EPCG Scheme — Zero Duty Capital Goods

The Export Promotion Capital Goods (EPCG) Scheme, set out in Chapter 5 of the Foreign Trade Policy 2023 (read with HBP 2023 Chapter 5), permits import of capital goods for pre-production, production, and post-production — including CKD/SKD components and computer software systems used for such capital goods — at zero Basic Customs Duty. The corresponding obligation is an Export Obligation (EO) equal to 6 times the aggregate duties, taxes, and cess saved on the imported capital goods, to be fulfilled within 6 years from the date of issuance of the EPCG authorisation.

Capital goods imported under EPCG remain subject to Actual User condition until the export obligation is discharged. Standard Input-Output Norms (SION) do not apply to EPCG, since it is a capital-goods scheme rather than an input scheme — it should not be conflated with Advance Authorisation, which serves a materially different purpose (duty-free inputs, not capital equipment).

On fulfilment of the EO, the authorisation holder applies to DGFT for redemption and an Export Obligation Discharge Certificate (EODC); any shortfall attracts proportionate customs duty recovery with interest, and repeated or wilful default can additionally attract penal action under the Foreign Trade (Development & Regulation) Act, 1992. The scheme is available to manufacturer-exporters, merchant-exporters (with a supporting manufacturer), and specified categories of service providers.

The EPCG scheme — Export Promotion Capital Goods — lets an exporter import capital goods at a concessional or zero customs duty, subject to an export obligation: the exporter must export goods of a value equal to a prescribed multiple of the duty saved, within a prescribed period (VERIFY: the current export obligation multiple and period under the Foreign Trade Policy). The scheme is the government's way of making Indian manufacturing's machinery competitive — the duty saving is effectively repaid through future exports, and the obligation is monitored by DGFT and Customs.

The scheme suits manufacturers whose capital costs — machinery, plant, equipment — are the competitive constraint. Importing the machine duty-free lowers the capital base; the export obligation converts the saving into a performance target. The obligation runs for years, and its fulfilment is tracked through shipping bills and export realisations, with the Export Obligation Discharge Certificate (EODC) closing the file.

The risk is the reversal: if the export obligation is not fulfilled in time, the duty saved becomes payable under the Customs Act with interest, and the exporter's DGFT record carries the default. The obligation can be extended in part under the FTP's provisions, but extensions are not automatic — they require application and conditions.

This service is for exporters importing capital goods under the EPCG scheme. We compute the duty saving and the obligation, prepare and file the application under the FTP, manage the import and the bonding, track the export obligation through shipping bills and e-BRCs, apply for extensions where needed, and file the EODC to close the authorisation cleanly.