On 7 March 2026, DGFT gave exporters a pass: export obligations under EPCG and Advance Authorisations due to expire between March and May 2026 now run to 31 August 2026, with no fresh application and no composition fee, after global shipping disruption (News on Air). It was one more relief in a long line for a scheme that has waived ₹4,75,745 crore in customs duty across 3,39,400 authorisations since inception, per the CAG's Performance Audit Report No. 17 of 2024. The EPCG scheme is simple to state and unforgiving to run: import your capital goods at zero customs duty, then export six times the duty you saved within six years. This guide covers what the export promotion capital goods scheme is, who qualifies, how to apply through DGFT, the 2023 policy changes, and the pitfalls that strand thousands of authorisations every year.
The 30-second version
- The EPCG scheme lets manufacturers and service providers import capital goods at zero customs duty, plus exemption from IGST and compensation cess, against an export commitment.
- That commitment is 6 times the duty saved, met within 6 years of the authorisation date: 50% in the first four years, the balance in years five and six.
- Miss it and you repay the saved duty with 15% annual interest; the machinery stays under an actual-user condition until your EODC is granted.
- FTP 2023 cut the obligation to 75% for green-technology goods and 25% for units in the North East, J&K and Ladakh, and lets RoDTEP, drawback and Advance Authorisation exports count toward it.
- CAG's 2024 audit found 1,08,798 authorisations with expired obligation periods still unredeemed. Monitoring, not the maths, is where the scheme leaks.
What is the EPCG scheme?
The Export Promotion Capital Goods (EPCG) scheme lets an exporter import capital goods (machinery, equipment, moulds, spares) at zero basic customs duty, in return for exporting six times the duty saved within six years. It sits in Chapter 5 of the Foreign Trade Policy 2023, is run by DGFT, and the duty exemption itself is granted by Customs under Notification No. 26/2023-Customs.
The logic is competitiveness: let a factory re-tool with imported plant it could not otherwise justify, provided that plant earns foreign exchange back. Imports also come free of IGST and compensation cess under Section 3(7) and 3(9) of the Customs Tariff Act, 1975, which on high-value equipment is often the larger saving. Most EPCG imports are machinery classified under HS Chapters 84 and 85; eligible goods are defined in Chapter 11 of the FTP, with a short negative list in Appendix 5F.
Who qualifies for an EPCG licence?
Three kinds of exporter can hold an EPCG licence (the official term is authorisation), under para 5.02 of the policy:
- Manufacturer exporters, with or without a supporting manufacturer named on the authorisation.
- Merchant exporters tied to a supporting manufacturer whose premises are endorsed on the licence.
- Service providers such as hotels, healthcare and logistics that earn foreign exchange, including a Common Service Provider certified in a Town of Export Excellence or a PM MITRA textile park.
You need a live Importer Exporter Code (IEC) and an RCMC from the relevant export promotion council before you file for an EPCG license. The imported goods carry an actual-user condition: you cannot sell or transfer the machinery until the export obligation is discharged and the Export Obligation Discharge Certificate (EODC) is in hand. Service providers post a bank guarantee equal to the duty saved; agri units in Agri-Export Zones can furnish a 15% BG instead.
How does the EPCG export obligation work?
The EPCG export obligation is six times the duties, taxes and cess saved on your capital goods, to be fulfilled over six years from the date the authorisation is issued. Save ₹50 lakh in duty and you owe ₹3 crore in exports above your past baseline. That baseline is the catch: the specific obligation sits on top of your Average Export Obligation (AEO), the mean of same-product exports over the previous three years, which you must also hold every year.
The specific obligation splits into two blocks, and you report progress to your Regional Authority within three months of each block closing.
| Block | Period from authorisation | Minimum specific EO to fulfil |
|---|---|---|
| Block I | 1st to 4th year | 50% |
| Block II | 5th and 6th year | Balance (50%) |
Not every export has to be your own factory shipping directly. You can export through third parties, count deemed exports, and, usefully, exports made under duty drawback, RoDTEP, RoSCTL and Advance Authorisation all count toward EPCG fulfilment. Clear 75% of the specific EO plus 100% of the average EO in half the period, and the RA condones the rest early.
