EPCG Scheme (2026): Import Capital Goods at Zero Duty

What is the EPCG Scheme?

The Export Promotion Capital Goods (EPCG) Scheme under Chapter 5 of the Foreign Trade Policy 2023 is the government's route for manufacturers and service exporters to modernise without paying full customs duty upfront. You import capital goods for pre-production, production and post-production at the prescribed zero customs duty / applicable customs exemptions, including IGST and Compensation Cess exemption where applicable, subject to the relevant Customs notification, and in return you commit to incremental exports. The scheme is administered by DGFT Regional Authorities, not by Customs, and is conditional on fulfilling the export obligation within the prescribed period, subject to applicable FTP/HBP provisions, Customs notifications and conditions.

How EPCG works — the 6x obligation in plain English

Analogy helps, but legally EPCG is an export-linked duty exemption/concession scheme, not a loan — though trade practice sometimes likens it to a duty loan repaid in exports. You save duties, taxes and cess today per the applicable Customs notification; you fulfil an obligation of 6 times the duties, taxes and cess saved by exporting more than your historical average. If you paid IGST/Cess in cash and did not avail Input Tax Credit, that IGST/Cess is excluded from duty-saved computation, subject to applicable FTP/HBP provisions. For domestic sourcing under para 5.07, notional customs duty on the FOR value is used and specific EO is 25% lower; average EO does not change, subject to applicable provisions.

• Duty saved is reckoned on actual duties, taxes and cess saved for direct imports, not on the CIF value, subject to applicable FTP/HBP provisions.
• Only exports over and above your applicable Average EO are generally counted toward the 6 times the duties, taxes and cess saved target, subject to FTP/HBP provisions and exemptions, including AEO-exempt categories and applicable reliefs.
• You can count physical exports and deemed exports where eligible under applicable provisions; exports under Advance Authorisation, DFIA, drawback, RoSCTL and RoDTEP are also eligible for EO fulfilment where eligible under applicable FTP/HBP and scheme notifications, subject to relevant conditions (para 5.04(e) FTP 2023).
• Ensure EPCG authorisation details are correctly declared/linked on shipping bills intended to be counted toward EO, as prescribed by DGFT/Customs procedures; export realisation should be evidenced by eBRC and/or other prescribed evidence of export realisation, as applicable.

What you can import and the benefit you get

EPCG is not for raw materials or consumables. It is for the machines, tools and systems that make your export product, subject to applicable FTP/HBP provisions, Customs notifications and conditions. Imports and indigenous procurement are both covered, and restricted items are allowed only after Exim Facilitation Committee approval at DGFT HQ where required.

• Prescribed zero customs duty / applicable customs exemptions, including IGST and Compensation Cess exemption where applicable, subject to the relevant Customs notification in force at import; verify the notification applicable to your import.
• Alternative: procure domestically against ARO/Invalidation Letter under para 5.07 and claim 25% lower specific EO, subject to applicable provisions; Average EO unchanged.
• Post Export EPCG is a variant where you pay duties in cash and receive a transferable duty-credit scrip proportionate to EO fulfilled (specific EO 85% of normal, average EO unchanged, subject to applicable provisions).

Who can apply for EPCG?

EPCG is for exporters with a manufacturing or service-delivery nexus, subject to applicable FTP/HBP provisions, Customs notifications and conditions. Trading houses without a supporting manufacturer cannot use it. The supporting manufacturer must be endorsed on the authorisation before installation, and any change must be intimated to both jurisdictional Customs authorities and the port of registration as prescribed.

• Prerequisites: live IEC (not in DEL/cancelled), valid RCMC, GSTN added to IEC profile, DSC/e-sign registered, user profile linked to IEC, subject to applicable DGFT procedures.
• Actual User condition applies till EODC — you cannot sell, shift or lease the capital goods without approval as prescribed and a fresh installation certificate within the period prescribed under the latest HBP after shifting, subject to applicable provisions.
• Subject to applicable FTP/HBP provisions on Average EO including exemptions and reliefs, exporters with no exports in the preceding three licensing years may have no Average EO or an AEO as determined under the governing provisions — verify against the applicable FTP/HBP before assuming nil AEO.

Export obligation — Specific EO, Average EO and the two blocks

Most EPCG defaults happen because exporters track only the 6 times the duties, taxes and cess saved number and miss the average and the block rule, subject to applicable FTP/HBP provisions. You owe two things at once: the incremental 6x exports (specific EO) and the maintenance of your historical average (Average EO), each governed by the applicable provisions and available reliefs.

