Export Promotion Capital Goods(EPCG) Scheme
The objective of the EPCG Scheme is to facilitate import of capital goods for producing quality goods and services and enhance India’s manufacturing competitiveness and exports
.The EPCG Scheme (Export Promotion Capital Goods Scheme) is a powerful initiative by the Government of India designed to boost exports by allowing businesses to import capital goods at zero customs duty, provided they commit to exporting goods worth six times the duty saved within six years
Key Highlights of the EPCG Scheme
- Purpose: To help Indian manufacturers upgrade technology and produce high-quality goods for export.
Capital Goods Covered:
- Machinery and equipment for manufacturing
- Computer systems and software (if part of capital goods)
- `Spares, tools, dies, jigs, fixtures, and catalysts`
Eligibility:
- Manufacturer exporters (with or without supporting manufacturers)
- Merchant exporters tied to supporting manufacturers
- Service providers (e.g., hotels, hospitals, logistics firms)
Export Obligation:
- Under the EPCG Scheme, the Export Obligation (EO) is the core commitment that an importer makes in exchange for duty-free import of capital goods. Must export goods worth 600% of the duty saved within 6 years.Here’s a breakdown to help you understand it clearly:
📦 What Is Export Obligation?
When you import capital goods under EPCG at zero customs duty, you’re required to export goods or services worth six times the duty saved within a 6-year period from the date of authorization- 🧮 Types of Export Obligation
Type Description
Specific EO: Directly linked to the imported machinery. You must export products made using it.
Average EO: Maintain average export performance based on past records. Useful for large exporters.
Deemed Exports: Supplies to SEZs, EOU units, or projects funded by multilateral agencies may count.
- 🧮 Types of Export Obligation
- Domestic Procurement: You can also source capital goods from Indian suppliers under certain conditions
📆 Fulfillment Timeline
- Block 1: First 4 years — partial EO must be fulfilled and reported.
- Block 2: Final 2 years — complete the remaining EO.
- You must submit progress reports to DGFT online after each block.
⚠️ Non-Compliance Consequences
Failure to meet EO can result in:
- Penalties under the Foreign Trade (Development & Regulation) Act
- Payment of saved duty with interest
- Suspension or cancellation of EPCG license
Average Export Obligation (AEO) : under the EPCG Scheme, which is a bit different from the Specific Export Obligation.
📊 What Is Average Export Obligation?
AEO requires you to maintain your average level of exports for the same or similar products over the preceding three licensing years, throughout the validity of your EPCG authorization (typically six years).
This obligation is in addition to the specific export obligation (6x duty saved) and ensures that your overall export performance doesn’t drop due to EPCG benefits.
🧮 How to Calculate It
- Identify the same/similar products you’ve exported in the last 3 licensing years.
- Add up the export values for those products over those 3 years.
- Divide by 3 to get the average annual export level.
- Maintain that average each year during the EPCG obligation period.
Example: If you exported ₹10 crore, ₹12 crore, and ₹8 crore worth of similar products in the last 3 years, your AEO would be ₹10 crore annually.
🧘 Exemptions from AEO
Certain sectors are exempt from maintaining AEO, including:
- Handicrafts, handlooms, carpets
- Floriculture, horticulture, sericulture
- Cottage and tiny industries
- Agriculture, aquaculture, animal husbandry, coir, jute
However, this exemption does not apply to imports of fishing trawlers, boats, ships, etc.
📝 How to Apply
- Application Link:
- www.dgft.gov.in
- Importer Exporter navigates through Services>>EPCG
- Steps to apply for EPCG file number are as follows:
- Login to the portal with valid credentials and click on ‘Services’menu present in the top of the screen
- Importer Exporter navigates through Services>>EPCG
You can explore the official application process and services on the DGFT EPCG Portal.