understood: Specific Export Obligation and Average Export Obligation.

 

Specific Export Obligation

Under the general EPCG rule, specific EO is six times the duties, taxes and cess saved on the imported capital goods.

 

It must ordinarily be fulfilled within six years from the date of issue of the authorisation.

 

The Handbook of Procedures divides the specific EO period into two blocks:

• First to fourth year: Minimum 50% of the specific EO
• Fifth and sixth year: Remaining specific EO

The authorisation holder must also comply with the prescribed reporting and intimation requirements regarding fulfilment of the block-wise obligation.

 

Average Export Obligation

Where Average Export Obligation applies, exports made towards EPCG fulfilment must generally be over and above the average exports of the same or similar products achieved during the preceding three licensing years.

 

The average is normally calculated as the arithmetic mean of export performance during those three licensing years.

 

This average generally has to be maintained every financial year until completion of the Export Obligation.

 

FTP 2023 provides certain exemptions and special conditions in specific cases. Therefore, exporters should check whether Average Export Obligation applies to their particular authorisation.

 

 

How to Apply for EPCG Authorisation?

Application for EPCG authorisation is generally made electronically to the concerned DGFT Regional Authority using ANF 5A along with the prescribed documents and information.

 

The process can broadly be understood through the following steps:

 

1. Check Eligibility

Determine whether the exporter, proposed capital goods and intended export activity satisfy the conditions under Chapter 5 of FTP.

 

2. Identify Capital Goods

Finalise the machinery, equipment or other eligible capital goods proposed to be imported or procured domestically.

 

3. Obtain Required Certification

Where applicable, obtain the required nexus certification from an independent Chartered Engineer in the prescribed format.

 

4. Submit the Application

Complete ANF 5A electronically and submit it to the appropriate DGFT Regional Authority with the required documents. Businesses needing assistance with DGFT-related registrations and authorisations can also review our DGFT Certificate services.

 

5. Obtain EPCG Authorisation

After approval, the authorisation can be used for permitted imports or domestic procurement.

 

6. Install Capital Goods

Install the capital goods at the authorised premises and fulfil the installation certification requirements.

 

7. Fulfil Export Obligation

Complete the applicable Specific and Average Export Obligations within the prescribed period.

 

8. Apply for EODC

After fulfilment, submit the required documents and apply for closure of the EPCG authorisation.

 

 

Installation and Compliance Requirements

Obtaining an EPCG authorisation does not complete the compliance process. Under the current Handbook of Procedures, the authorisation holder must generally submit an installation certificate to the concerned Regional Authority within three years from completion of import.

 

The certificate may be obtained from the jurisdictional Customs authority or an independent Chartered Engineer, subject to the prescribed conditions. The exporter must also maintain proper records showing how qualifying exports are linked with the EPCG authorisation.

 

After expiry of the first four-year block, an online report regarding EO fulfilment is required, and reporting continues until expiry of the valid EO period. Relevant supporting records may include shipping bills, invoices, Bills of Export and FIRC details, wherever applicable, along with the prescribed professional certification.

 

 

Latest EPCG Scheme Update in 2026

DGFT introduced an important temporary relaxation through Public Notice No. 51/2025-26 dated 6 March 2026.

 

For EPCG authorisations where the block-wise Export Obligation period, whether original or extended, expires between 1 March 2026 and 31 May 2026, the relevant block-wise EO period has been automatically extended up to 31 August 2026.

 

Similarly, where the original or extended overall EO period expires between 1 March 2026 and 31 May 2026, the applicable EO period also stands automatically extended up to 31 August 2026.

 

For this specific relief, no separate application, composition fee, amendment or Regional Authority endorsement is required. However, this is a temporary relaxation only for qualifying EPCG authorisations. It should not be interpreted as a general extension for every EPCG authorisation holder.

 

 

What is EODC Under the EPCG Scheme?

