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A few years ago, I watched an exporter sign off on a new stitching line from Germany. The machine was exactly what the business needed. Then the customs estimate arrived, and the duty and taxes came to a number that could have paid three months of salaries and fabric. He almost postponed the order. What changed his mind was a scheme he had heard about but never looked into properly.
That scheme is the EPCG scheme. So, what is the EPCG scheme in India? The Export Promotion Capital Goods (EPCG) scheme lets exporters import capital goods such as machinery and equipment at zero customs duty. In return, the exporter promises to export goods or services worth a fixed multiple of the duty saved, within a fixed time.
It sounds simple, but the details decide whether the scheme saves you money or creates a compliance headache. Machines are only half the story. The other half is exporting enough and receiving those export payments in a clean, documented way, which is where a platform like Infinity quietly matters.
In this guide, we cover what EPCG is, who can apply, what the export obligation really means, the documents you need, the step-by-step application process, the fee, and the mistakes to avoid.
TL;DR
What is the EPCG scheme? - The Export Promotion Capital Goods scheme allows businesses to import or procure capital goods such as machinery and equipment at zero customs duty. It is administered by DGFT under India's Foreign Trade Policy.
What is the export obligation? - Businesses must fulfil an export obligation equal to six times the duties, taxes and cess saved on capital goods, generally within six years from the date of EPCG authorisation. Proper records must be maintained throughout to demonstrate DGFT compliance.
Who can use the EPCG scheme? - Manufacturer exporters, merchant exporters tied to supporting manufacturers, and service providers earning foreign exchange through exports. Businesses in sectors such as manufacturing, IT, consulting, engineering, and design may qualify.
What is the average export obligation? - On top of the six times obligation, existing exporters must maintain their average exports of the last three years. New exporters have a zero average export obligation.
What if I buy machinery in India? - Capital goods bought from an Indian manufacturer carry a 25% lower export obligation, which works out to 4.5 times. The domestic supplier gets deemed export benefits.
What documents are required? - Common documents required for EPCG compliance and closure include shipping bills, export invoices, e-BRCs, Foreign Inward Remittance Advice (FIRA), and proof of international payment realisation.
How do I apply? - You apply online on the DGFT portal using form ANF 5A, pay the application fee, and receive a digital authorisation valid for 24 months for imports. You then register it at the port and execute a bond or bank guarantee with customs.
What is the EPCG scheme in India?
The EPCG scheme is a DGFT scheme that allows exporters to import capital goods at zero customs duty, subject to an export obligation. Its stated objective is to make it easier to import the capital goods needed to produce quality goods and services, and to improve India's manufacturing competitiveness.
The scheme covers imports for three stages of a business:
Pre-production: machines and tools used before manufacturing starts, such as moulds and dies.
Production: the core machinery on your shop floor.
Post-production: equipment used after production, such as packaging or testing.
EPCG is part of Chapter 5 of the Foreign Trade Policy 2023 and the matching chapter of the Handbook of Procedures 2023.
How does the EPCG scheme work?
You get an EPCG authorisation from DGFT, import capital goods at zero customs duty, use them to make goods or services for export, and then fulfil your export obligation within the allowed time.
You apply for an EPCG authorisation on the DGFT portal.
DGFT's Regional Authority issues the authorisation digitally.
You register it at your port of import and give customs a bond or bank guarantee.
You import the capital goods at zero customs duty.
You export goods or services worth the required amount within six years.
You apply for closure of the authorisation with proof of exports and realisation.
Is the EPCG scheme still active in 2026?
Yes. The Foreign Trade Policy 2023 came into force on 1 April 2023 with no end date. It stays in force until the government amends it. EPCG continues under it, although DGFT can change conditions through public notices, so always check the DGFT website (https://www.dgft.gov.in/CP/) before you file.
Which capital goods are covered under EPCG?
EPCG covers machinery and equipment used to produce goods or services for export, along with certain related items.
According to DGFT, capital goods for EPCG include:
Capital goods as defined in the Foreign Trade Policy
Computer systems and software that are part of the capital goods
Spares, moulds, dies, jigs, fixtures, tools and refractories
Catalysts for the initial charge plus one subsequent charge
Items on the negative list in Appendix 5F of the Handbook of Procedures cannot be imported under EPCG. Items that are restricted for import need approval from the Exim Facilitation Committee at DGFT headquarters before they can be imported under the scheme.
Who is eligible for the EPCG scheme?
Manufacturer exporters, merchant exporters tied to supporting manufacturers, and service providers can apply for EPCG. Every applicant needs a valid Importer Exporter Code (IEC).
