CHAPTER 5

Export Promotion
Capital Goods
(EPCG) Scheme
Chapter-5
Export Promotion Capital Goods (EPCG) Scheme

5.01 Policy
Policy relating to EPCG Scheme is given in Chapter 5 of FTP

5.02 Application Form

An application for grant of an authorisation may be made by Registered Office or
Head Office or a Branch Office or Manufacturing Unit of an eligible exporter to RA
concerned in ANF 5A along with documents prescribed therein.

5.03 Nexus Certification

(a) RA concerned shall, on the basis of nexus certificate from an independent
Chartered Engineer (CEC) submitted by the applicant in Appendix 5A, issue
EPCG authorisation. For issuance of such certificate, the Chartered Engineer
shall act only in the domain of his/her competence. In case of fabrication,
reasonable wastage, if any, anticipated at the time of installation of capital
goods shall be certified by the Chartered Engineer in the nexus certificate
and the same would be mentioned in the condition sheet of the EPCG
authorisation at the time of issue. The wastage so permitted at the time of
issuance of authorisation would be allowed to be sold as scrap/waste on
payment of applicable duty by the authorisation holder.
(b) An application for amendment in the list of import item(s) including
addition(s)/deletion(s), if any, may be filed with RA concerned provided the
authorisation is valid for import. The applicant would give justification for
seeking such amendment(s) along with fresh nexus certificate from an
independent Chartered Engineer.
(c) An application for amendment in the list of export item(s) including
addition(s)/deletion(s) if any, may be filed with RA concerned provided the
Export Obligation period of the authorisation is valid and the CG has nexus
with export product. The applicant would give justification for seeking such
amendment(s) along with fresh nexus certificate from an independent
Chartered Engineer.

5.04 Certificate of Installation of Capital Goods

(a) Authorization holder shall produce, within 3 years from date of completion
of import, to the concerned RA, a certificate from the jurisdictional Customs
authority or an independent Chartered Engineer, at the option of the
authorisation holder, confirming installation of capital goods/spares at
factory/premises of authorization holder or his supporting
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 manufacturer(s). The RA may allow extension of the said period for
submission of certificate, upto valid EO period with a payment of a
composition fee of Rs. 10,000/- per year by the authorisation holder. Where
the authorisation holder opts for independent Chartered Engineer’s
certificate, he shall send a copy of the certificate to the jurisdictional
Customs Authority for intimation/record. The authorization holder shall be
permitted to shift capital goods during the entire export obligation period
to other units mentioned in the IEC and RCMC of the authorization holder
subject to production of fresh installation certificate to the RA concerned
within six months of the shifting.
(a) Deleted .

5.05 Port of Registration

EPCG Authorisation shall be issued with a single port of registration as per
paragraph 4.35 of HBP, for imports. However, exports can be made from any port
specified in paragraph 4.35 of HBP.

5.06 Import of spares, tools, refractories and catalysts

(a) Applications for procurement of capital goods covered under sub-
paragraphs (a) (iii) and (iv) of paragraph 5.01 of FTP shall contain a list of
plant/machinery installed in factory/premises of the applicant for which
such capital goods are required, duly certified by independent Chartered
Engineer or jurisdictional Customs Authorities.
(b) In case of import of spares, EPCG authorisation shall not specify list of
spares but shall indicate:
(i) Name of plant /machinery for which spares are required.
(ii) Value of duty saved allowed under the authorisation.
(iii) Description of product to be exported and value of export
obligation.
(c) Authorisation holder shall maintain a register of stock & utilisation of
capital goods covered under sub-paragraphs (a)(iii) and (iv) of paragraph
5.01 of FTP imported under the scheme and at the time of application for
EODC, authorisation holder shall submit certificate from independent
Chartered Engineer confirming their use in the installed capital goods on
the basis of such register.

i. Para 5.04(a) amended vide Public Notice No. 15/2024-25 dated 25.07.2024.
ii. Para 5.04(b) deleted vide Public Notice No. 15/2024-25 dated 25.07.2024.

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5.07 Conversion of EOU/Relocated SEZ Units to DTA Unit under EPCG
Scheme
(a) An EOU/a relocated SEZ unit, while converting to a DTA Unit, may apply for
an EPCG authorisation along with documents prescribed. ‘No Objection
Certificate’ should be produced from the concerned Development
Commissioner.
(b) The export obligation period for a unit which converts from EOU/SEZ
Scheme to EPCG Scheme would be the same as is available to a direct EPCG
Authorisation holder as per paragraph 5.01 of FTP.
(c) If a standalone EOU / SEZ unit wishes to de-bond from EOU to EPCG Scheme,
there shall be no requirement for maintenance of average export obligation
and the unit shall be required to maintain only specific export obligation
equivalent to six times of the proportionate duty saved amount of the
depreciated value of capital goods for which the Authorisation has been
obtained.
(d) In case one unit of a firm / company opts to de-bond from EOU to EPCG
Scheme, while other unit(s) are DTA units, then the average export
obligation in respect of the authorisations issued to the firm / company
(other than de-bonding unit) shall remain unchanged and the average EO,
after de-bonding of the unit, shall be fixed by excluding the exports made by
the de-bonded unit from the total exports of the firm/ company, which runs
concurrently for all the units of the firm/ company. In such a case, specific
EO equivalent to six times of the proportionate duty saved amount on the
depreciated value of the Capital Goods would be imposed on the de- bonding
unit shifting to the EPCG Scheme.

