EPCG Scheme — Export Promotion Capital Goods Complete Guide
Complete guide to the EPCG Scheme — import capital goods at zero customs duty for production of export goods. Understand export obligation, DGFT authorization, eligible goods, and how to maximise benefits under the Foreign Trade Policy.
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EPCG Scheme — Step-by-Step Guide
Prepared by TaxClue's expert team. Updated for 2026.
What Is the EPCG Scheme?
The Export Promotion Capital Goods (EPCG) Scheme allows exporters to import capital goods — plant, machinery, equipment, components, and spares — at zero customs duty for use in manufacturing or producing export goods and services. It is a flagship scheme under India's Foreign Trade Policy (FTP) administered by the Directorate General of Foreign Trade (DGFT). The scheme reduces capital costs for exporters, making Indian products more competitive in global markets. EPCG has been one of the most widely used export promotion instruments, benefiting thousands of manufacturer exporters across sectors including textiles, engineering, chemicals, pharmaceuticals, food processing, and IT services.
Export Obligation — 6 Times Duty Saved in 6 Years
The core condition of EPCG is the export obligation (EO). The EPCG holder must export goods or services worth 6 times the duty saved within 6 years from the date of authorization. For example, if duty saved on imported machinery is ₹10 lakh, the export obligation is ₹60 lakh over 6 years. The EO is calculated on FOB (Free on Board) value of exports. Export obligation can be fulfilled through direct exports, deemed exports, or supply to other exporters. The 6-year period provides flexibility to ramp up production before meeting the full obligation. Failure to meet EO results in proportionate customs duty recovery with interest.
Average Export Obligation
In addition to the specific export obligation (6x duty saved), EPCG holders must also maintain an Average Export Obligation (AEO). This means exports during the EO period must exceed the average export performance of the 3 years preceding the EPCG authorization. The AEO ensures that EPCG benefits genuinely promote incremental exports rather than simply repackaging existing export volumes. The exporter must demonstrate that the capital goods have contributed to increased export capacity. AEO is calculated as: average FOB value of exports in 3 preceding years multiplied by the EO period. Both specific EO and AEO must be fulfilled for the EPCG to be redeemed.
Eligible Applicants
EPCG authorization can be obtained by manufacturer exporters (who produce and export goods directly), merchant exporters tied to supporting manufacturer(s), and service providers who earn foreign exchange. Manufacturer exporters are the primary beneficiaries. Merchant exporters must tie up with a supporting manufacturer whose facility will use the imported capital goods. Service providers in IT, hospitality, healthcare, education, and other sectors can import equipment for providing export services. Both existing exporters and new exporters are eligible. An Importer Exporter Code (IEC) from DGFT is mandatory for all applicants.
DGFT Authorization Process
Step 1: Obtain an IEC (Importer Exporter Code) from DGFT if not already registered. Step 2: Apply online on the DGFT portal (dgft.gov.in) for EPCG authorization specifying the capital goods to be imported and estimated duty saving. Step 3: Submit documents including IEC, RCMC (Registration-cum-Membership Certificate), proforma invoice of capital goods, export plan, and past export data. Step 4: DGFT Regional Authority evaluates the application and issues the EPCG authorization. Step 5: Import capital goods within 18 months of authorization. Step 6: Install the goods and begin production. Step 7: File Export Obligation Discharge Certificate (EODC) after completing the obligation.
Capital Goods Covered
EPCG covers a wide range of capital goods including plant, machinery, equipment, tools, dies, jigs, fixtures, moulds, spares (up to 20% of CIF value), and components. Computer systems, office equipment, and professional instruments used for export production are also eligible. Second-hand capital goods can be imported under EPCG provided they have a minimum residual life of 5 years. Capital goods for service sector include medical equipment, hotel equipment, IT hardware, testing equipment, and professional tools. Goods that are not eligible include consumer durables, raw materials, and items restricted under the ITC (HS) classification.
Special Provisions for Agriculture Exporters
Agriculture and allied sector exporters enjoy relaxed EPCG norms. The export obligation period for agri exporters is extended to 12 years (instead of 6). The specific export obligation may be reduced based on the nature of agricultural products and export seasonality. Agriculture includes dairy, fisheries, poultry, horticulture, floriculture, and food processing. These relaxations recognise the seasonal nature of agriculture and longer gestation periods for agri-processing infrastructure. Agri exporters can import cold chain equipment, food processing machinery, packaging lines, and quality testing equipment under EPCG at zero duty.
Post-Export EPCG Scheme
The Post-Export EPCG scheme allows exporters to first make exports and then obtain EPCG authorization for capital goods. Under this variation, the exporter can claim duty-free import of capital goods after demonstrating export performance. This is useful for exporters who have already achieved significant exports and want to expand capacity. The duty saved is calculated based on the capital goods imported, and the export obligation is adjusted against exports already made plus future commitments. Post-Export EPCG provides flexibility for exporters who are uncertain about their capital goods requirements at the time of initial export.
Combining EPCG with Other FTP Schemes
EPCG can be combined with other Foreign Trade Policy schemes for maximum benefit. Exporters can simultaneously use EPCG (for capital goods) and Advance Authorization (for duty-free raw materials). RoDTEP benefits (refund of embedded taxes) can be claimed on exports made under EPCG. However, exports counted towards Advance Authorization fulfilment cannot be double-counted for EPCG obligation. Duty Drawback at lower rates is available on products manufactured using EPCG machinery. Understanding the interplay between these schemes is critical to optimise total export incentives — this is where expert CA/CS guidance from TaxClue is most valuable.
How TaxClue Can Help
TaxClue provides comprehensive EPCG support — IEC registration, EPCG application filing on DGFT portal, export obligation tracking, EODC preparation, and coordination with customs authorities. Our CA/CS team handles the complex calculations of specific and average export obligations, ensures compliance with authorization conditions, and helps with extension requests if EO deadlines are tight. We also assist with related compliance including GST on imports, customs documentation, RoDTEP claims, and annual export reporting. Our goal is to maximise your duty savings while ensuring full regulatory compliance.
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