Applicant type | Can apply? | Key condition |
Manufacturer exporter | Yes | Can apply with or without supporting manufacturers |
Merchant exporter | Yes | Must be tied to one or more supporting manufacturers |
Service provider | Yes | Must earn foreign exchange from exported services |
Common Service Provider (CSP) | Yes | Covers certain facilities such as those in Towns of Export Excellence and PM MITRA parks |
Can service providers use the EPCG scheme?
Yes. Service providers are covered, and they fulfil their export obligation through export of services earning foreign exchange. IEC is mandatory for service exporters on the date they render the service if they want to claim FTP benefits. Businesses in sectors such as IT, consulting, engineering and design may qualify, but the capital goods must have a clear link to the services being exported.
Can a new exporter apply for EPCG?
Yes. A new exporter can apply, and in that case the average export obligation is zero. The six times specific obligation still applies.
What are the benefits of the EPCG scheme?
The biggest benefit of the EPCG scheme is zero customs duty on eligible capital goods. That keeps cash inside your business at the time you need it most.
1. Zero customs duty on capital goods
You can import machinery, tools and spares without paying basic customs duty. For a large machine, this can mean a big saving upfront.
2. IGST and Compensation Cess exemption for physical exports
Under Chapter 5 of FTP 2023, capital goods imported under an EPCG authorisation for physical exports are also exempt from IGST and Compensation Cess, as provided in the Department of Revenue notification. The conditions are set in the customs notification for EPCG, so check the current notification with your CA or customs broker before importing.
3. Better cash flow
Money that would have gone to duty stays available for raw material, wages and marketing.
4. Flexibility to import or buy locally
You can import capital goods or buy them from an Indian manufacturer. We cover that next.
5. A path to upgrade technology
Because the entry cost is lower, businesses can invest in better machinery earlier, which improves quality and output.
Can I buy capital goods in India under EPCG?
Yes. An EPCG holder can source capital goods from a domestic manufacturer, and the export obligation is 25% lower, which works out to 4.5 times instead of six times. The domestic manufacturer becomes eligible for deemed export benefits.
Since no customs duty is actually paid on domestic purchases, the obligation is calculated on a notional customs duty on the FOR value of the goods. In simple words, DGFT assumes you imported the goods, works out the duty that would have applied, and multiplies it by 4.5.
Note that the GST relief on domestic sourcing under EPCG applied only up to 31 March 2022, so do not assume it continues.
What is the export obligation under EPCG?
The export obligation under EPCG is six times the duties, taxes and cess saved on the capital goods, to be fulfilled within six years from the date of issue of the authorisation.
There are two parts to it:
Specific export obligation (SEO): exports worth six times the duty saved.
Average export obligation (AEO): maintaining your average annual exports of the last three years, on top of the SEO.
Worked example (illustrative figures)
Sourcing | Duties, taxes and cess saved | Multiple | Export obligation | Time allowed |
Imported machine | ₹20 lakh | 6x | ₹1.2 crore | 6 years |
Bought in India | ₹20 lakh (notional) | 4.5x | ₹90 lakh | 6 years |
These numbers are only for illustration. Your actual duty saved depends on the machine and the applicable rates.
What is the average export obligation (AEO)?
The AEO means that, besides the six-times obligation, you must keep exporting at least at the level of your previous three-year average. Only exports above that average are counted towards your specific export obligation. Existing exporters should plan for both numbers together.
New exporters do not have this problem, because their average export obligation is zero.
What counts towards the export obligation?
Physical exports and deemed exports both count. Exports under Advance Authorisation, DFIA, Duty Drawback, RoSCTL and RoDTEP are also eligible for fulfilling the EPCG obligation. The obligation is measured on an FOB basis, and exports must be realised in convertible currency, except for deemed exports.
That last point matters. The proof that your foreign exchange actually came in is part of closing the authorisation, which is why payment records matter as much as shipping records.
Is there a lower export obligation for some products?
Yes. For green technology products, the export obligation is reduced to 75% of the normal obligation. FTP 2023 added battery electric vehicles of all types, vertical farming equipment, wastewater treatment and recycling, rainwater harvesting systems and filters, and green hydrogen to the list. Check the current list on DGFT before you rely on this.
Is there an early closure benefit?
Yes. If you complete 75% or more of the specific export obligation and 100% of the average export obligation in half the original time or less, the remaining obligation can be condoned and the authorisation redeemed. Confirm the current conditions in the Handbook of Procedures.
What documents are required for EPCG?
You need documents at two stages: to get the authorisation, and later to prove compliance and close it.
