EPCG Scheme 2026: A Comprehensive Guide for Indian Exporters

If you are an Indian exporter looking to upgrade your machinery without the burden of high customs duties, the Export Promotion Capital Goods (EPCG) scheme offers a strong option. Many businesses struggle with staying globally competitive while also managing large capital investment costs. The EPCG scheme helps by allowing duty-free imports of capital equipment against an export commitment, so you can modernise operations while preserving working capital.

This guide explains how the EPCG scheme works, who can benefit, and how it can support your export growth.

What Is the Export Promotion Capital Goods (EPCG) Scheme?

The Export Promotion Capital Goods scheme is a DGFT initiative that enables import of capital goods and specified technology at zero or concessional duty against an export obligation to be fulfilled over a prescribed period. This programme allows manufacturers and service providers to import machinery, spares, tools, and equipment without paying customs duties upfront.

How the scheme works

1. Import capital goods duty-free or at reduced rates
2. Commit to achieving exports worth 6 times the duty saved
3. Fulfil this export obligation within 6 years from the authorisation date
4. Maintain average export performance alongside the specific obligation

Related Read : Export Promotion Schemes in India

Who Can Benefit from the EPCG Scheme?

Eligible entities include:

1. Manufacturer exporters, with or without supporting manufacturers
2. Merchant exporters tied to supporting manufacturers
3. Service providers, including hotels, logistics companies, IT firms, and hospitals

Eligibility mainly depends on holding a valid Import Export Code (IEC) and showing clear intent and capability for export production. Businesses with consistent export history and significant capital investment needs often benefit the most.

What Are the Benefits of Importing Capital Goods Under EPCG?

1. Zero or concessional customs duty
   Save substantial upfront costs on importing machinery, tools, and equipment. For high-value imports, this can translate into large savings.
2. Technological upgradation
   Access advanced technology that improves product quality, increases efficiency, and reduces production costs.
3. Enhanced global competitiveness
   Cost savings combined with modern equipment can help exporters compete better in international markets.
4. Increased export potential
   Higher capacity and improved capabilities can support export growth and diversification into new products or services.

How to Apply for an EPCG License?

The DGFT has digitised the EPCG licence application process, allowing businesses to apply through its online portal. Before applying, ensure all supporting documents are verified and formatted correctly for upload to avoid delays.

Key documents required for EPCG application

1. Import Export Code (IEC)
2. Registration cum Membership Certificate (RCMC) from the relevant export promotion council
3. Digital Signature Certificate (DSC) for online application submission
4. PAN card and GST registration certificate
5. Proof of manufacturing, such as MSME, SSI, or IEM certificates as applicable
6. Proforma invoice with specifications, CIF value, and HS code of capital goods
7. Professional certificates from CA, Cost Accountant, or Company Secretary, and Chartered Engineer, in the prescribed formats (Appendix 5B and 5A)

Step-by-step online application procedure

1. Register on the DGFT portal and log in using your IEC details
2. Open the ANF 5A form and fill in the required details
3. Upload supporting documents in the prescribed format
4. Digitally sign the application, pay the applicable fee online, and submit
5. Track the application status on the portal and respond to any follow-ups
6. Once approved, the EPCG licence is typically issued quickly, depending on verification and processing

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Registering the EPCG license at the port of import

1. Register the issued EPCG authorisation with the jurisdictional Customs Authority at the port of import
2. Execute a bond or bank guarantee with Customs to ensure export obligation compliance
3. Import capital goods duty-free only after registration and bond execution

Understanding and Fulfilling Your Export Obligation

When you import capital goods under EPCG, you commit to exporting goods or services worth six times the duty saved within six years. Since the duty saved is the customs duty you would have paid without EPCG, this figure becomes your export target.

Specific Export Obligation vs Average Export Obligation

Specific Export Obligation (SEO)
The primary requirement to export goods or services worth six times the duty saved, within the overall six-year period.

Average Export Obligation (AEO)
Maintain the average export performance of similar products or services from the preceding three licensing years.

AEO applies in addition to SEO, and the calculation differs for new versus existing firms.

SEO vs AEO summary

Specific Export Obligation

1. Basis: Six times duty saved
2. Purpose: Direct export target linked to EPCG imports
3. Timeframe: Six years
4. Applicability: Mandatory for all EPCG holders

Average Export Obligation

1. Basis: Average export performance of preceding three years
2. Purpose: Ensures ongoing export consistency
3. Timeframe: Reviewed annually
4. Applicability: Applies in addition to SEO, with exceptions for new units

Block-wise fulfilment and early redemption incentives

1. At least 50% of SEO must be met within the first four years, with the remaining in the last two years
2. If you meet 75% or more of SEO and 100% of AEO in half or less than half the prescribed period, authorities may condone the remaining obligation
3. Exports to SEZ units and deemed exports can contribute to export obligation fulfilment

Monitoring and annual reporting

1. Submit annual export obligation fulfilment reports to the DGFT Regional Authority online by June 30 each year
2. Include both specific and average export obligation fulfilment details
3. Late filing can attract penalties, including a commonly referenced amount of ₹5,000 for non-compliance

Avoiding Penalties: Key Compliance Requirements Under EPCG

Non-compliance can trigger customs duty payment with interest, penalties, or even IEC suspension.

