Overview
The Export Promotion Capital Goods (EPCG) Scheme enables eligible exporters to import capital goods required for pre-production, production and post-production at zero customs duty, subject to fulfilment of the prescribed conditions and export obligation under the scheme.
Under the EPCG Direct Import route, capital goods are imported directly from an overseas supplier against an EPCG Authorisation issued by the Directorate General of Foreign Trade (DGFT).
The EPCG Scheme covers manufacturer exporters, with or without supporting manufacturer(s), merchant exporters tied to supporting manufacturer(s), service providers, and eligible Common Service Providers (CSPs), subject to the prescribed conditions.
The EPCG Authorisation holder is required to fulfil a Specific Export Obligation (SEO) equivalent to 6 times the duty saved value of the imported capital goods. In addition to the SEO, the authorisation holder is required to meet the prescribed Average Export Obligation (AEO), wherever applicable.
Key facts
- Scheme type: EPCG Direct Import allows import of capital goods without payment of Customs Duty.
- Administering authority: the Directorate General of Foreign Trade (DGFT) administers the EPCG Scheme under Chapter 5 of the Foreign Trade Policy, 2023.
- Export Obligation (EO): imports made under the EPCG authorisation are subject to a Specific Export Obligation (SEO) equivalent to 6 times the duty saved. This is over and above the Average Export Obligation (AEO), which is calculated as an average of exports made during the preceding three years and must be fulfilled every financial year.
- Block-wise fulfilment: the SEO under an EPCG Authorisation must be fulfilled block-wise — at least 50% by the end of the first block (1st to 4th year) and the balance by the end of the second block (5th and 6th year). Extensions of the block-wise EO period and the overall EO period may be permitted subject to the prescribed conditions, timelines and applicable composition fees.
- Import validity: the validity for import of EPCG capital goods is 24 months from the date of issue of the Authorisation. Revalidation of the EPCG Authorisation is not permitted.
Core conditions of EPCG Direct Import
Export Obligation
The EPCG license holder must export goods valued at 6 times the duty saved value, within 6 years from the date of issue of the license, in 2 blocks — minimum 50% in the first 4 years and the remainder in the second block of 2 years. The holder must also comply with the Average EO, calculated on export performance of the preceding three years.
Actual User Condition
The imported capital goods cannot be freely sold or transferred as long as they remain under the Actual User Condition — i.e., until the Export Obligation is fulfilled and the EODC is granted.
Import Validity
The capital goods are required to be imported within 24 months from the date of issue of the license, and this period cannot be revalidated or extended.
Bank Guarantee / LUT
Generally, a bank guarantee or LUT equivalent to the amount of duty saved must be furnished at Customs at the time of import of the capital goods, and it will be released only on successful issuance of EODC.
Installation Certificate
The capital goods imported under the license must be installed at the permitted factory/premises, and an installation certificate must be submitted to the Regional Authority (RA) within 6 months from the date of completion of import.
EODC for closure
The closure of the EPCG Authorisation is considered complete when the license holder applies for EODC and it is successfully issued by the Regional Authority.
Eligibility criteria under the EPCG Scheme
Under the EPCG scheme, capital goods can be imported for pre-production, production and post-production activities without the payment of Customs duties.
Who can apply?
- Manufacturer Exporters — an exporter manufacturing the export product.
- Merchant Exporters — tied to a supporting manufacturer who is endorsed on the EPCG authorisation.
- Eligible Service Providers — service providers eligible under the Foreign Trade Policy.
Capital goods include machinery, equipment, computer systems and software forming part of the capital goods, spares, moulds, dies, jigs, fixtures, tools, refractories and eligible catalysts. Capital goods mentioned under Appendix-5F are not eligible for import under the EPCG Scheme.
- The imported capital goods must be utilised in the production of the export good or rendering of the export service for which the EPCG Authorisation is issued.
- The imported capital goods are subject to the Actual User Condition and must be used by the authorisation holder in accordance with the provisions of the license issued.