Issuance has cooled from its mid-decade peak. DGFT issued 23,101 EPCG authorisations in 2016-17; by 2020-21 that had fallen to 10,067, as GST subsumed several duties and the pandemic stalled capex:
Every rupee of duty you save is a six-rupee export promise. The EPCG scheme is cheap capital equipment bought with a forward contract on your own exports.
How do you apply for EPCG through DGFT?
The whole flow is online through the DGFT portal:
- File ANF 5A with a Chartered Engineer certificate linking the capital goods to the product you will export. The authorisation issues against a single port of registration.
- Register at Customs and import. The authorisation is valid for imports for 24 months and cannot be revalidated, so line up your supplier before you file.
- Install and certify. You install the machinery and file an installation certificate. Since the July 2024 simplification you have up to three years from completion of import, not six months, to submit it.
- Export and report. Every shipping bill must carry the EPCG authorisation number to count, and you report EO fulfilment online each year.
- Redeem. After the obligation period you file for the EODC in Form ANF 5B; Customs then cancels your bond or bank guarantee.
New to the groundwork? Our guide to starting an export business in India covers the IEC, AD code and RCMC that an EPCG application assumes you already hold.
What changed for the EPCG scheme under Foreign Trade Policy 2023?
FTP 2023, in force since 1 April 2023, kept the 6x-over-6-years core but softened the edges and leaned into automation. The reductions that matter:
| Category | Specific export obligation | What it means |
|---|---|---|
| Standard EPCG | 6× duty saved | Baseline |
| Green-technology products | 75% of standard | 4.5× duty saved |
| Units in NE region, J&K & Ladakh | 25% of standard | 1.5× duty saved |
| Capital goods sourced indigenously | 25% less | 4.5× duty saved, plus deemed-export benefits for the domestic supplier |
| Post-export EPCG (duty-credit scrip) | 85% of applicable SEO | Pay duty upfront, take a transferable scrip |
Two more shifts reward speed and honesty. Buying machinery from an Indian manufacturer instead of importing cuts the specific obligation by a quarter and hands the supplier deemed-export benefits. And a July 2024 public notice replaced the fiddly 2%-of-duty composition fee for extensions with flat, banded fees, and stretched the installation-certificate window to three years (Public Notice 15/2024). The direction of travel is rule-based processing with less manual touch.
Common EPCG scheme pitfalls
The scheme's failure mode is rarely the headline duty saving. It is the follow-through. CAG's 2024 audit, covering 2018-19 to 2020-21, logged 72 observations and a revenue implication of ₹479.81 crore, and its bluntest finding was about monitoring, not fraud.
As per the data furnished by DGFT, 1,08,798 authorisations whose export obligation period had expired remained unredeemed till the end of March 2021.
Where exporters actually trip:
- Average EO forgotten. Firms chase the flashy 6x specific target and let the annual average obligation slip. Both must hold, every year.
- Block I default. Miss the 50% first-block mark without a timely extension and proportionate duty plus 15% interest falls due.
- Installation certificate not filed, so the RA never re-fixes your obligation and the file stalls at redemption.
- Shipping bills without the authorisation number. Those exports simply do not count toward EO.
- Realisation gaps. Proceeds must arrive through banking channels in convertible currency; unrealised exports do not discharge the obligation.
Exporters who redeem cleanly treat the EODC as the finish line from day one. They map every shipping bill to the authorisation, watch both blocks, and apply for discharge the moment the obligation is met.
How ShipScout helps EPCG exporters
EPCG hands you cheaper machinery. It also hands you a six-year export bill to fill, and that is a demand problem.
- Size the market for your product across 240+ countries in the ShipScout company directory, built on 11B+ shipment records, so your export obligation maps to real buyers rather than hope.
- Build a buyer shortlist ranked by shipment volume instead of working cold lists. Here is the full playbook on finding buyers for export from India.
- Check a buyer before you commit. Their sourcing history tells you whether your price band fits, and contact intelligence, where available, gets you past the generic inbox.
- Keep the money side tight so obligations discharge on schedule; pair this with our guide to GST refunds for exporters.
The duty exemption is the easy part. Filling the export obligation is the job, and that starts with knowing who is buying. Start a free trial and see who is importing your product right now.
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