EPCG Authorisation (Export Promotion Capital Goods Scheme)
EPCG Authorisation under Chapter 5 of FTP 2023 lets you import capital goods at zero customs duty against an export obligation of six times the duties saved, to be met in six years. Corpseed prepares and files the DGFT application and the EODC.
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Get Support AnytimeWhat is an EPCG Authorisation?
The Export Promotion Capital Goods (EPCG) Scheme in Chapter 5 of the Foreign Trade Policy (FTP) 2023 helps exporters import capital goods for producing quality goods and services. An EPCG Authorisation, issued by the DGFT Regional Authority, allows import of capital goods for pre-production, production and post-production at zero customs duty (FTP para 5.01(a)).
Capital goods imported under EPCG for physical exports are also exempt from IGST and Compensation Cess, as provided in the Department of Revenue's notification. You may instead source the capital goods from Indian manufacturers (FTP para 5.07).
What counts as capital goods under EPCG
- Capital goods as defined in Chapter 11 of the FTP, including in CKD/SKD condition
- Computer systems and software that are part of the capital goods being imported
- Spares, moulds, dies, jigs, fixtures, tools and refractories
- Catalysts for the initial charge plus one subsequent charge
Capital goods in the negative list in Appendix 5F are not allowed. Items restricted for import, or exports restricted for export, need approval of the Exim Facilitation Committee at DGFT headquarters first (FTP para 5.01(f) and (g)).
Who can apply for EPCG?
The scheme covers (FTP para 5.02):
- manufacturer exporters, with or without supporting manufacturers;
- merchant exporters tied to supporting manufacturers;
- service providers; and
- a service provider certified as a Common Service Provider (CSP) by DGFT headquarters in a Town of Export Excellence or a PM MITRA park, on the conditions in para 5.02(b).
You need an Importer-Exporter Code (IEC) and, as for any authorisation under the FTP, an RCMC (FTP para 2.57). The application may be made by the registered office, head office, a branch office or a manufacturing unit of the exporter (Handbook of Procedures, para 5.02).
Actual user condition: imported capital goods are subject to the actual user condition until the export obligation is completed and the Export Obligation Discharge Certificate (EODC) is granted (FTP para 5.03).
EPCG export obligation: amount, period and conditions
| Item | Rule | Source |
|---|---|---|
| Specific export obligation | Six times the duties, taxes and cess saved on the capital goods, to be fulfilled in six years from the date of issue of the authorisation | FTP 5.01(b) |
| Block-wise fulfilment | At least 50% of the specific EO in years 1 to 4; the balance in years 5 and 6 | HBP 5.13(a) |
| Average export obligation (AEO) | The EO is over and above your average exports of the same and similar products in the preceding three licensing years. The AEO must be met every financial year until the EO is completed; only exports above the AEO count towards the specific EO | FTP 5.04(c) |
| Import validity | 24 months from the date of issue. Revalidation is not permitted | FTP 5.01(d) |
| Installation certificate | Within 3 years from completion of import, from the jurisdictional Customs authority or an independent Chartered Engineer. The Regional Authority may extend this up to the EO period on a composition fee of Rs 10,000 per year | HBP 5.04(a) |
Reduced export obligation
- Capital goods sourced in India: specific EO is 25% less (FTP 5.04(d)).
- Exporters of Green Technology Products: specific EO is 75% of the normal EO (FTP 5.10; list in HBP 5.26).
- Manufacturing units in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Jammu and Kashmir and Ladakh: specific EO is 25% of the normal EO (FTP 5.11).
- Early fulfilment: if you meet 75% or more of the specific EO and 100% of the AEO in half the original EO period or less, the rest of the EO is condoned (FTP 5.09).
Only one of the benefits in paras 5.04(d), 5.09, 5.10 and 5.11 can be taken (FTP 5.04(l)). The average EO does not change under these reductions. Exporters in the sectors listed in FTP para 5.12, such as handicrafts, handlooms, KVIC industries, agriculture, aquaculture, animal husbandry, floriculture, poultry, sericulture, carpets, coir and jute, need not maintain the AEO, except for imports of fishing trawlers, boats, ships and similar items.
