The Export Promotion Capital Goods (EPCG) Scheme is an initiative by the Government of India under the Foreign Trade Policy (FTP), aimed at enhancing India’s manufacturing competitiveness by facilitating the import of capital goods at zero customs duty. This scheme helps exporters reduce production costs, boost production efficiency, and expand into international markets.

Types of EPCG Licenses

  1. Manufacturer Exporter EPCG
    Issued to manufacturers who directly export goods or services.

  2. Merchant Exporter EPCG with Supporting Manufacturer
    Issued to merchant exporters tied up with supporting manufacturers.

  3. Service Provider EPCG
    Granted to service providers (e.g., hotels, logistics, IT firms) who earn foreign exchange.

EPCG Process Flow

The EPCG process involves a series of steps that require careful documentation and compliance:

1. Application Filing

  • Apply online through the DGFT (Directorate General of Foreign Trade) portal using the ANF 5A form.

  • Submit necessary documents and fee.

  • Fee is max capped at 1lakh rupees.

2. License Issuance

  • On approval, the EPCG Authorization is issued.

  • This license permits duty-free import of capital goods, subject to export obligations.

    License is registered with customs after this process

3. Import of Capital Goods

  • Import capital goods without paying customs duty (Basic Customs Duty exempted; IGST applicable unless otherwise exempted).

4. Export Obligation Fulfillment

  • Export products/services worth 6 times the duty saved within 6 years from the date of issuance.

    Quick Example – How EPCG Works

    Company: Haridwar Garments Pvt. Ltd.
    Imported Machinery: ₹50 Lakhs
    Duty Saved: ₹15 Lakhs (30% of CIF)
    Export Obligation: ₹90 Lakhs (6× the duty saved)

    • Haridwar Garments applied for an EPCG license to import textile machines duty-free.
    • They saved ₹15 lakhs in customs duty.
    • Over 6 years, they exported goods worth ₹95 lakhs.
    • Export obligation fulfilled → License successfully closed → No penalties.

    Result: Cost savings, increased efficiency, and global market growth!

5. Redemption & Closure

  • After fulfilling the export obligation, apply for redemption.

  • DGFT verifies the documents and closes the EPCG license.

    Documents Required for EPCG License

    To apply for an EPCG license, the following documents are generally required:

    • IEC (Import Export Code)

    • Digital Signature Certificate (DSC)

    • RCMC (Registration-cum-Membership Certificate)

    • GST Registration

    • PAN & Aadhaar of authorized person

    • CA Certificate for export turnover (if applicable)

    • Chartered Engineer Certificate (for machinery details)

    • Proforma Invoice or Purchase Order of capital goods

    • Company Profile

    • Self-certified copy of MSME/Udyam/Factory License (if available)

    • Bank Realisation Certificate (BRC) or Foreign Inward Remittance Certificate (FIRC)

    • Declaration/Undertaking on letterhead

Points to Remember Under the EPCG Scheme

1. Export Obligation (EO) Extension

  • If you are unable to fulfill EO within the 6-year period, you can apply for an EO extension of up to 2 years (as per FTP provisions).

  • A justification letter must be submitted, along with applicable composition fees.

  • Extension is subject to DGFT approval and compliance history.

2. Penalty for Non-Compliance

  • Failure to fulfill the EO within the specified or extended period may result in:

    • Payment of proportionate customs duty plus interest

    • Possible blacklisting or cancellation of IEC

    • Legal action under Customs and FTP rules

  • Non-filing of blockwise EO reports may attract penalty under Section 11(2) of the FTDR Act.

3. Amendments to EPCG License

  • Any change in machinery details, import port, address, or export product must be amended in the EPCG license through DGFT.

  • Amendments must be done before license expiry.

  • Supporting documents like revised purchase orders or CE certificates may be required.

4. Invalidation and Revalidation

  • If you’re unable to import under the license, you can invalidate the EPCG license to use domestic procurement (against Advance Authorization).

  • Revalidation of EPCG license (validity to import) can be requested if it expires before use.

5. Maintain Records

  • Maintain all relevant import, export, and redemption documents for a minimum of 3 years from the date of EO fulfillment.

  • DGFT or Customs may audit at any point during or after EO fulfillment.

6. EO Fulfillment Through Third-Party or Deemed Exports

  • You can fulfill EO through:

    • Third-party exports (with proper documentation)

    • Deemed exports (e.g., supplies to SEZs, EOUs, etc.)

  • Must be pre-declared at the time of application or amended later.

7. Capital Goods Cannot Be Sold or Transferred

  • Capital goods imported under EPCG cannot be sold, transferred, or disposed of until:

    • EO is fully completed and

    • DGFT issues the Export Obligation Discharge Certificate (EODC)

  • Unauthorized sale may result in penalty and recovery of duty saved.

8. Redemption and EODC Application

  • Once EO is fulfilled, apply for license closure with:

    • Shipping bills

    • Export invoices

    • BRC/FIRC

    • Chartered Accountant and Engineer certificates

  • DGFT will issue the EODC, marking the license as closed.

    Bond BG must be released from Customs after this step.