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.
The Export Promotion Capital Goods (EPCG) Scheme lets an exporter bring in capital goods at zero customs duty in return for an export obligation. Paragraph 5.00 states the objective and paragraph 5.01 sets out the core rules; the matching Handbook paragraphs 5.01, 5.02, 5.05 and 5.06 say how to apply and how to treat spares.
This article is based on the chapter-wise text of the Foreign Trade Policy, 2023 published on the DGFT website, as consulted on 2 October 2026; the copy carries no "updated up to" date. 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 Notifications and Public Notices should be checked. If you are setting up an exporter profile for the scheme, begin with the IEC registration that every authorisation application depends on.
Under paragraph 5.01(a) capital goods may be imported at zero customs duty (except the goods in the negative list in Appendix 5 F). Paragraph 5.01(b) fixes an export obligation of 6 times the duties, taxes and cess saved, to be fulfilled in 6 years from the date of issue. The authorisation is valid for import for 24 months and cannot be revalidated (paragraph 5.01(d)). Restricted items need approval from the Exim Facilitation Committee (paragraph 5.01(f) and (g)).
What the Policy says
Paragraph 5.00 (objective). The objective is to facilitate import of capital goods for producing quality goods and services and to enhance India's manufacturing competitiveness.
Paragraph 5.01(a): what is allowed. The scheme allows import of capital goods for pre-production, production and post-production at zero customs duty, except those in the negative list in Appendix 5 F (named here, not opened). Capital goods imported under an EPCG Authorisation for physical exports are also exempt from IGST and Compensation Cess leviable under sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act, 1975, as provided in the notification issued by the Department of Revenue. The holder may alternatively procure capital goods from indigenous sources under paragraph 5.07 of the Policy (see our article on paragraph 5.07).
For the purposes of the scheme "capital goods" include four heads: (i) capital goods as defined in Chapter 11 of the Policy, including their CKD or SKD condition; (ii) computer systems and software that are part of the capital goods being imported; (iii) spares, moulds, dies, jigs, fixtures, tools and refractories; and (iv) catalysts for initial charge plus one subsequent charge.
The chapter file still prints the Compensation Cess reference in paragraph 5.01(a) and (e). Notification 32/2026-27 of 21 August 2026 dropped the Compensation Cess exemption from paragraph 4.63 only; the present levy should be checked, and this article changes nothing in paragraph 5.01.
Paragraph 5.01(b) and (c): the obligation. Import is subject to an Export Obligation (EO) equivalent to 6 times the duties, taxes and cess saved on capital goods, to be fulfilled in 6 years reckoned from the date of issue of the Authorisation. Import or procurement is also subject to the Average Export Obligation (AEO) given in paragraph 5.04(c) of the Policy. The AEO is explained in our article on paragraphs 5.04 and 5.08.
Paragraph 5.01(d): validity. The Authorisation is valid for import for 24 months from the date of issue. Revalidation is not permitted.
Paragraph 5.01(e): tax paid in cash. If Integrated Tax and Compensation Cess are paid in cash on imports under EPCG, their incidence is not taken into account in computing net duty saved, provided Input Tax Credit is not availed.
Paragraph 5.01(f) and (g): restricted items. Import of items that are restricted for import is permitted under EPCG only after approval from the Exim Facilitation Committee (EFC) at DGFT Headquarters. If the goods proposed to be exported under the Authorisation are restricted for export, the Authorisation is issued only after approval for issuing the Export Authorisation from the EFC. Whether an item is restricted is read from the item's entry in ITC(HS); this article does not state any item's policy.
Procedure under the Handbook
| Paragraph | What it says |
|---|---|
| 5.01 | The policy relating to EPCG is given in Chapter 5 of the Policy. |
| 5.02 | An application may be made by the Registered Office, Head Office, a Branch Office or a Manufacturing Unit of an eligible exporter to the concerned Regional Authority (RA) in ANF 5A, with the documents prescribed there. |
| 5.05 | An EPCG Authorisation is issued with a single port of registration, as per paragraph 4.35 of the Handbook, for imports. Exports can be made from any port specified in paragraph 4.35 of the Handbook. |
| 5.06(a) | An application for spares, tools, refractories and catalysts (sub-paragraphs (a)(iii) and (iv) of paragraph 5.01 of the Policy) carries a list of plant and machinery installed at the applicant's premises for which they are required, certified by an independent Chartered Engineer or by the jurisdictional Customs authority. |
| 5.06(b) | For spares the Authorisation does not list the spares but shows the name of the plant or machinery, the value of duty saved allowed, and the description of the export product and value of export obligation. |
| 5.06(c) | The holder keeps a register of stock and utilisation of those items and, when applying for the Export Obligation Discharge Certificate (EODC), submits a Chartered Engineer's certificate based on the register that confirms their use in the installed capital goods. |
The Nexus Certification, the installation certificate and the actual user condition belong to the next article in this series, paragraphs 5.02 and 5.03.
A worked illustration with invented names
Kaveri Auto Components Pvt Ltd plans to bring a press line under the scheme. Under paragraph 5.01(b), if its duties, taxes and cess saved come to a particular amount, its export obligation is six times that amount, to be met within 6 years of the date the Authorisation is issued. The Authorisation is valid for import for 24 months from issue (paragraph 5.01(d)); imports after that are outside it, and no revalidation is allowed. If the press line is on the list of items restricted for import, paragraph 5.01(f) requires the Exim Facilitation Committee's approval first. It applies in ANF 5A to the Regional Authority (paragraph 5.02 of the Handbook) and gets a single port of registration (paragraph 5.05 of the Handbook).
Related reading and the Act
EPCG, drawback, RoDTEP and Advance Authorisation are compared in Duty-exemption schemes. For the scheme's zero-duty design in plain terms, see EPCG Scheme: Zero-Duty Capital Goods for Exporters. The Policy is made under section 5 of the Act (Section 5 of the Foreign Trade (Development and Regulation) Act, 1992), and the Handbook is issued by the Director General (Section 6 of the Act). The Policy is not a statute; it binds through the Act and the conditions of each authorisation.
Need help with an EPCG application?
Before an EPCG application is filed, the exporter profile must be in order. We can help you sort out the Importer-Exporter Code, its details and its registered units through our IEC registration service, so the application in ANF 5A starts clean.
Key takeaways
- Paragraph 5.01(a): capital goods at zero customs duty, except those in Appendix 5 F; four heads of capital goods.
- Paragraph 5.01(b): export obligation 6 times duties, taxes and cess saved, in 6 years from date of issue.
- Paragraph 5.01(d): 24 months for import; no revalidation.
- Paragraph 5.01(f) and (g): restricted items need Exim Facilitation Committee approval.
- Handbook paragraph 5.05: one port of registration for imports; exports from any port listed in paragraph 4.35 of the Handbook.
- The chapter file still prints Compensation Cess; check the present levy.
Read next
- Paragraphs 5.02 and 5.03 of the Foreign Trade Policy, 2023: EPCG coverage and the actual user condition
- Paragraph 5.07 of the Foreign Trade Policy, 2023: indigenous sourcing of capital goods under EPCG
- GST Refund Under the EPCG Scheme
- 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.