Benefits under the EPCG Scheme
Duty exemption on eligible capital goods
Eligible capital goods can be imported under an EPCG Authorisation at zero customs duty, subject to the conditions prescribed under the EPCG Scheme and the applicable Customs exemption notification. Exemption from IGST and GST Compensation Cess is subject to applicable provisions and should not be treated as an unconditional EPCG benefit.
Flexibility in EO fulfilment
The Export Obligation under EPCG may be fulfilled through various eligible exports and supplies permitted under the Foreign Trade Policy, including physical exports and deemed exports.
Early EO fulfilment incentive
If the Authorisation holder fulfils 75% or more of the Specific EO and 100% of the Average EO, where applicable, within half or less than half of the original EO period, the remaining Specific EO may be condoned and the Authorisation redeemed.
Reduced EO for Green Technology Products
For exporters of notified Green Technology Products, the Specific EO is reduced to 75% of the normal Specific EO. There is no corresponding reduction in the Average EO, where applicable.
Reduced EO for NE Region, J&K and Ladakh
For manufacturing units in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Jammu & Kashmir and Ladakh, the Specific EO is reduced to 25% of normal — a 75% reduction, with no change to the Average EO where applicable.
Exemption from Average EO for specified sectors
Authorisation holders exporting goods relating to handicrafts, handlooms, KVIC industries, agriculture, aquaculture (incl. fisheries), animal husbandry and dairying, floriculture and horticulture, poultry, viticulture, sericulture, carpets, coir and jute are exempt from maintaining the Average EO.
Reduced BG/LUT for eligible agro units
For eligible units in Agri-Export Zones, LUT/Bond or 15% Bank Guarantee, as applicable, may be furnished where the EPCG Authorisation is taken for export of specified primary agricultural products or their value-added variants.
Relief options available for genuine EO shortfall
If the license holder is unable to fulfil the Export Obligation due to genuine hardships, relief options are available under the EPCG scheme. The Authorisation holder needs to choose the applicable option best suited to the circumstances.
Extension of block-wise EO period
If the EO applicable to a block is not fulfilled, the Authorisation holder may apply for an extension of the relevant EO period, subject to prescribed conditions, timelines and applicable composition fee. Where the EO remains unregularised, the applicable duty and interest may become payable.
Relief due to export ban or restriction
If the export product is banned or restricted by the Government of India, additional time is given without payment of fee.
Average EO relief
If the export performance of a sector is impacted because of market conditions, DGFT can reduce the Average EO for that year.
Regularisation of EO shortfall
If the license holder cannot fulfil the Specific EO, the holder can close the license by regularisation, which involves paying the applicable duty and interest related to the shortfall.
PRC relaxation (special cases)
If the exporter has a genuine hardship, DGFT's Policy Relaxation Committee (PRC) can be approached for specific relief.
Practical example — EPCG Direct Import
PSR Model Works Private Limited, an automobile component manufacturer in Hyderabad, wants to increase its production capacity by importing advanced machinery from Spain. The proposed machine value is ₹2 crores and the applicable customs duty is ₹40 lakh.
Best possible way: before PSR imports the machinery, the company applies for an EPCG license and successfully receives the license issued by DGFT. Once the license is issued, PSR imports the machinery.
- ₹40 LakhDuty saved
- 6× duty savedExport Obligation
- ₹2.40 CroreTotal EO
The Export Obligation is completed within the EPCG period through eligible exports, supported by export documents such as shipping bills and realisation records. The EO is monitored in two blocks: the first block (year 1–4) requires a minimum 50% of Specific EO, i.e. ₹1.2 crore, and the second block (year 5–6) covers the remaining ₹1.2 crore.
After completing the Export Obligation, the company applies for EODC with DGFT. On approval, the EPCG Authorisation is closed and the related compliance obligations are released.
Documents required
The documents required under the EPCG Scheme vary depending on the stage of the process — from applying for the EPCG Authorisation, importing the capital goods, monitoring export obligation, and obtaining redemption/EODC.