Common reasons for non-compliance

1. Failure to meet specific or average export obligation within the stipulated timeframe
2. Delay in filing export obligation documents or applying for redemption before expiry
3. Delayed installation of imported machinery, with longer timelines now permitted in some cases
4. Misdeclaration, inaccurate documentation, or unauthorised transfer or sale of EPCG machinery

Financial implications and other penalties

1. Repayment of the entire customs duty saved, along with interest per year from the import date
2. Composition fees for extension requests or partial completion of export obligation
3. Monetary penalties under the Foreign Trade (Development and Regulation) Act, 1992, which can be severe for major defaults
4. IEC suspension or blacklisting for repeated defaults or fraudulent claims
5. Enforcement of bonds or bank guarantees furnished at the time of clearance

Recent Updates to DGFT Rules 2025

1. From 1 May 2025, service exporters must identify their Mode of Export of Services in the e-BRC, mapped to WTO GATS categories
2. This increases documentation diligence for EPCG holders in services, as mismatches may delay redemption
3. Some procedural relaxations have been introduced, including longer timelines for requesting export obligation extensions

Maximising EPCG Benefits: Strategic Considerations

Planning and execution

1. Export capability assessment: Evaluate production capacity and market demand before applying
2. Internal tracking systems: Set up monitoring for export performance and documentation
3. Professional guidance: Use trade consultants or CAs for navigating compliance requirements

Strategic selection of capital goods

1. Direct export impact: Choose machinery that improves export quality and efficiency
2. Market relevance: Consider long-term market trends so the equipment remains useful throughout the obligation period
3. Capacity planning: Base imports on realistic export growth expectations to avoid over or under-investment

Leveraging technology for compliance and payments

1. Use digital tools for DGFT applications, tracking, and reporting to reduce manual errors
2. Use modern payment solutions that simplify international receipts and documentation, such as the MoneySaver Export Account, for easier FX handling and FIRC generation

Streamlining Export Payments with Razorpay MoneySaver Export Account

As exporters scale production under EPCG, managing international payments becomes as important as meeting export obligations. A reliable payment setup helps maintain cash flows, supports compliance, and reduces administrative effort.

Key features of the MoneySaver Export Account

1. Easy international bank transfers: Receive payments via SWIFT, ACH, SEPA, FPS, and other networks through virtual account details that are simple for clients to use
2. Live FX rates with no additional markups: Conversion at real-time exchange rates without extra forex markup
3. Automated FIRC and FIRA generation: Digital inward remittance certificates issued automatically to support documentation
4. Multi-currency acceptance with INR settlement: Accept major currencies while receiving INR settlements for easier reconciliation
5. Lower costs and better bank transfer success rates: Often lower fees compared to traditional bank and card-heavy flows

Conclusion

The EPCG scheme remains a valuable route for Indian exporters to upgrade technology and expand capacity without the burden of high import duties. Duty-free access to machinery supports better quality, improved efficiency, and stronger competitiveness across sectors.

Meeting export obligations on time, keeping documentation accurate, and staying aligned with evolving compliance rules helps avoid penalties and keeps operations smooth. With careful planning and the right digital tools to track progress, exporters can use EPCG to build long-term export growth.

FAQs

1. What is the primary objective of the EPCG scheme?

The primary objective of the EPCG scheme is to promote exports from India by allowing manufacturers and service providers to import capital goods at zero or concessional customs duty.

2. What is the export obligation under the EPCG scheme?

Under the EPCG scheme, the authorisation holder must fulfil an export obligation equivalent to six times the duty saved on imported capital goods within six years from the date of issuance of EPCG authorisation.

3. What happens if an exporter fails to meet the EPCG export obligation?

If an exporter fails to meet the stipulated export obligation under the EPCG scheme, they are liable to pay customs duties saved on imported capital goods along with interest per annum, payable to the customs authority.

4. What types of capital goods are allowed under the EPCG scheme?

The EPCG scheme permits import of capital goods including machinery, spares, fixtures, jigs, and tools. Second-hand capital goods are also allowed without any age restriction under the scheme.

5. How does the DGFT e-BRC rule impact service exporters under EPCG?

From 1 May 2025, service exporters must mention the correct Mode of Export of Services in every e-BRC. This increases documentation care, and mismatches can delay EPCG compliance or redemption.