The Export Promotion Capital Goods (EPCG) Scheme is a government scheme under the Foreign Trade Policy (FTP) that seeks to increase exports by permitting duty-free import of capital goods. The capital goods are machinery, equipment, spares, tools, and other items required to manufacture export products.
Policy Framework
The policy of EPCG Scheme is explained in Chapter 5 of the FTP. It allows exporters eligible to import capital goods at zero customs duty, on the condition that they meet a certain export obligation (EO) amounting to six times the duty saved.
How to Apply?
Exporters may make an application for an EPCG authorisation to the concerned Regional Authority (RA) on the notified Application Form (ANF 5A). The application is required to be accompanied by a Nexus Certificate issued by an independent Chartered Engineer to the effect that the capital goods have a direct nexus to the export product.
Key Features
1. Certificate of Installation
The holder of the authorization has to provide a certificate declaring the installation of the capital goods within six months from the date of import completion. Extensions are allowed with a composition fee.
2. Port of Registration
Imports on EPCG are associated with a single port of registration, whereas exports are allowed from any approved port.
3. Indigenous Sourcing
Exporters can purchase capital goods produced in India and claim deemed export benefits. In these situations, the RA provides an Invalidation Letter or Advance Release Order (ARO).
4. Export Obligation
The export obligation should be met in two blocks:
1st to 4th year: Minimum 50% of EO.
5th and 6th year: The balance EO.
The EO may be met directly by the authorisation holder or indirectly through third-party exports, with due documentation.
Additional Provisions
Average Export Obligation: The exporters have to sustain the average export performance along with satisfying the individual EO.
Annual Reporting: Annual EO satisfaction information has to be posted online by the authorisation holder by 30th June every year.
Extensions: Extension of EO period with a composition fee is permissible under certain conditions.
Relief Measures: Concession in average EO is allowed for reduction in sectoral exports.
Green Technology Incentives
Producers of green technology products such as solar and wind power solutions, LED lighting, waste water treatment plant, battery electric vehicles, and green hydrogen enjoy a lower export obligation of 75%.
EODC & Regularisation
After fulfilling EO, the exporter can submit an application online for Export Obligation Discharge Certificate (EODC). Upon default in fulfilling EO, the authorisation holder has to pay proportionate customs duty along with interest to withdraw from the scheme.
Advantages of EPCG Scheme
Cost Savings: Facilitates duty-free import of capital goods.
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