Paragraphs 5 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
This article is on the Handbook of Procedures only; these paragraphs have no Policy paragraph of their own. They carry an EPCG authorisation to its end: the Export Obligation Discharge Certificate (EODC) in paragraph 5.20, surrender and payment for a shortfall in paragraph 5.21, records in paragraph 5.22, re-export or replacement in paragraph 5.23, penal action in paragraph 5.24, and clubbing of authorisations in paragraph 5.25.
The procedure is taken from Chapter 5 of the Handbook of Procedures, 2023 as published on the DGFT website (file of July 2026), consulted on 2 October 2026. Later Public Notices should be checked. If a shortfall has already led to a notice, our legal dispute resolution team can advise on the response.
The holder applies online in ANF 5B for the EODC and the RA ordinarily processes it within 30 days (paragraph 5.20). Surrender of an unutilised authorisation carries no penalty or fee; a shortfall is met by paying customs duty, taxes and cess in proportion to the shortfall with interest (paragraph 5.21). Records are kept for 2 years from redemption (paragraph 5.22). Clubbing is applied for in ANF 5C (paragraph 5.25).
Paragraph 5.20: the EODC
- (a) The holder applies for the online EODC in ANF 5B with the documents prescribed there, as proof of export obligation fulfilment.
- (b) On being satisfied, the RA issues the EODC and an online copy goes to ICEGATE through an API message exchange, for further action by the jurisdictional Customs authority with which the Bank Guarantee or LUT was executed.
- (c) The RA ordinarily processes such applications within 30 days. Shortcomings are pointed out normally in one go. Once documents are complete in all respects, the export obligation is discharged within 30 days of receipt of the complete documents and information.
Paragraph 5.21: bona fide default and exit
The paragraph prints its sub-paragraphs as (a), (b), (c) and (e); there is no (d) in the copy.
| Sub-paragraph | What it says |
|---|---|
| (a) | The holder may surrender the unutilised authorisation at any time. No penalty or fees are levied in that case. |
| (b) | If the holder fails to fulfil the prescribed export obligation, it pays customs duty, taxes and cess in proportion to the shortfall, with applicable interest as prescribed by Customs. The same facility may be used to exit at the holder's option. |
| (c) | For domestic sourcing through an Invalidation Letter or ARO, the duties, taxes and cess payable are on the notional Customs duties, taxes and cess saved on the FOR value of the capital goods (including spares, jigs, fixtures, dies and moulds). |
| (e) | The holder may provisionally pay duty and interest suo motu on its own calculation under the procedure in paragraph 4.50 of the Handbook. |
Composition fees for extension and the block structure are in our article on paragraphs 5.13 and 5.14 and paragraphs 5.15, 5.16 and 5.19. Paragraph 5.21 itself prints no fee for payment on shortfall beyond the duties and interest.
Paragraph 5.22: records
Every EPCG authorisation holder maintains, for 2 years from the date of redemption, a true and proper account of exports and supplies made and services rendered towards fulfilment of the export obligation.
Paragraph 5.23: re-export, repair and replacement
- (a) Capital goods found defective or unfit for use may be re-exported to the foreign supplier within three years from the date of clearance by Customs, with the permission of the RA or the Customs authority. The export obligation is then re-fixed.
- (b) Capital goods found defective or otherwise unfit for use may be exported within two years from the date of clearance, with permission, and replacement capital goods imported under EPCG. While allowing the export, Customs credits the duty benefit availed, which can be debited again when the replacement is imported.
- (c) Capital goods may be re-exported for repairs abroad within three years from the date of clearance, with permission. The duty component on the repair expenditure, and the insurance and freight both ways, is taken into account when the export obligation is re-fixed.
Paragraph 5.24: penal action
On failure to fulfil the export obligation or any other condition of the authorisation, the holder is liable to action under the Foreign Trade (Development and Regulation) Act, 1992 (the Handbook prints a short form of the name), the Orders and Rules made under it, the provisions of the Policy and Handbook, the Customs Act, 1962, or any other law in force. The paragraph names no penalty. For the penalty section of the Act, see Section 11 of the Foreign Trade (Development and Regulation) Act, 1992.