Documents to apply for an EPCG authorisation
Importer Exporter Code (IEC) and a DGFT-registered digital signature
Application form ANF 5A, with fee payment details
Proforma invoice or quotation for the capital goods
Nexus certificate from an independent Chartered Engineer, as prescribed in the Handbook of Procedures
Certificate from a chartered accountant, cost accountant or company secretary, as required in the form
RCMC from the relevant export promotion council, where applicable
Details of supporting manufacturers, if you are a merchant exporter
The exact list can change, so check the application screen on the DGFT portal before you file.
Documents for EPCG compliance and closure
When you apply to close the authorisation, you will typically need proof of exports and of payment realisation:
Export invoices
Foreign Inward Remittance Advice (FIRA)
Proof of international payment realisation
Installation certificate for the capital goods
Records showing the goods were used by the authorisation holder or the supporting manufacturer
What is an EODC?
The Export Obligation Discharge Certificate (EODC) is the proof that you have completed your obligations. After fulfilling your export obligation, you apply to the Regional Authority in Form ANF 5B, and once verified, DGFT issues the EODC. You can then ask customs to redeem the bond or bank guarantee.
Until the EODC is issued, the capital goods must remain with you as the actual user, and you cannot sell or transfer them.
Why do payment records matter?
DGFT checks both the exports and the money received for them. Banks report foreign exchange realisation, and e-BRCs and FIRAs support the proof of payment. Infinity automatically generates a FIRA for its users at no extra charge, which saves exporters from chasing paperwork when it is time to file for closure. Your CA can confirm exactly which records to keep for your case.
How to apply for an EPCG authorisation
You apply online on the DGFT portal with your IEC and digital signature, using form ANF 5A. The Regional Authority concerned then issues the authorisation digitally.
Check your IEC. You cannot apply without a valid IEC, and your IEC profile should be up to date.
Register on the DGFT portal and log in with your digital signature.
Get your supporting certificates. Arrange the Chartered Engineer nexus certificate and the CA, cost accountant or company secretary certificate.
Collect the proforma invoice from your capital goods supplier.
Open the EPCG application. Go to Services, then EPCG, then Apply for EPCG (ANF 5A).
Fill in your details. Add business details, the capital goods, the port of registration, and your export projections.
Pay the application fee online.
Receive the authorisation. Once approved, it is issued digitally, valid for 24 months for imports, with no revalidation.
Register the authorisation at the port and provide the bond or bank guarantee that customs requires. Customs will not clear the goods at zero duty without it.
Import the goods within the validity period and install them.
Submit the installation certificate within the time prescribed in the Handbook of Procedures.
Fulfil your export obligation and track it, including your average export obligation.
What is the validity of an EPCG authorisation?
An EPCG authorisation is valid for 24 months for imports, and the export obligation period is six years from the date of issue. These are two different clocks. The first is how long you have to import, and the second is how long you have to export. The import validity cannot be revalidated.
Why do I need a bond or bank guarantee?
Customs needs a security that you will complete the export obligation. When you register the authorisation at the port, you execute a bond or bank guarantee against the duty saved. Once you get the EODC, the bond can be redeemed.
How much is the EPCG application fee?
The fee depends on whether you are an MSME and on the CIF value or duty saved amount.
Applicant | Fee |
MSME, up to ₹1 crore | ₹100 |
MSME, above ₹1 crore | ₹5,000 |
Non-MSME | ₹1 per thousand or part thereof, minimum ₹500, maximum ₹1 lakh |
For example, a non-MSME with a basis of ₹20 lakh would pay about ₹2,000. These slabs come from Appendix 2K of the Handbook of Procedures 2023.
EPCG vs Advance Authorisation vs RoDTEP
EPCG is for capital goods, Advance Authorisation is for raw materials and inputs, and RoDTEP refunds embedded taxes on exported goods. They solve different problems, and many exporters use more than one.
Feature | EPCG | Advance Authorisation | RoDTEP |
What it covers | Capital goods such as machines, tools and spares | Duty-free import of inputs used in export products | Refund of embedded central, state and local taxes on exports |
Export obligation | Yes, six times the duty saved over six years | Yes, linked to the imported inputs | No |
Best for | Upgrading or expanding production capacity | Exporters who import raw materials | Lowering the tax cost of exports |
Counts towards EPCG obligation? | Not applicable | Yes | Yes |
Because exports under Advance Authorisation and RoDTEP can count towards your EPCG obligation, you can combine them in your planning.
Is the EPCG scheme right for your business?
EPCG works best when you have reliable export orders and a machine purchase big enough for the duty saving to matter. If you are not sure you can reach six times the duty saved, think carefully first.
A quick checklist:
Do you have confirmed or recurring export orders?
Is the duty on the machine large enough to justify the paperwork and the guarantee?
Can you meet the six times obligation, and your average export level, within six years?
Can you keep export and payment records in order for years?
