EPCG Scheme Process Guide

A comprehensive step-by-step guide to navigate the Export Promotion Capital Goods Scheme

What is EPCG Scheme?

The Export Promotion Capital Goods (EPCG) Scheme is a flagship initiative under India's Foreign Trade Policy that allows importers to bring in capital goods at zero or concessional customs duty. This scheme is designed to facilitate technology upgradation and enhance India's manufacturing competitiveness in global markets.

Key Features:

  • Import of capital goods at zero customs duty
  • Export obligation of 6 times the duty saved amount
  • Export obligation period of 6 years
  • Applicable for manufacturer exporters, merchant exporters, and service providers

Under this scheme, businesses can import capital goods (including computer software systems) for pre-production, production, and post-production at zero customs duty. In return, they must fulfill an export obligation equivalent to 6 times the duty saved on the imported capital goods within a period of 6 years.

The EPCG scheme is particularly beneficial for businesses looking to upgrade their manufacturing capabilities, increase productivity, and enhance the quality of their products to meet international standards.

Types of EPCG Scheme

The EPCG scheme offers three different approaches to acquiring capital goods based on your business needs and sourcing preferences.

EPCG - Direct Import

Import capital goods directly from foreign suppliers at zero customs duty.

  • Direct sourcing from international manufacturers
  • Zero customs duty benefit
  • Access to global technology
EPCG - Indian Purchase

Source capital goods from domestic manufacturers with duty benefits.

  • Support for domestic manufacturing
  • Deemed export benefits
  • Faster delivery and local support
EPCG - Spares Import

Import spares, tools, and accessories for existing machinery at concessional duty.

  • Maintenance of existing machinery
  • Reduced duty on spares
  • Extended equipment lifecycle

EPCG Scheme Process Flow

Applying for EPCG Scheme

The first step in the EPCG process is submitting an application to the Directorate General of Foreign Trade (DGFT) for an EPCG license.

Required Documents:

  • ANF 5A application form
  • Valid IEC (Import Export Code)
  • Proforma invoice for capital goods
  • Project report detailing the proposed investment

Application Process:

  1. Register on DGFT website
  2. Fill ANF 5A form online
  3. Upload required documents
  4. Pay application fee

Amendment of EPCG Licence

After obtaining the EPCG license, you may need to make amendments due to changes in requirements or specifications.

Common Amendments:

  • Change in capital goods specifications
  • Change in CIF value
  • Change in quantity of capital goods
  • Change in port of registration

To amend your EPCG license, submit an application in ANF 5B form along with the original license and supporting documents justifying the amendment.

Import Process under EPCG & Installation Certificate

Once you have the EPCG license, you can proceed with importing the capital goods and installing them at your premises.

Common Amendments:

Import Process:

  1. Register EPCG license with customs
  2. File Bill of Entry mentioning EPCG license details
  3. Claim duty exemption
  4. Clear goods from customs

Installation Certificate:

  1. Register on DGFT website
  2. Fill ANF 5A form online
  3. Upload required documents
  4. Pay application fee

To amend your EPCG license, submit an application in ANF 5B form along with the original license and supporting documents justifying the amendment.

Export Obligation under EPCG Scheme

After importing capital goods under EPCG, you must fulfill the export obligation as per the scheme requirements.

Export Obligation Requirements:

  • Total Export Obligation: 6 times the duty saved on imported capital goods
  • Time Period: 6 years from the date of issue of EPCG authorization
  • Specific Export Obligation: 50% of the total export obligation must be fulfilled within the first 4 years
  • Average Export Obligation: Maintain average level of exports done before EPCG license

The export obligation must be fulfilled by exporting goods manufactured or services rendered using the imported capital goods.

Block-wise Extension under EPCG Scheme

The export obligation period under EPCG is divided into blocks, and extensions can be obtained for specific blocks if needed.

Block Division:

  1. First Block: Years 1-4 (50% of export obligation)
  2. Second Block: Years 5-6 (Remaining 50% of export obligation)

Extension Process:

  1. Submit application before expiry of the block
  2. Provide justification for extension
  3. Pay composition fee if applicable
  4. Obtain approval from Regional Authority

Export Obligation Period Extension under EPCG Scheme

In addition to block-wise extensions, you can also apply for an overall extension of the export obligation period if required.

Extension Provisions:

  • Extension up to 2 years beyond the prescribed period of 6 years
  • Extension granted by Regional Authority with payment of composition fee
  • Further extension by DGFT Headquarters in exceptional cases
  • Extension requests must be submitted before expiry of the original period

Fulfillment of Export Obligation / Export Process under EPCG Licence

Fulfilling the export obligation is a critical part of the EPCG scheme. Proper documentation and reporting are essential.

Export Documentation:

  • Shipping Bills/Bills of Export
  • Bank Realization Certificates (BRCs)
  • Export invoices
  • Foreign Inward Remittance Certificates

Reporting Requirements:

  1. Maintain record of all exports made under EPCG
  2. Submit periodic reports to DGFT
  3. File progress reports as required
  4. Respond to any queries from authorities

Closure of EPCG Licence / Export Obligation Discharge Certificate

The final step in the EPCG process is obtaining the Export Obligation Discharge Certificate (EODC) after fulfilling all obligations.

EODC Application Process:

  1. Submit ANF 5B application form
  2. Attach original EPCG license
  3. Provide details of all exports made
  4. Submit all supporting documents (Shipping Bills, BRCs, etc.)
  5. Submit installation certificate
  6. Provide certificate from Chartered Accountant

Benefits of EPCG Scheme

Zero Customs Duty

Import capital goods without paying customs duty, resulting in significant cost savings and reduced initial investment.

Technology Upgradation

Access to advanced machinery and equipment at reduced cost, enabling technological advancement and improved production capabilities.

Global Competitiveness

Enhance product quality and production efficiency to compete effectively in international markets and expand export reach.

Extended Time Period

6-year period to fulfill export obligation, providing sufficient time for business growth and market development.

Flexibility in Fulfillment

Options for extensions and adjustments in export obligation fulfillment to accommodate business challenges and market conditions.

Increased Profitability

Reduced import costs and improved production efficiency lead to higher profit margins and better return on investment.

Frequently Asked Questions

The EPCG scheme is available to manufacturer exporters, merchant exporters tied to supporting manufacturers, and service providers. Applicants must have a valid Import Export Code (IEC) and GSTIN registration. The scheme is applicable to all sectors except those specifically excluded in the Foreign Trade Policy.

The export obligation under the EPCG scheme is equivalent to 6 times the duty saved on the capital goods imported. This obligation must be fulfilled within a period of 6 years from the date of issuance of the EPCG authorization. Additionally, 50% of the total export obligation must be fulfilled within the first 4 years.

Yes, the export obligation period can be extended by the Regional Authority for up to 2 years beyond the prescribed period of 6 years, subject to payment of composition fee. Further extension may be granted by DGFT Headquarters in exceptional cases. Extension requests must be submitted before the expiry of the original obligation period.

If the export obligation is not fulfilled within the stipulated period, the license holder is liable to pay the customs duty saved along with interest at the rate prescribed by Customs. Additionally, penalties may be imposed as per the Foreign Trade Policy provisions. The bank guarantee submitted at the time of application may also be encashed.

EODC stands for Export Obligation Discharge Certificate. It is issued by the DGFT after the EPCG license holder has fulfilled the export obligation and submitted the necessary documents as proof. The EODC confirms that the export obligation has been met and the license holder has no further liability under the EPCG scheme.