EPCG Scheme: Zero Duty on Capital Goods for Exporters

The Export Promotion Capital Goods scheme, usually called EPCG, lets an exporter import machinery and other capital goods at zero customs duty. In return, the exporter agrees to export goods worth a set multiple of the duty saved. It is one of the most useful schemes in the Foreign Trade Policy for manufacturers and service providers who are setting up or upgrading.

What you get

Under the scheme, eligible capital goods can be imported at zero customs duty for pre-production, production and post-production use. Items on the negative list in the policy are excluded. Imports for physical exports are also exempt from IGST. You can also buy capital goods from Indian suppliers under the same authorisation, in which case the export obligation is 25% lower for those goods.

The export obligation

The obligation is six times the duties, taxes and cess saved on the capital goods, and it has to be completed within six years from the date the authorisation is issued. If you saved ₹10 lakh in duty, for example, you need to export ₹60 lakh worth of goods or services over those six years. Missing the obligation can mean paying back the duty with interest, so it needs tracking from day one.

Validity of the authorisation

The authorisation is valid for imports for 24 months from the date it is issued, and the policy does not allow revalidation. Plan your equipment order and shipping before you apply, because a delayed shipment cannot be saved by an extension.

Who can apply

Manufacturer exporters, with or without supporting manufacturers, merchant exporters tied to supporting manufacturers, and service providers can apply. Certain common service providers in towns of export excellence can apply too, subject to conditions. You need a valid Import Export Code before anything else.

After you export

Once the obligation is met, you apply to DGFT for an Export Obligation Discharge Certificate. That closes the authorisation. Keep shipping bills, invoices and bank realisation certificates organised through the six years, because the discharge application depends on them.

How we can help

If you do not have an IEC, start with import export registration. Our EPCG licence service covers the application and obligation tracking, and customs clearance helps at the port. Related reading is in our export, import and trade bodies section.