Export Promotion Capital Goods (EPCG) Authorization

The Export Promotion Capital Goods (EPCG) Authorization is a specialized trade facilitation scheme issued by the Directorate General of Foreign Trade (DGFT) that allows Indian exporters to import capital goods for pre-production, production, and post-production at zero customs duty. The primary objective is to promote Indian exports by upgrading technology and reducing upfront machinery costs.In exchange for this duty exemption, the importer commits to a mandatory Export Obligation (EO), promising to generate a specific value of foreign currency earnings within a defined timeline.

Dual Commitments: Export Obligations

An authorization holder must concurrently fulfill two types of obligations

1.    Specific Export Obligation (SEO): Exporters must export finished goods or services worth 6 times the actual customs duty saved. This obligation must be completed within 6 years from the date the authorization is issued.

      I.        Block-wise fulfillment: Usually split into blocks—at least 50% must be completed within the first 4 years, and the remaining balance in the final 2 years.

    II.        Indigenous Sourcing Benefit: If an exporter procures capital goods from domestic manufacturers instead of importing them, the specific EO is reduced by 25%

2.    Average Export Obligation (AEO): Exporters must also maintain their average export turnover from the preceding three financial years for the same or similar products. This ensures that the newly upgraded machinery increases or maintains baseline export volumes rather than replacing existing business

Features & Conditions Export Promotion Capital Goods (EPCG) Authorization

·         Eligible Entities: Covers manufacturer exporters (with or without supporting manufacturers), merchant exporters tied to supporting manufacturers, and service providers

·         Eligible Goods: Includes machinery, equipment, components, spare parts, tools, jigs, fixtures, and computer software essential for production.

·         Import Validity: The authorization is valid for physical imports for 18 months from the date of issue and cannot be revalidated

·         Actual User Condition: Imported machinery cannot be sold, transferred, or leased until the export obligation is fully met and an Export Obligation Discharge Certificate (EODC) is obtained

 

·         Early Closure Incentive: If 75% or more of the specific EO and 100% of the average EO are met in half or less than half of the permissible time (3 years or less), the remaining export obligation is condoned, allowing early redemption

·         Default Penalty: Failure to fulfill the EO requires the exporter to pay the saved customs duty proportion to the shortfall, plus interest to the customs authorities

Step-by-Step Procedure Export Promotion Capital Goods (EPCG) Authorization

1.    Application Submission: File online via the DGFT E-Platform using Form ANF 5A, backed by an active Import Export Code (IEC) and Registration-cum-Membership Certificate (RCMC). You must attach a Nexus Certificate from an independent Chartered Engineer.

2.    Customs Registration: Once issued, register the license at the designated port of import by executing a bond or bank guarantee with customs.

3.    Installation Certification: After physical delivery, the capital goods must be installed at the declared premises. A Chartered Engineer's certificate confirming physical installation must be submitted to the DGFT within 6 months of import completion.

4.    Fulfillment & Reporting: Execute export shipments, tracking details through shipping bills and electronic Bank Realization Certificates (e-BRCs).

5.    Redemption (Closure): Upon satisfying the EO, apply for redemption using Form ANF 5B. The DGFT verifies proofs and issues an Export Obligation Discharge Certificate (EODC).

6.    Bond Cancellation: Submit the EODC to customs to cancel the initial indemnity bond and release any financial bank guarantees.

Benefits of Export Promotion Capital Goods (EPCG) Authorization

1. Significant Cost Savings

EPCG allows import of capital goods at zero or concessional customs duty, reducing overall project cost and improving cash flow.

2. Easy Technology Upgrade

Businesses can import advanced machinery and equipment, helping them modernize operations and improve production quality.

3. Boost in Export Competitiveness

With better technology and reduced costs, companies can offer competitive pricing in global markets, increasing export potential.

4. No Upfront Duty Burden

Unlike normal imports, you don’t need to block funds in duties, which helps in better financial planning and working capital management.

5. Flexible Export Obligation Period

Export obligation can be fulfilled over a long duration (generally 6 years), giving businesses sufficient time to plan and execute exports.

6. Applicable to Multiple Sectors

EPCG is not limited to manufacturers—service providers like hotels, hospitals, and logistics companies can also benefit.    

How to apply for Export Promotion Capital Goods (EPCG) Authorization

Step 1: Eligibility & Feasibility Analysis

We assess your business model, export potential, and capital goods requirement to determine EPCG suitability and calculate expected benefits vs obligations.

Step 2: Export Obligation Calculation

We compute the exact export obligation based on duty saved and guide you on realistic export targets aligned with your business capacity.

Step 3: Documentation Preparation

All required documents are compiled, verified, and structured to ensure error-free filing and avoid delays or rejections.

Step 4: Application Filing on DGFT Portal

We file the EPCG application online with accurate technical and financial details, ensuring compliance with DGFT guidelines.

Step 5: Query Handling & Approval

If DGFT raises any queries, we handle clarifications, modifications, and follow-ups to ensure smooth approval.

Step 6: Authorization Issuance

Once approved, EPCG authorization is issued with clearly defined terms, including import value, duty saved, and export obligation.

Step 7: Import / Procurement & Installation

You can import or procure machinery. Post-installation, necessary certificates are obtained to confirm usage as per EPCG norms.

Step 8: Export Execution & Monitoring

We assist in tracking export performance, maintaining records, and ensuring timely fulfillment of export obligations.

Step 9: EODC (Closure of EPCG Authorization)

After fulfilling export obligation, we file for Export Obligation Discharge Certificate (EODC) and complete the closure process.

Documents required for Export Promotion Capital Goods (EPCG) Authorization

ü  IEC (Import Export Code)

ü  GST Registration Certificate

ü  PAN of the entity

ü  Proforma Invoice / Purchase Order of capital goods

ü  CA Certificate for duty saved & EO calculation

ü  Digital Signature Certificate (DSC)

ü  Installation Certificate (post import)

ü  Past export data 

ü  Undertaking / declarations as per DGFT

 Conclusion:

The conclusion of an Export Promotion Capital Goods (EPCG) Authorization involves the formal closure or redemption of the license after fulfilling all compliance and export obligations. Corporate compliance platforms like Metacorp Product Specific Compliances outline this final stage as the path to legally release the business from liabilities.