Paragraph 5.25: clubbing
| Sub-paragraph | Rule |
|---|---|
| (a) | Two or more EPCG authorisations issued to the same holder may be clubbed. |
| (b) | The application goes to the RA in ANF 5C. Clubbing is permitted only if the export products endorsed are the same or similar and the authorisations were issued by the same RA. |
| (c) | The total export obligation is re-fixed on the total duty saved of the clubbed authorisations. |
| (d) | On clubbing, the authorisations are deemed a single authorisation for all purposes. The export obligation period is reckoned from the first authorisation's issue date. |
| (e) | The average export obligation is the highest of those endorsed on the individual authorisations. |
| (f) | Clubbing is permitted during the valid export obligation period, including any extended period. For regularisation, clubbing of authorisations whose period is over may be allowed if issued under the same policy period. |
| (g) | Where the obligation can be fulfilled by alternate products or services, the proportion for fulfilment or regularisation is restricted to the lowest percentage allowed in the clubbed authorisations. |
| (h) | Authorisations issued earlier than the dates given are governed by the Handbook of that period: before 01.04.2007, Chapter 5 of HBP Vol.1 (RE-2006); 01.04.2007 to 17.04.2013, Chapter 5 of HBP Vol.1 (RE-2012, as amended); from 18.04.2013 until the notification of HBP 2015-20, Public Notice 1 dated 18.04.2013; then HBP 2015-20, and HBP 2015-20 (RE-2017) until HBP 2023 is notified. |
Example with invented names
Meenakshi Fabrics Ltd holds two EPCG authorisations from the same RA for similar export products. Under paragraph 5.25 it applies in ANF 5C to club them. The total obligation is refixed on the sum of the duty saved; the period runs from the first authorisation's date; the average obligation is the higher of the two endorsed. Later it finds that part of its obligation cannot be met. Under paragraph 5.21(b) it pays customs duty, taxes and cess in proportion to the shortfall with interest; then it applies in ANF 5B for the EODC, which the RA ordinarily processes within 30 days. It keeps its export records for 2 years from redemption.
Where this article stops
The paragraphs name forms (ANF 5B, ANF 5C) and no fields of them are described here. For the plain-language scheme guide see EPCG Scheme: Zero-Duty Capital Goods for Exporters; the tax side is in GST Refund Under the EPCG Scheme. The Handbook is issued under section 6 of the Foreign Trade (Development and Regulation) Act, 1992, and the Policy it serves is made under section 5.
Need help closing out an EPCG authorisation?
If the obligation is short, if a notice has arrived or if two authorisations should be clubbed, the order in which you act matters. Our legal dispute resolution team can review the file and the correspondence with you.
Key takeaways
- Paragraph 5.20: EODC in ANF 5B; ordinarily 30 days to process; 30 days to discharge once complete.
- Paragraph 5.21: surrender of an unutilised authorisation carries no penalty or fees; a shortfall is paid in proportion with interest.
- Paragraph 5.22: records for 2 years from redemption.
- Paragraph 5.23: re-export within three years, replacement within two years, repair abroad within three years.
- Paragraph 5.24: action under the Act, the Policy, the Handbook, the Customs Act, 1962 and other law.
- Paragraph 5.25: clubbing in ANF 5C, single authorisation, highest average obligation.
Read next
- Paragraphs 5.15, 5.16 and 5.19 of the Handbook of Procedures, 2023: extension of the EPCG export obligation period
- Paragraphs 5.13 and 5.14 of the Handbook of Procedures, 2023: block-wise fulfilment of EPCG export obligation
- Section 11 of the Foreign Trade (Development and Regulation) Act, 1992: contravention, penalty and settlement
- EPCG Scheme: Six Times Duty Saved, and the Average Export Obligation
Disclaimer: Based on the chapter-wise text of the Foreign Trade Policy, 2023 and the Handbook of Procedures, 2023 published on the DGFT website, and on the later Notifications named in this article, as consulted on 2 October 2026. The copies carry no "updated up to" date. Notifications, Public Notices, Trade Notices, the ITC(HS) schedules, Appendices and forms change often; the current text on the DGFT website should be checked before acting. This article is general information, not legal advice; check the official text before acting.