• Illustrative example (subject to applicable exemptions, exclusions and reliefs under FTP/HBP — not an unconditional universal rule): if your average exports were ₹2 crore (mean of ₹1.8, ₹2.0, ₹2.2 cr), you maintain that ₹2 crore average each year until EO is completed and, over and above that average, you fulfil the 6 times the duties, taxes and cess saved specific exports — e.g. ₹2.4 crore in the earlier ₹40 lakh duty-saved example — split 50/50 across the two blocks as per applicable provisions.
• Sectors where total exports fell more than 5% in FY 2024-25 vs FY 2023-24 get a proportional Average EO reduction for 2024-25 under Policy Circular No. 10/2025-26 dated 26 February 2026 (para 5.17 HBP); the annexed product groups are notified by DGFT and Regional Authorities refix the AEO accordingly — this is sector-specific relief, not a blanket EPCG extension, subject to applicable provisions and RA endorsement.
• DTA exports, deemed exports, ITA-I supplies to DTA with free forex, royalties and R&D forex, and para 5.04(j) rupee payments for notified services can all count where FTP so provides, subject to applicable conditions and evidence.
• Ensure EPCG authorisation details are correctly declared/linked on shipping bills intended to be counted toward EO, as prescribed by DGFT/Customs procedures; export realisation should be evidenced by eBRC and/or other prescribed evidence of export realisation, as applicable.

EPCG application process: ANF-5A to authorisation

Apply online; DGFT no longer processes physical files for EPCG for most cases, subject to applicable procedures. The Chartered Engineer nexus certificate is an important supporting document used to establish the nexus between the proposed capital goods and the export product/service — a clear, product-specific nexus helps avoid Deficiency Letters.

1. Get IEC, RCMC and GSTN in order: register IEC in ANF-2A, complete e-RCMC on the DGFT common portal, add GSTN under IEC Profile Management, and register a Class-3 DSC, subject to applicable procedures.
2. Secure the nexus chain: Chartered Engineer certificate in Appendix 5A format (goods, end-use, capacity, plant layout, wastage if any) and CA/CS certificate in Appendix 5B for export performance, where applicable.
3. File ANF-5A via Services > EPCG: capital-goods list with ITC HS, CIF, duty calculation, sector classification, export products/services mapped to the capital goods, and a clear declaration of the benefit claimed at para 5.04/5.09/5.10/5.11 as applicable.
4. Attach: IEC copy, RCMC, GST proof, CE and CA certificates, proforma invoice, EO statement, and where relevant the plant/machinery list for spares/tools and the NOC from the Development Commissioner for EOU/SEZ units, as applicable.
5. Pay the fee per Appendix 2K electronically and sign with DSC; track the file number under My Dashboard > Submitted Applications.
6. Answer any consolidated Deficiency Letter promptly; indicative processing timelines for clean cases are often cited as 15–30 days in trade practice, but this is not a guaranteed DGFT service standard — actual timelines depend on RA workload and case completeness — and EODC timelines likewise depend on completeness, subject to applicable provisions.
7. On approval, complete applicable Customs bond, bank guarantee/security and other prescribed import formalities (requirements depend on the circumstances and the applicable Customs/DGFT procedures), register the authorisation on ICEGATE for the chosen port, import within 24 months, and file the Installation Certificate (Customs or independent Chartered Engineer as per applicable HBP) within the period prescribed under the latest HBP and upload intimation as prescribed — any extension/regularisation is strictly as per the latest HBP provisions and applicable extension/regularisation mechanism, not an automatic ₹5,000 / 12-month rule.

After import: compliance, reporting and discharge

Import is only the midpoint, subject to applicable FTP/HBP provisions, Customs notifications and conditions. EPCG ties the machine to the factory and to periodic proof until the discharge certificate arrives. Missing the installation intimation or the shipping-bill linkage are among the most common paperwork lapses that delay discharge.

• Install only at the declared premises; shifting during the EO period to another unit listed in your IEC/RCMC needs prior intimation as prescribed and a fresh installation certificate within the period prescribed under the latest HBP after shifting.
• Realise export proceeds in free foreign exchange (or INR per para 2.52(d)(ii) where allowed, subject to applicable provisions) and generate eBRC and/or other prescribed evidence of export realisation, as applicable; ensure EPCG authorisation details are correctly declared/linked on shipping bills intended to be counted toward EO, as prescribed by DGFT/Customs procedures.
• Maintain applicable Average EO each financial year and the 50/50 block split as per applicable provisions; file EO fulfilment updates and reports within the period prescribed under applicable FTP/HBP/DGFT procedures and retain records as required.
• On fulfilment, file closure in ANF-5B via Services > EPCG > Closure of EPCG authorisation with bank certificate, shipping bills, eBRCs and/or other prescribed evidence and installation proof; the RA issues the Export Obligation Discharge Certificate (EODC) and forwards it to Customs for release/closure of applicable Customs bond / bank guarantee / security and other prescribed import formalities as per applicable procedures.
• Apply for amendments while the relevant period is valid: import-item changes need a fresh CE nexus and are allowed only while the authorisation is valid for import; export-item changes need linkage and are allowed while EO is still alive, each as per applicable provisions.

