What is EPCG Scheme? Benefits & How to Apply

What Is Export Promotion Capital Goods (EPCG) Scheme?

The Export Promotion Capital Goods (EPCG) Scheme allows Indian exporters to import capital goods, such as machinery and equipment, at zero customs duty, provided they fulfill prescribed export obligations within a specified period. Under the scheme, businesses are generally required to complete exports worth six times the customs duty saved, known as the Specific Export Obligation (SEO), within six years of authorisation.

Certain exporters may also need to maintain their Average Export Obligation (AEO), which means continuing their historical export performance while separately fulfilling the EPCG-linked export target. The scheme is administered by the Directorate General of Foreign Trade (DGFT) under India’s Foreign Trade Policy.

The objective of the EPCG Scheme is to reduce the upfront cost of importing machinery and equipment, helping Indian businesses improve production capacity, technology, and global competitiveness.

Capital goods covered under the EPCG scheme include machinery, production equipment, computer systems, packaging units, testing instruments, tools, and similar assets used for manufacturing goods or delivering export services. 

For example, textile manufacturers importing automated looms or IT companies importing high-performance servers qualify under the scheme.

How Does the EPCG Scheme Work?

The EPCG scheme enables businesses to import capital goods at reduced or zero customs duty in exchange for meeting prescribed export obligations. The process typically begins with obtaining an EPCG authorisation, followed by importing capital goods, and eventually fulfilling export obligations. Here’s how the scheme typically works in practice:

For example, if you import machinery worth ₹50 lakh, the applicable duty on the import is 20%. This comes to ₹10 lakh saved on duty.

Now, under SEO, your obligation becomes ₹10 lakh × 6 = ₹60 lakh. So, over the next six years, you must generate exports worth ₹60 lakh. 

At the same time, if your business was already exporting ₹20 lakh every year before obtaining the EPCG license, you cannot let that drop. You need to continue exporting at least ₹20 lakh annually, and the ₹60 lakh target comes on top of that.

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Who Is Eligible for the EPCG Scheme?

Businesses engaged in export-related activities can apply for the EPCG Scheme if they fall under the following categories:

While eligible businesses are generally required to fulfil export obligations under the scheme, not all sectors are required to maintain AEO. Certain industries are exempt due to the nature of their operations, seasonal export patterns, or policy support objectives under the Foreign Trade Policy (FTP).

These exemptions typically include:

What Are the Key Benefits of EPCG Scheme?

The EPCG scheme helps businesses import capital goods at reduced or zero customs duty. This lowers upfront costs, supports business expansion, encourages technology upgrades, and improves export competitiveness. Thus, directly reduces the financial pressure of expanding your business.

1. Significant Reduction in Import Cost

The EPCG Scheme helps businesses reduce the cost of importing machinery and equipment by allowing duty-free import of capital goods. This removes Basic Customs Duty (BCD), lowering the overall cost of imports for exporters.

2. GST Benefit on Domestic Procurement Under EPCG

The EPCG Scheme is not limited to imported machinery. Businesses can also procure eligible capital goods from domestic manufacturers under EPCG authorisation. In such cases, the domestic supplier, rather than the EPCG holder, may qualify for deemed export benefits under applicable GST provisions.

In simple terms, while the EPCG business receives the benefit of acquiring capital goods under the scheme, the supplier may become eligible for specific tax-related benefits for supplying goods against an EPCG authorisation.

3. Reduced Capital Expenditure Improves Export Competitiveness

By eliminating or reducing customs duty on capital goods, the EPCG Scheme lowers the upfront investment required for expansion.

This allows businesses to:

Lower production costs also help exporters offer more competitive pricing in global markets, especially in price-sensitive sectors. 

4. Strong Support for Service Exporters

The EPCG Scheme also benefits service exporters, including IT firms, consultancies, and design agencies. It allows them to import capital goods such as servers, high-performance computers, and specialised equipment at a lower cost. 

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How to Apply for an EPCG License: A Step-by-Step Guide

Applying for an EPCG license is a fully digital process on the DGFT portal, completed in nine steps from registration to tracking your export obligation.

Step 1: Register on the DGFT Portal

Create an account using your Import Export Code. A digital signature is required to proceed. 

EPCG Scheme: DGFT Login

Step 2: On the DGFT portal, select EPCG under services

EPCG Scheme: Dashboard

Step 3: Fill the ANF 5A Form

Next, you need to complete the ANF 5A (Application Form for EPCG Authorisation) on the portal. This form captures details about your business, capital goods to be imported, and the export obligation that you expect.

EPCG Scheme: Fill ANF 5A

Step 4: Upload Relevant Documents

Now, upload the relevant documents to the portal. The commonly required documents include your:

All details in the documents must match the information mentioned in the application.

EPCG Scheme: Documents Upload

Step 5: Submit the Application

After uploading all the documents, you submit the ANF 5A form digitally and pay the required fee.

EPCG Scheme: Submit Application

Step 6: Review by DGFT

After you submit the application, your details and documents will be reviewed by the DGFT. If all the details are accurate, the application is usually processed within a few working days. 

EPCG Scheme: DGFT Review

However, if any information is missing or unclear, they may ask for clarification before approval.

Step 7: Import Capital Goods

Once approved, you can proceed with importing the goods under EPCG benefits.

Step 8: Installation Certificate

You must confirm that the imported goods are installed and operational. This is done through an installation certificate, which is submitted to DGFT.

This is an important step as the certificate is necessary after import and before your export obligation period is considered to have started. Unless this certificate is available, your EO tracking may not start formally.

Step 9: Track Export Obligation

After this step, your focus shifts to meeting export targets and maintaining documentation.

EPCG Scheme: Obligation Tracking

For a detailed walkthrough, find the official EPCG Scheme pdf here.

EPCG vs Duty Drawback vs Advance Authorization: Differences & Similarities

Importers often confuse the EPCG Scheme with Duty Drawback and Advance Authorization. However, each serves a different purpose within export-import operations. The table below highlights the key differences between these export incentive schemes.

While EPCG focuses on strengthening manufacturing infrastructure, Duty Drawback and Advance Authorization mainly support production inputs and export-related cost optimization.

Once businesses start managing export obligations under schemes such as EPCG, maintaining proper payment documentation becomes equally important. This is where Skydo supports exporters by simplifying international payment collection and compliance documentation. Skydo auto-generates FIRCs and streamlines e-BRC documentation required for EPCG obligation closure.

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What Happens If You Fail to Meet EPCG Export Obligation?

Failing to meet your EPCG export obligation triggers duty recovery, interest charges, and potential bank guarantee invocation. Here is what each consequence means in practice:

How Can Skydo Help?

Under the EPCG Scheme, businesses must maintain records acknowledging that export payments were received while fulfilling export obligations and closing EPCG authorisations. Skydo provides a Foreign Inward Remittance Advice (FIRA) for every export payment received through the platform. FIRAs act as proof that export proceeds were received and can support documentation required for export compliance, including e-BRC generation, DGFT submissions, and EPCG-related recordkeeping.

Through the Skydo dashboard, exporters can track incoming payments, access remittance records, and download FIRAs and payment proofs from one place. This makes it easier to maintain organised records for export documentation, including processes related to e-BRC generation and EPCG compliance, as export volumes grow.