Applying for the EPCG Authorisation
Stage 1- Importer Exporter Code (IEC)
- RCMC, wherever applicable
- GST registration/details, particularly for service providers
- Details/specifications and intended use of the proposed capital goods
- Nexus Certificate from an independent Chartered Engineer (Appendix 5A)
- Export Performance Certificate (Appendix 5B), duly certified by a CA/CMA/CS where required
- Details of existing EPCG Authorisations, including pending export obligations
- Digital Signature Certificate (DSC) for online filing
Importing or procuring the capital goods
Stage 2- EPCG Authorisation
- Bill of Entry, for import of capital goods
- Commercial Invoice and Packing List
- Installation Certificate, where applicable
Tracking & demonstrating EO fulfilment
Stage 3- Shipping Bills / Bills of Export
- Export invoices
- e-BRCs
- Documents evidencing eligible deemed exports or other permitted supplies
- Third-party export documentation, where applicable
- Records supporting block EO and Specific EO fulfilment
Closure / Redemption (EODC)
Stage 4- Online redemption/EODC application in ANF-5B
- Export Obligation fulfilment / export performance certificate, duly certified
- Installation Certificate
- Shipping Bills / Bills of Export and other evidence of eligible exports/supplies
- e-BRC
- Bills of Entry, for verification of imports made under the Authorisation
- Documents evidencing fulfilment of Average EO and Specific EO, wherever applicable
- Any additional documents/information sought by the DGFT Regional Authority
EPCG Direct Import — how it works
The process involves obtaining an EPCG Authorisation, importing eligible capital goods under it, installing and using them as prescribed, fulfilling the applicable Export Obligation, and finally obtaining redemption/EODC from DGFT.
Before you import
Check eligibility & applyCheck whether your capital goods are eligible
The EPCG Scheme permits import of eligible capital goods for pre-production, production and post-production, except items specified in the negative list in Appendix 5F.
Understand your Export Obligation
The Specific EO is generally equivalent to 6 times the duties, taxes and cess saved on the capital goods, to be fulfilled within 6 years from the date of issue. The Authorisation may also be subject to an Average Export Obligation based on the applicant's preceding three financial years, unless exempted.
Keep the required documents ready
If the capital goods proposed to be imported are restricted for import, import under EPCG is permitted only after approval of the Exim Facilitation Committee (EFC) at DGFT Headquarters. Similarly, if the goods proposed to be exported are restricted for export, the EPCG Authorisation can be issued only after the required export authorisation is approved by the EFC.
Apply for EPCG Authorisation
Submit the EPCG application online in ANF-5A using a Digital Signature Certificate (DSC), along with the prescribed documents. Once approved, DGFT issues the EPCG Authorisation, generally valid for 24 months from the date of issue for import of capital goods. Revalidation is not permitted.
Import the machinery
Register, clear and installRegister the Authorisation with Customs
After the EPCG Authorisation is issued, complete the prescribed Customs registration/processing formalities at the port through which the capital goods are to be imported.
Complete Customs formalities
Depending on the applicable requirements, the Authorisation holder may have to execute the prescribed bond/LUT or furnish a Bank Guarantee before clearance of the capital goods, depending on the status of the importer and applicable Customs/DGFT provisions.
Import and install the capital goods
Under FTP 2023, EPCG permits eligible capital goods to be imported at zero customs duty; goods imported for physical exports are also exempt from IGST and Compensation Cess, subject to the applicable Department of Revenue notification. After import, the capital goods must be installed and the prescribed Installation Certificate submitted to the concerned RA within six months from the date of completion of import.
Actual User condition
The imported capital goods are subject to the Actual User condition until the Export Obligation is completed and the EODC is granted, and should not be transferred or disposed of in a prohibited manner before then.
Complete the Export Obligation
Export, record and monitorStart exporting
Once the capital goods are installed, use them for the authorised manufacturing activity or services and fulfil the applicable EO. Goods may be exported directly or through permitted third-party exporters. EO may also be fulfilled through other eligible categories permitted under the FTP, including specified exports under Advance Authorisation, DFIA, and deemed exports.
Maintain supporting records
Shipping Bills/Bills of Export, export invoices, e-BRC, documents evidencing deemed exports or other eligible supplies, and any other documents required to establish fulfilment of Specific EO and Average EO.