Exports that count towards the EO
- Goods made by you or your supporting manufacturer, or services you render, exported directly or through a third party (FTP 5.04(a), (b))
- Physical exports and deemed exports (FTP 5.04(f))
- Exports also made under Advance Authorisation, DFIA, Duty Drawback, RoSCTL or RoDTEP (FTP 5.04(e))
- Royalty and R&D service receipts in freely convertible currency, and rupee receipts for services listed in Appendix 5D (FTP 5.04(i), (j))
Documents for an EPCG Authorisation
The application is filed online in ANF 5A with these uploads:
- Self-certified copy of the MSME, IEM, LOI or industrial licence registration for products, or GST registration for service providers
- Chartered Engineer certificate in Appendix 5A, showing the nexus between the capital goods and the export product. The certificate must be from an independent Chartered Engineer (HBP 5.03)
- Certificate of a Chartered Accountant, Cost Accountant or Company Secretary in Appendix 5B (export performance)
- For spares, tools, refractories and catalysts for existing machinery: a list of plant and machinery already installed, certified by a Chartered Engineer or the jurisdictional authority
- For a unit de-bonding from EOU or SEZ: the Development Commissioner's No Objection Certificate with details of the capital goods, their value and depreciated value
- Proof of payment of the application fee as per Appendix 2K
The application must be filed online using a digital signature (ANF 5A guidelines). Keep your IEC profile and RCMC current.
How to apply for EPCG on the DGFT portal
- Check that the capital goods are not in the negative list in Appendix 5F and that they have a nexus with your export product.
- Get the Chartered Engineer nexus certificate (Appendix 5A) and the CA, Cost Accountant or CS certificate (Appendix 5B).
- On the DGFT portal, choose Apply for EPCG (ANF-5A), fill the form, upload documents, pay the fee and sign digitally.
- The Regional Authority issues the EPCG Authorisation with a single port of registration for imports; exports may be made from any port listed in HBP para 4.35 (HBP 5.05).
- Import the capital goods within 24 months, or source them in India against an Invalidation Letter or Advance Release Order (HBP 5.09).
- Upload the installation certificate within 3 years of completing imports.
- Export, and report EO fulfilment online after the first block of four years, certified by a CA, Cost Accountant or CS (HBP 5.14). Tell the Regional Authority within three months of completing a block (HBP 5.13(b)).
- Apply for the EODC in ANF 5B when the EO is complete.
EPCG government fees and timelines
Application fee (Appendix 2K)
| Applicant | Duty saved amount | Fee |
|---|---|---|
| MSME | Up to Rs 1 crore | Rs 100 |
| MSME | Above Rs 1 crore | Rs 5,000 |
| Non-MSME | Any | Rs 1 per Rs 1,000 (or part) of the duty saved amount, minimum Rs 500 and maximum Rs 1,00,000 |
Composition fees for extensions (HBP 5.13 and 5.16)
| Request | Duty saved up to Rs 2 crore | Above Rs 2 crore to Rs 10 crore | Above Rs 10 crore |
|---|---|---|---|
| Extension of first-block EO period, applied within 6 months of block expiry (HBP 5.13(c)) | Rs 5,000 | Rs 10,000 | Rs 15,000 |
| Extension of first-block EO period, applied after 6 months but within 6 years of issue (HBP 5.13(c)) | Rs 10,000 | Rs 20,000 | Rs 30,000 |
| Extension of block-wise EO period for regularisation, applied after 6 years (HBP 5.13(c)) | Rs 15,000 | Rs 30,000 | Rs 45,000 |
| Extension of EO period beyond 6 years: two extensions of one year each, or two years at once (HBP 5.16(b)) | Rs 20,000 | Rs 30,000 | Rs 60,000 |
A request to extend the EO period must be made within 6 months of expiry of the original EO period. The Regional Authority may consider a later request within the extendable period with a late fee of Rs 10,000, and a request for regularisation from the 6th to the 8th year with a late fee of Rs 15,000. No extension beyond 8 years from the date of issue is allowed under this provision (HBP 5.16(c)). No refund of composition fee is allowed.
