Export Promotion Capital Goods Scheme

Export Promotion Capital Goods Scheme allows Indian exporters to import capital goods for pre-production, production and post-production at zero customs duty. The scheme is managed by the Directorate General of Foreign Trade under the Ministry of Commerce and Industry and continues under the Foreign Trade Policy 2023. It is open for manufacturer exporters, merchant exporters and service providers who want to raise the manufacturing competitiveness of Indian industry.

Under this scheme, capital goods, except those listed in the negative list, can be imported at zero customs duty. Imports made for physical exports are also exempt from Integrated Goods and Services Tax and Compensation Cess. Capital goods can also be bought from indigenous sources as per the Foreign Trade Policy.

Export Promotion Capital Goods Scheme - Introduction

Export Promotion Capital Goods Scheme helps exporters import capital goods for producing quality goods and services, which in turn boosts the manufacturing competitiveness of India. The scheme covers the full cycle of production, from pre-production to post-production. Capital goods under this scheme include:

• Capital Goods as defined in Chapter 11 of the Foreign Trade Policy, including those in CKD or SKD condition.
• Computer systems and software that are integrated with the imported capital goods.
• Spares, moulds, dies, jigs, fixtures, tools and refractories.
• Catalysts for the initial charge and one subsequent charge.

There are some key operational rules to keep in mind while using this scheme:

• An Export Obligation (EO) equal to 6 times the total duties, taxes and cess saved must be met within 6 years from the date of issue of the authorisation.
• Imports are also subject to an Average Export Obligation (AEO).
• The authorisation stays valid for 24 months from the date of issue and cannot be revalidated.
• If Integrated Tax and Compensation Cess are paid in cash, they should not be claimed for net duty saved calculations when Input Tax Credit is not taken.
• Approval from the Exim Facilitation Committee at DGFT Headquarters is required for restricted items.
• The supporting manufacturer's name must be endorsed on the authorisation before the machinery is installed.

Key Information

Benefits

Export Promotion Capital Goods Scheme gives exporters significant flexibility by allowing imports at zero customs duty and zero IGST. There are also reduced export obligations in some cases, as listed below:

Eligibility

Before applying for Export Promotion Capital Goods Scheme, exporters should make sure they meet these conditions:

• Goods have already been imported by paying customs duty.
• An Active IEC is held and the exporter is registered on the DGFT Customer Portal.
• E-Sign and DSC are enabled for submitting the application.
• GSTN details for all branches are updated through the IEC Profile Management section.

Application Process

Exporters can apply for Export Promotion Capital Goods Scheme online through the DGFT portal. The steps are given below.

STEP 1 - Go to the official website at https://www.dgft.gov.in.

STEP 2 - Log in to the portal using valid credentials.

STEP 3 - Open the Services menu at the top of the screen.

STEP 4 - Select the EPCG module to start the application process.

Documents

For the initial issue of the authorisation, exporters need a self-certified copy of MSME, IEM, LOI, IL or Service Tax Registration, a certificate from a Chartered Engineer in Appendix 5A format, and a certificate from a Chartered Accountant, Cost Accountant or Company Secretary in Appendix 5B format. For import of spares or tools, a list of installed machinery certified by a Chartered Engineer is required. For EOU or SEZ units, a No Objection Certificate from the Development Commissioner is needed.

For closure of the authorisation, a TR-6 Challan for regularization cases and a certificate from a Chartered Accountant in Appendix 5C format are required.

References

User Help File EPCG Module

EPCG FAQs

Foreign Trade Policy 2023, Chapter 5 EPCG Scheme

FAQ's

What does EPCG stand for and what is the benefit of an EPCG authorisation?

EPCG stands for Export Promotion Capital Goods. The aim of this scheme is to help import of capital goods to produce quality goods and services and improve India's export competitiveness through zero customs duty imports.

Who can benefit from the Export Promotion Capital Goods Scheme?

Manufacturer exporters (with or without supporting manufacturers), merchant exporters tied to supporting manufacturers, and service providers can benefit from this scheme.

If my IEC is in DEL, cancelled or suspended, am I eligible to apply for the EPCG authorisation?

If the IEC is in DEL, the application is processed only after the IEC is removed from DEL. If it is cancelled or suspended, the application cannot proceed.

How is my export obligation period divided into blocks?

The 6-year export obligation is divided into two blocks. The first block covers the first 4 years, and the second block covers the final 2 years.

Is there a time period for amendment of an issued authorisation?

An authorisation can only be amended within its import validity period.

What is the application fee for amendment?

One per thousand of the differential duty amount must be paid, plus a flat fee of ₹200 per amendment.

Why can't I decrease my import quantity of an item?

The quantity cannot be decreased once the bill of entries exists in the Shipping Bill Repository.

What are the benefits of domestic sourcing?

A 25% reduction in the specific Export Obligation can be received for sourcing capital goods domestically.

What is an installation certificate?

An installation certificate is proof that capital goods are correctly installed at the factory or the premises of the supporting manufacturer. It can be obtained from a customs authority or an independent chartered engineer.