If you are planning to start or expand manufacturing for exports and need to import capital goods (machinery), the EPCG scheme process guide can help you understand how the Export Promotion Capital Goods (EPCG) Scheme allows eligible businesses to import capital goods at NIL customs duty, subject to fulfilling an export obligation. In short, the EPCG scheme allows purchase of capital goods (machinery) at NIL customs duty, subject to fulfilment of an export obligation over a specified period.
This article explains who is eligible for the scheme, how the scheme benefits you, the obligations and commitments involved, and the step-by-step application process — so you can decide with confidence whether EPCG is right for your business.
What is the EPCG scheme?
The Directorate General of Foreign Trade (DGFT) administers the EPCG scheme under the Foreign Trade Policy (FTP) 2023, Chapter 5. DGFT permits the import of capital goods — plant, machinery, and equipment used directly in producing export goods or services — to manufacturer-exporters, merchant-exporters tied to a supporting manufacturer, and eligible service providers, at a reduced or nil customs duty rate.
In return for this benefit, the licence holder is responsible for fulfilling the Export Obligation (EO) — a commitment to export goods or services worth a multiple of the duty saved, within a fixed window.
Who is eligible for the EPCG scheme?
Eligibility depends purely on the import of capital goods and the export of goods or services, backed by a valid Importer Exporter Code (IEC) — the basic registration required for any cross-border trade activity in India. The imported capital goods must have a genuine, demonstrable link to producing export goods or services, irrespective of company size and turnover. DGFT and the licensing authority look for a clear correlation between the machinery imported and the exports projected against it.
The scheme is open to:
- Manufacturer-exporters (with or without a supporting manufacturer)
- Merchant-exporters tied to a supporting manufacturer
DGFT allows manufacturer-exporters to import capital goods for their own production, merchant-exporters tied to a supporting manufacturer where the goods are installed at the manufacturer's premises, and eligible service providers in specified sectors — such as hotels and hospitals — who use capital goods to render export services.
What benefits does the EPCG scheme offer?
Duty savings on capital goods are the primary advantage of the EPCG Scheme. Businesses can choose the EPCG direct import route to import eligible machinery at reduced or zero customs duty, which lowers capital investment while improving export competitiveness. For any business investing in new production or export-service capacity, the real margin gain comes from a lower upfront capital outlay.
Beyond duty savings, the EPCG Scheme also allows:
- Import of capital goods in CKD/SKD (completely or semi-knocked-down) condition for assembly in India
- Import of spares, moulds, dies, jigs and fixtures for the imported capital goods, in specified circumstances
- Indigenous sourcing under EPCG — procuring eligible capital goods from Indian manufacturers instead of importing, with the export obligation calculated on the domestic invoice value
Indigenous sourcing is particularly useful when a suitable Indian manufacturer already produces the required equipment, avoiding the complexity of importing altogether.
The main challenge in this scheme is the Export Obligation. Our companion article on EPCG export obligations covers the process of tracking, reporting, and eventually closing an EPCG licence with an Export Obligation Discharge Certificate (EODC).
How to apply for an EPCG licence
The application is filed online with DGFT and broadly follows this sequence:
- Confirm eligibility and plan the import. Identify the capital goods, confirm they qualify under the scheme, and estimate the export obligation this will create.
- File the application through DGFT's online portal, with supporting documents — typically the IEC, company registration details, a Chartered Engineer Certificate (CEC) confirming the nature and use of the capital goods, and projected export figures.
- Wait for licence issuance. Once DGFT is satisfied with the application, it issues the EPCG authorisation specifying the capital goods covered, the duty saved, and the resulting export obligation.
- Import against the licence, registering it with customs through ICEGATE (the Indian Customs EDI Gateway) at the port of import, so the duty concession applies at clearance.
- Handle installation and certification. Depending on the nature of the goods, an installation certificate may need to be filed with DGFT within the prescribed period to confirm the capital goods are in use for the intended purpose.
- Track and discharge the export obligation over the licence period, ultimately applying for the EODC once obligations are met.
Each of these steps carries its own documentation requirements and deadlines. Errors at the application stage — an incomplete Chartered Engineer Certificate, say, or an export projection that doesn't match actual capacity — tend to surface as complications much later, when the export obligation comes due.
What this means for you
For an export-oriented business planning a capacity upgrade, EPCG offers a real cost advantage. But it is also a multi-year compliance commitment alongside the duty-saving benefit. It isn't just about the duty saved on day one — it's worth mapping out your realistic export trajectory against the obligation the licence will create, before you apply.