Timelines
Issue of the authorisation depends on the Regional Authority's scrutiny. For the EODC, the Regional Authority processes applications ordinarily within 30 days, points out shortcomings normally in one go, and discharges the EO within 30 days of receiving complete documents (HBP 5.20(c)).
Redemption and EODC for EPCG
When the export obligation is complete, you apply online in ANF 5B for the Export Obligation Discharge Certificate (HBP 5.20). The documents are:
- Appendix 5C certificate signed by a Chartered Accountant, Cost Accountant or Company Secretary, with a statement of the export documents relied on
- Self-certified copy of the EPCG Authorisation with enclosures
- Bills of Entry for imports, or invoices for capital goods sourced in India
- Proof of submitting the installation certificate within the time limit
- For third-party exports, the additional documents in HBP para 5.10(d)
Once satisfied, the Regional Authority issues the EODC and an online copy goes to ICEGATE for the jurisdictional Customs authority with whom the bank guarantee or legal undertaking (BG/LUT) was executed (HBP 5.20(b)).
If you cannot meet the EO
- You may surrender an unutilised authorisation at any time without penalty or fee (HBP 5.21(a)).
- If you fail to fulfil the EO, you pay customs duty, taxes and cess in proportion to the shortfall, with interest as prescribed by Customs. You may also use this route to exit the scheme (HBP 5.21(b)).
Keep a true and proper account of exports and services towards the EO for 2 years from the date of redemption (HBP 5.22). See also our EODC service.
Why Corpseed for EPCG?
Corpseed checks your capital goods against Appendix 5F, works out the duty saved and the export obligation, coordinates the Chartered Engineer and accountant certificates, and prepares and files the ANF 5A application, extensions and the ANF 5B redemption on the DGFT portal. DGFT's Regional Authority issues the authorisation and the EODC.
Connect With Corpseed
Connect with the Corpseed team to discuss your requirements at IVR: 7558640644 or hello@corpseed.com. It takes 20–25 minutes to discuss the requirement.
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Frequently Asked Questions
Quick answers to common questions about this service.
What is the export obligation under EPCG?
Six times the duties, taxes and cess saved on the capital goods, to be fulfilled within six years from the date of issue of the authorisation (FTP 2023, para 5.01(b)). At least 50% must be met in the first four years (HBP 5.13).
What is the average export obligation?
Your EPCG exports must be over and above your average exports of the same and similar products in the preceding three licensing years. This average must be maintained every financial year until the EO is complete (FTP para 5.04(c)). Some sectors listed in para 5.12 are exempt.
Can I buy the machinery in India instead of importing it?
Yes. You can source capital goods from an Indian manufacturer against an Invalidation Letter or Advance Release Order. The specific EO is then 25% less (FTP paras 5.04(d) and 5.07).
How long can I import under an EPCG Authorisation?
For 24 months from the date of issue. Revalidation is not permitted (FTP para 5.01(d)).
Can I move or sell the imported machines?
The capital goods are under the actual user condition until the EO is complete and the EODC is granted (FTP para 5.03). You may shift them during the EO period to other units listed in your IEC and RCMC, with a fresh installation certificate within six months of shifting (HBP para 5.04(a)).
What if I cannot complete the export obligation?
You can apply for extension with a composition fee (HBP 5.13 and 5.16), or pay customs duty, taxes and cess in proportion to the shortfall, with interest (HBP 5.21(b)).
Do service providers qualify for EPCG?
Yes. The scheme covers service providers, and Common Service Providers certified by DGFT in a Town of Export Excellence or PM MITRA park (FTP para 5.02).
Which capital goods are not allowed?
Those in the negative list in Appendix 5F. Restricted items need prior approval of the Exim Facilitation Committee at DGFT headquarters (FTP para 5.01).
How is an EPCG Authorisation closed?
By an online application for EODC in ANF 5B with the Appendix 5C certificate and supporting documents. The Regional Authority ordinarily processes it within 30 days (HBP para 5.20).
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