Monitor your export progress
The Specific EO is generally required block-wise: at least 50% in the first four years, and the balance in the fifth and sixth years. Where applicable, the Average EO must also be fulfilled every financial year until the Export Obligation is completed.
If you're falling short
If the Authorisation holder is unable to fulfil the EO within the prescribed period, extension or other permissible regularisation may be available under the FTP/HBP, subject to applicable conditions, timelines and fees.
Close the EPCG Authorisation
Redemption & EODCApply for redemption / EODC
After fulfilling the applicable Export Obligation and other EPCG conditions, apply to the concerned DGFT Regional Authority for redemption/EODC online in ANF-5B, along with the prescribed supporting documents.
Receive the EODC
The Regional Authority examines the application and supporting documents to verify fulfilment of the applicable conditions and Export Obligation. On satisfactory fulfilment, the Regional Authority issues the EODC, and the closure details are communicated electronically to Customs, enabling closure of the corresponding Customs obligations, subject to the applicable Customs procedure.
Thinking of importing capital goods for your business? Save Customs Duty under the EPCG Scheme and keep more money available for your business instead of locking it up in import duty payments.
Book a free consultation, and we'll help you through the entire process — from planning your import and getting the EPCG Authorisation to meeting your export obligation and closing the file with the EODC.
EPCG Direct Import, explained
A quick video walkthrough of how EPCG Direct Import works, from eligibility through to export obligation and EODC closure. Tap play to watch here, or open it directly on YouTube.
Prefer YouTube? Watch it on youtube.com in a new tab.
FAQs
The EPCG Scheme allows import of capital goods, except those specified in the ineligible list at Appendix 5F, for pre-production, production and post-production at zero customs duty.
The Export Obligation under EPCG is equivalent to 6 times the duties, taxes and cess saved on capital goods, to be fulfilled in 6 years. HBP 2023, Para 5.13(a) splits this into blocks: a minimum of 50% by the end of the first block (1st to 4th year), and the balance by the end of the second block (5th and 6th year).
Where the EO of the first block is not fulfilled, the Authorisation holder shall, within 6 months from the expiry of the block, pay duties of customs, along with applicable interest as notified by DoR, proportionate to the duty saved amount on the total unfulfilled EO of the first block, or the Authorisation holder can apply for a block period extension.
The Authorisation holder must produce, within 6 months from the date of completion of import, a certificate to the concerned Regional Authority from the jurisdictional Customs authority or an independent Chartered Engineer, at the option of the Authorisation holder, confirming installation of the capital goods/spares.
The Export Obligation Discharge Certificate (EODC) is DGFT's confirmation that the export obligation has been met in full. Without it, the bond and bank guarantee remain encumbered, so the duty saving stays a contingent liability rather than a closed benefit.
No. FTP 2023, Para 5.01(a) allows import of capital goods except those specified in the negative list at Appendix 5F, and second-hand capital goods are listed there as not permitted, so second-hand machinery does not qualify for import under EPCG.
Relief routes are available depending on the circumstances, including special extensions, Policy Relaxation Committee (PRC) review, and regularisation, but none apply automatically and each has its own eligibility conditions that should be assessed for the specific case.
It depends case to case, since both schemes have their own benefits: EPCG gives duty exemption for capital goods, while Advance Authorisation covers raw materials, so the right choice depends on the specific business requirement.
Yes. DGFT will not issue the EPCG authorisation unless an independent Chartered Engineer certifies that the machine to be imported genuinely connects to the export product or export service — this is called the Nexus Certificate.
Yes. FTP 2023, Para 5.01(a)(iii) lists spares, moulds, dies, jigs, fixtures, tools and refractories as eligible capital goods under the EPCG Scheme.
No timeline is prescribed in FTP 2023 or HBP 2023 for issuing the authorisation itself. The only fixed timeline that exists is for EODC: HBP 2023, Para 5.20(c) states that the Regional Authority shall process such applications ordinarily within 30 days.
Official DGFT/CBIC source notifications
- Foreign Trade Policy (FTP) 2023, Chapter 5 — Export Promotion Capital Goods (EPCG) Scheme.
- DGFT official portal (dgft.gov.in) — ANF-5A/5B application forms and current Public Notices.