What happens if you miss the EO? Common mistakes and EPCG vs other schemes

EPCG is manageable if you plan, but an EO shortfall can result in duty and interest liability and other consequences, including penal action under FTDR and Customs law, subject to applicable extension, regularisation, redemption and adjudication provisions under FTP/HBP and Customs law. Shortfalls are assessed as per the governing provisions, not only at EODC.

• Mistake 1: counting gross exports without subtracting applicable Average EO — generally only the excess over applicable AEO counts toward the 6 times the duties, taxes and cess saved, subject to FTP/HBP provisions.
• Mistake 2: missing the 50% block-1 target without timely extension as per applicable provisions — block-wise EO is assessed per the governing provisions and may attract duty and interest consequences.
• Mistake 3: a weak Chartered Engineer nexus certificate or a mid-trade change of capital goods without a fresh nexus — can trigger deficiency or later regularisation/duty consequences as per applicable provisions.
• Mistake 4: not ensuring EPCG authorisation details are correctly declared/linked on shipping bills intended to be counted toward EO, or not generating eBRC and/or other prescribed evidence of export realisation, as applicable — those shipments may not be counted.
• Mistake 5: selling or shifting the machine before EODC without approval as prescribed — breaches Actual User condition, subject to applicable provisions.
• Mistake 6: claiming multiple EO reductions at once — generally only one of paras 5.04(d), 5.09, 5.10, 5.11 is admissible where applicable, subject to applicable provisions.
• If EO is at risk, apply for extension under HBP paras 5.13/5.16 on prescribed composition fees before expiry as per applicable provisions; for 2026 the one-time automatic extension to 31 Aug 2026 per PN 51/2025-26 already covers specified authorisations where EO/block-wise period was expiring 1 Mar–31 May 2026 — verify applicability to your authorisation.

In practice exporters stack these tools where eligible: EPCG for the new line, Advance Authorisation for the next season's fabric or chemicals, and RoDTEP/ROSCTL where eligible under the applicable notifications, rates and conditions — and exports counted under those schemes can, where eligible under applicable FTP/HBP and scheme notifications, count toward EPCG EO fulfilment (para 5.04(e) FTP 2023, subject to relevant conditions).

Practical example: a Tiruppur fabric exporter

A Tiruppur knit-fabric manufacturer has an Average Export Obligation of ₹1.5 crore per year (the arithmetic mean of its same/similar product exports in the preceding three licensing years) and wants to import a stentering range (CIF ₹3 crore, duties, taxes and cess saved about ₹60 lakh, illustrative). Specific EO is 6 times the duties, taxes and cess saved: ₹60 lakh × 6 = ₹3.6 crore to be fulfilled over six years, in two blocks — 50% (₹1.8 crore) in years 1–4 and the remaining 50% (₹1.8 crore) in years 5–6, subject to applicable FTP/HBP provisions. Critically, Average EO and Specific EO are distinct: the exporter maintains its ₹1.5 crore average every year, and only exports over and above that applicable average contribute toward fulfilment of the ₹3.6 crore specific EO, subject to applicable exemptions, exclusions and reliefs under FTP/HBP. So gross exports in the period must cover both the yearly average and the incremental specific obligation — they are not interchangeable. The exporter maps the stenter to its knit fabric, obtains a Chartered Engineer nexus certificate (an important supporting document used to establish nexus), imports in month 4, installs in month 6 and files the Installation Certificate within the period prescribed under the latest HBP, ensures EPCG details are correctly declared/linked on shipping bills intended to be counted toward EO, and generates eBRC and/or other prescribed evidence of export realisation as applicable. With disciplined linkage and realisation evidence, the file can be closed on EO completion and EODC obtained as per applicable procedures, after which applicable Customs bond / bank guarantee / security is released.

The lesson replicates: treat the applicable Average EO as the yearly floor to be maintained as per applicable provisions, and the 6 times the duties, taxes and cess saved as incremental business to be found over and above that floor — often by adding a product variant or a geography that the new machine enables, subject to applicable FTP/HBP provisions, Customs notifications and conditions.

Frequently asked questions