Have you compared buying in India, where the obligation is lower, with importing?
If most answers are yes, EPCG is usually worth serious consideration.
Common mistakes exporters make with EPCG
Most EPCG problems come from planning and paperwork, not from the scheme itself.
Overcommitting. Six times the duty saved is a large target. Check your export pipeline before applying.
Forgetting the average export obligation. It runs alongside the main obligation, and many exporters miss it.
Missing the 24-month import window. The authorisation cannot be revalidated.
Skipping the bond or bank guarantee step. Customs needs it before it clears goods at zero duty.
Assuming IGST is always exempt. The exemption is for physical exports and depends on the notification in force.
Selling or moving the machine early. The actual user condition applies until the EODC is issued.
Weak payment records. Missing e-BRCs or FIRAs can slow down closure.
Late certificates. The Chartered Engineer and CA certificates can hold up the application.
Conclusion
The EPCG scheme in India is one of the most useful tools for exporters who want to upgrade machinery without paying heavy customs duty upfront. It rewards planning. If you know your export pipeline, can meet the six times obligation and your average export level, and keep clean records, EPCG can free up a lot of working capital. If you cannot, the obligation can become a burden. Do the maths first, apply carefully, and keep your documents organised from day one.
How Infinity helps exporters receive and document export payments
Every EPCG export obligation ends in real export proceeds, and how smoothly you receive them affects both your cash flow and your paperwork. Infinity is an AD-1 certified, RBI-regulated platform built for Indian exporters, freelancers, agencies and SaaS businesses, helping them receive international payments.
Pricing: a 0.5% all-inclusive fee, with no separate FX markup and no additional GST.
Speed: settlement in 24 hours.
Documentation: a free, auto-generated FIRA, which gives you clean supporting proof of foreign inward remittance.
Reach: 50+ currencies across 160+ countries.
Support: a dedicated personal account manager to help when you need it.
Convenience: a dedicated mobile app to track and manage payments.
Getting started is quick. You sign up in about 2 minutes, complete verification and KYC the same day, receive bank details in multiple currencies, and start receiving payments.
Read more: Quick guide for account setup with Infinity
If you are planning an EPCG import, you must set up how you will receive your international payments and document export payments early, so your records are ready when it is time to close the authorisation.
FAQs
What is the EPCG scheme in India?
The EPCG scheme in India allows exporters to import capital goods at zero customs duty in return for an export obligation. The obligation is six times the duties, taxes and cess saved, to be completed within six years of the authorisation date. DGFT runs the scheme under the Foreign Trade Policy 2023.
What is the full form of EPCG?
EPCG stands for Export Promotion Capital Goods.
Who is eligible for the EPCG scheme?
Manufacturer exporters, merchant exporters tied to supporting manufacturers, and service providers can apply. All need a valid Importer Exporter Code.
What is the export obligation under EPCG?
It is six times the duties, taxes and cess saved on the capital goods, fulfilled within six years from the date of the authorisation. For goods bought from an Indian manufacturer, it is 25% lower, or 4.5 times.
What is the average export obligation under EPCG?
It is the requirement to maintain your average annual exports of the last three years, in addition to the specific export obligation. New exporters have a zero average export obligation.
Is EPCG available for service exporters?
Yes. Service providers can apply and meet the obligation through foreign exchange earned from exported services.
Can a new exporter use the EPCG scheme?
Yes. New exporters can apply, and their average export obligation is zero.
How long is an EPCG authorisation valid?
It is valid for 24 months for imports, with no revalidation. The export obligation period is six years from the date of issue.
Does EPCG exempt IGST?
Capital goods imported under EPCG for physical exports are exempt from IGST and Compensation Cess, as provided in the customs notification. Confirm the current notification before you import.
Can I buy capital goods in India under EPCG?
Yes. The export obligation is then 25% lower, and the domestic manufacturer gets deemed export benefits.
How much does it cost to apply for EPCG?
For MSMEs, the fee is ₹100 up to ₹1 crore and ₹5,000 above that. For others, it is ₹1 per thousand, with a minimum of ₹500 and a maximum of ₹1 lakh.
What is an EODC under EPCG?
The Export Obligation Discharge Certificate is DGFT's proof that you have fulfilled your EPCG obligations. You apply for it in Form ANF 5B after completing the exports, and then you can ask customs to redeem the bond.
What documents are needed to close an EPCG authorisation?
Typically shipping bills, export invoices, e-BRCs, FIRA and proof of payment realisation, along with the installation certificate and usage records.
Is the EPCG scheme still active in 2026?
Yes. The Foreign Trade Policy 2023 has no end date, and EPCG continues under it. Check DGFT notices for updates before you apply.