EODC stands for Export Obligation Discharge Certificate.

 

After completing the prescribed Export Obligation, the EPCG authorisation holder must apply for discharge and closure of the authorisation. The application is made online through ANF 5B along with the prescribed evidence showing fulfilment of the Export Obligation.

 

After examining the documents and being satisfied with compliance, the concerned DGFT Regional Authority issues the EODC. The EODC is important because it confirms that the Export Obligation attached to the EPCG authorisation has been discharged. The relevant details are also communicated electronically for further action by the jurisdictional Customs authorities.

 

 

What Happens if Export Obligation is Not Fulfilled?

Businesses should realistically assess their expected export capacity before applying under the EPCG Scheme.

 

If the prescribed Export Obligation is not fulfilled, the authorisation holder may be required to pay customs duty, taxes and cess proportionate to the shortfall, along with applicable interest as prescribed by Customs authorities.

 

The Handbook of Procedures also contains provisions under which an extension of the Export Obligation period may be considered in eligible cases, subject to the applicable conditions and composition fees.

 

An authorisation holder may also use the prescribed mechanism for regularisation or exit from the scheme, depending on the circumstances. Failure to fulfil the conditions of an EPCG authorisation can also lead to action under applicable foreign trade and customs laws. Businesses comparing different export incentive mechanisms may also read about the Advance Authorization Scheme.

 

 

Record Keeping Under the EPCG Scheme

Proper documentation remains necessary even after completion of the Export Obligation.

 

An EPCG authorisation holder is required to maintain true and proper accounts of exports, supplies and services used towards fulfilment of the Export Obligation for two years from the date of redemption.

 

Important records may include:

• EPCG authorisation
• Import documents
• Shipping bills
• Export invoices
• Export realisation records
• Installation certificate
• Professional certificates
• EO reporting documents
• EODC and related correspondence

Maintaining organised records can make the redemption process easier and help the exporter respond to any clarification or verification required by DGFT or Customs.

 

 

Important Note for Older EPCG Authorisations

Businesses holding older EPCG authorisations should not automatically assume that every provision of FTP 2023 applies in the same manner.

 

Authorisations issued under earlier Foreign Trade Policy periods may continue to be governed by the corresponding FTP, Handbook of Procedures and transitional provisions applicable to those authorisations, unless a subsequent amendment or relaxation specifically provides otherwise. Therefore, the date of issue and applicable policy period should always be checked when reviewing an older EPCG case.

 

 

How Can Ebizfiling Help with EPCG Compliance?

Managing an EPCG authorisation involves more than submitting an application. Businesses need to review eligibility, prepare the required documents, understand export obligations, monitor compliance timelines and complete the EODC process correctly.

 

Ebizfiling can assist businesses with DGFT-related registrations, applications and compliance requirements, helping exporters understand the procedural requirements applicable to their case. Our professionals can support you with documentation and filing requirements so that important compliance steps are not missed.

 

If you are planning to import capital goods under the EPCG Scheme or need assistance with DGFT compliance, connect with Ebizfiling for professional guidance and application support.

 

Need help with EPCG compliance? Contact Ebizfiling today.

 

 

Conclusion

The EPCG Scheme can be an important option for Indian exporters planning to invest in machinery, technology and other eligible capital goods while expanding their presence in international markets. The scheme can reduce the immediate customs duty burden on eligible capital goods, but the benefit comes with defined Export Obligation, reporting, installation and record-keeping requirements.

 

Before applying, businesses should carefully evaluate the duty saved amount, expected exports, Specific Export Obligation, Average Export Obligation, validity period and EODC requirements. The 2026 DGFT relaxation also provides additional time to certain qualifying authorisation holders, but it applies only to the specified EO periods. Careful planning, timely compliance and accurate documentation are essential to obtain the benefits of the EPCG Scheme without creating avoidable duty, interest or compliance exposure.

 

 

Frequently Asked Questions