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.
Paragraph 5.02 of the Policy says which kinds of applicant the EPCG scheme covers, including a Common Service Provider in a Town of Export Excellence or a PM MITRA park. Paragraph 5.03 says the imported capital goods stay under the actual user condition until the export obligation is completed. The Handbook adds the nexus certificate (paragraph 5.03) and the installation certificate (paragraph 5.04).
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. Every applicant needs a valid Importer-Exporter Code, which is why many start with our IEC registration service.
Paragraph 5.02(a) covers manufacturer exporters (with or without supporting manufacturers), merchant exporters tied to supporting manufacturers, and service providers. Paragraph 5.02(b) also covers a Common Service Provider certified by DGFT Headquarters in a Town of Export Excellence or PM MITRA, on five conditions, including a Bank Guarantee equal to the duty saved. Under paragraph 5.03 the goods remain under the actual user condition until the EODC is granted.
What the Policy says
Paragraph 5.02(a): who is covered. The scheme covers manufacturer exporters with or without supporting manufacturer(s), merchant exporters tied to supporting manufacturer(s), and service providers. The name of a supporting manufacturer is endorsed on the EPCG Authorisation before the capital goods are installed in that manufacturer's factory or premises. If the supporting manufacturer changes, the Regional Authority (RA) informs the jurisdictional Customs authority of the existing and the new supporting manufacturer, and the Customs at the port of registration of the Authorisation.
Paragraph 5.02(b): the Common Service Provider (CSP). The scheme also covers a service provider certified as a Common Service Provider by DGFT Headquarters, Department of Commerce, in a Town of Export Excellence or a Prime Minister Mega Integrated Textile Region and Apparel Park (PM MITRA), subject to the Policy and the Handbook and the following five conditions.
| Condition | What it says |
|---|---|
| (i) | Common utility services such as electricity, water, gas, sanitation, sewerage, telecommunication and transportation are not considered for the CSP's benefit. |
| (ii) | Exports by users of the common service count towards the CSP's export obligation, provided the CSP's EPCG Authorisation details appear in the respective shipping bills and the concerned RA is told the details of the users before the export. |
| (iii) | Such exports do not count towards the specific export obligation of the user's other EPCG Authorisations. |
| (iv) | The Authorisation holder submits a Bank Guarantee (BG) equivalent to the duty saved. The BG can be given by the CSP, by any one of the users, or by a combination, at the CSP's option. |
| (v) | The capital goods are installed within a Town of Export Excellence or PM MITRA. |
Paragraph 5.03: actual user condition. Imported capital goods stay subject to the Actual User condition until the export obligation is completed and the Export Obligation Discharge Certificate (EODC) is granted.
Procedure under the Handbook
Paragraph 5.03 of the Handbook (nexus certification).
- (a) The RA issues the EPCG authorisation on the basis of a nexus certificate from an independent Chartered Engineer, submitted by the applicant in Appendix 5A. The Chartered Engineer acts only in the domain of his or her competence. For fabrication, reasonable wastage anticipated at installation is certified by the Chartered Engineer in the nexus certificate and shown in the condition sheet of the authorisation. The wastage so permitted may be sold as scrap or waste on payment of applicable duty by the holder.
- (b) An application to amend the list of import items (additions or deletions) may be filed with the RA while the authorisation is valid for import, with justification and a fresh nexus certificate from an independent Chartered Engineer.
- (c) An application to amend the list of export items may be filed while the export obligation period is valid and the capital goods have nexus with the export product, again with justification and a fresh nexus certificate.
Paragraph 5.04 of the Handbook (certificate of installation).
- The holder produces to the RA, within 3 years from the date of completion of import, a certificate confirming installation of the capital goods or spares at the factory or premises of the holder or of the supporting manufacturer(s). The certificate comes either from the jurisdictional Customs authority or from an independent Chartered Engineer, at the holder's option. If the Chartered Engineer's certificate is chosen, a copy goes to the jurisdictional Customs authority for intimation and record.
- The RA may extend the period for submitting the certificate, up to the valid export obligation period, on payment by the holder of a composition fee of Rs. 10,000 per year.
- The holder may shift capital goods during the entire export obligation period to other units mentioned in the IEC and RCMC of the holder, subject to a fresh installation certificate being produced to the RA within six months of the shifting.
- The second sub-paragraph of paragraph 5.04 is printed in the chapter file as "Deleted". Next to it the chapter file carries an end-note saying that paragraph 5.04(a) was amended, and 5.04(b) deleted, by Public Notice 15/2024-25 dated 25.07.2024; this article relies on the paragraph as printed.
An example with invented names
Lotus Weave Mills Pvt Ltd, a manufacturer exporter, will install weaving machines partly in the factory of Surya Spinners, its supporting manufacturer. Under paragraph 5.02(a) the name of Surya Spinners is endorsed on the authorisation before installation at its premises. Once the machines are imported, Lotus Weave must produce an installation certificate within 3 years from completion of import (paragraph 5.04 of the Handbook). If it is late, the RA may extend the period up to the valid export obligation period on a composition fee of Rs. 10,000 per year. If a weaving unit is moved to another unit named in the IEC and RCMC, a fresh certificate is due within six months of the shift. The machines cannot be sold on as it likes: paragraph 5.03 of the Policy holds them to the actual user condition until the EODC is granted.
Reading the CSP rules carefully
Paragraph 5.02(b) turns on three facts: the certification by DGFT Headquarters, the location (a Town of Export Excellence or PM MITRA), and the Bank Guarantee equal to the duty saved. The Policy does not say how the certification is obtained, and this article does not describe any portal step. The Policy also does not give a separate export obligation formula for the CSP in paragraph 5.02; the general rule of paragraph 5.01(b) is in our article on paragraphs 5.00 and 5.01.
Related reading and the Act
The scheme is explained for a business reader in EPCG Scheme: Zero-Duty Capital Goods for Exporters, and the tax side in GST Refund Under the EPCG Scheme. Export obligation periods and discharge are in paragraphs 5.04 and 5.08. The Policy rests on section 5 of the Foreign Trade (Development and Regulation) Act, 1992 and the Handbook on section 6. The Policy is not a statute; it binds through the Act and the conditions of each authorisation.
Need help getting your EPCG file started?
Nexus certificates, supporting-manufacturer endorsements and installation certificates all depend on the exporter's records matching the IEC. If any of your details need correction before you apply, our IEC registration team can help with that part.
Key takeaways
- Paragraph 5.02(a): manufacturer exporters, merchant exporters tied to supporting manufacturers, and service providers are covered.
- Paragraph 5.02(b): Common Service Provider in a Town of Export Excellence or PM MITRA, five conditions, Bank Guarantee equal to duty saved.
- Paragraph 5.03: actual user condition until the EODC is granted.
- Handbook paragraph 5.03: nexus certificate from an independent Chartered Engineer (Appendix 5A).
- Handbook paragraph 5.04: installation certificate within 3 years of completion of import; Rs. 10,000 per year composition fee for extension; shifting needs a fresh certificate within six months.
Read next
- Paragraphs 5.00 and 5.01 of the Foreign Trade Policy, 2023: the EPCG Scheme
- Paragraphs 5.04 and 5.08 of the Foreign Trade Policy, 2023: EPCG export obligation
- EPCG Scheme: Six Times Duty Saved, and the Average Export Obligation
- GST Refund Under the EPCG Scheme
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.