5.08 Procurement from SEZ

(a) If the request is made along with the application for authorisation for
procurement of new Capital goods from SEZs, the RA may issue a
"Certificate of supplies from SEZ", containing the details for the requested
items after making the import item "Invalid for direct imports”. The
"Certificate of supplies from SEZ" shall contain the following details:

(i) Name, Address and GSTIN of SEZ unit;

(ii) GSTIN & Address of recipient unit of EPCG authorisation holder

where capital goods would be installed;
(iii) Name, description including specifications, where applicable,
and quantity of items; and
(iv) Individual value of items to be procured.

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(b) The said “Certificate of supplies from SEZ" shall be marked in
quadruplicate with a copy each to the authorisation holder, SEZ supplier
unit, designated officer at SEZ and the relevant port customs authorities.
The above certificate shall be issued as an online amendment to the
authorisation and has to be transmitted.
(c) In cases where the request for issue of "Certificate of supplies from SEZ" is
made in due course, it shall be accompanied with an authorisation
utilization status issued by the relevant Customs authorities mentioned on
the authorisation for the RA to verify the actual utilization of authorisation
at the time of application. The certificate may be issued to the extent of
quantity available as per utilization status. In case the request for
"Certificate of supplies from SEZ" is made along with the application for
authorisation, the same procedure shall apply.

5.09 Sourcing of Capital Goods Manufactured Indigenously

(a) EPCG authorisation holder intending to source capital goods manufactured
indigenously shall make a request to the RA for issuance of Invalidation
Letter or Advance Release Order (ARO).
(b) Deemed export benefits as given in paragraph 7.03 of FTP shall be
available.
(c) This request can be made either along with application or during the
validity period of EPCG Authorisation.
(d) Applicant shall give the name and address of the manufacturer(s) of
capital goods.
(e) RA concerned will issue the invalidation letter/ARO, in quadruplicate.
(f) Validity period of invalidation letter/ARO shall be co-terminous with the
validity period of EPCG authorisation.

5.10 Conditions for fulfillment of Export Obligation

In addition to conditions in paragraph 5.04 of FTP, the following conditions shall
also be applicable for fulfillment of export obligation:
(a) Name of the supporting manufacturer as well as the exporter shall be
indicated on export documents.
(b) In case the Authorisation holder wants to export through a third
party, export documents viz., shipping bills/Bill of exports etc. shall
indicate name of both authorisation holder and supporting
manufacturer, if any, along with EPCG authorisation number.
Shipping bill/Bill of Export, GST invoice and e-BRC/ export
realisation from RBI’s EDPMS should be in the name of third party
exporter. The goods exported through third party should be
manufactured by the EPCG authorisation holder or the supporting

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 manufacturer where the capital goods imported under the
authorisation have been installed. The goods manufactured by the
authorisation holder shall be exported as it is by the ultimate
exporter (third party exporter) without further processing. Proceeds
realised through normal banking channel from third party exporter’s
account to the authorisation holder’s account on account of such
exports shall only be counted towards fulfillment of export obligation.
(c) Disclaimer certificate from third party that they shall not use such
proceeds towards EO fulfillment of any EPCG authorisation (s)
obtained by them.
(d) The EPCG authorisation holder shall submit the following additional
documents for discharge of EO through third party exporter(s):
(i) Proof of having dispatched the goods from authorisation
holder’s factory premises to the ultimate exporter/port of
export viz.
(a) ARE 1 certificate issued by Central Excise/Tax invoice for
export prescribed under the GST rules with due authentication
by the Customs verifying the exports along with the shipping
bill number, date and EPCG authorisation number, or
(b) Invoice duly incorporating the relevant EPCG
authorisation number & date at the time of dispatch in case the
unit is not registered with Central Excise/GST.
(ii) Lorry Receipt (LR) /Logistical evidence for transportation of
goods from the premises of the authorisation holder to the
third party exporter/Port of export.
(iii) An undertaking from the third party exporter on a stamp
paper, declaring that the products exported for fulfillment of
EO by them on behalf of the license holder as per details given
in the statement of exports, were manufactured by the license
holder.
(iv) Financial evidence for having received proceeds through
normal banking channel from third party exporter’s account to
the authorisation holder’s account on account of such exports
towards such third party supplies.
(v) Disclaimer certificate from third party exporter that they shall
not use such proceeds towards EO fulfillment of any EPCG
authorisation(s) obtained by them.

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5.11 Realization of Export proceeds
Export proceeds shall be realized in freely convertible currency or in Indian
Rupees as per para 2.53 of FTP, except for Deemed Exports supplies under
Chapter-7 of FTP. Exports to SEZ units/Supplies to developers/co-developers
irrespective of currency of realization would also be counted for discharge of
Export Obligation. Realization in case of supplies to SEZ units shall be from foreign
currency account of the SEZ unit.

5.12 Calculation of Average Export Obligation

While calculating Average Export Obligation, exports counted/being counted for
fulfilling specific EO against EPCG Authorisations within valid EO Period (whether
original or extended) that have been made in the preceding 3 years will not be
taken into account.

5.13 Block-wise Fulfillment of EO

(a) The Authorisation holder under the EPCG scheme shall, while maintaining
the average export obligation, fulfill the specific export obligation over the
prescribed block period in the following proportions:

Period from the date of issue Minimum export

of Authorisation obligation to be fulfilled
Block of 1st to 4th year 50%
Block of 5th and 6th year Balance EO

(b) The Authorisation holder would intimate the Regional Authority on the
fulfilment of the export obligation, as well as average exports, within three
months of completion of the block.

(c) Request for extension of Export Obligation period of first block shall be
submitted within 6 months from the date of expiry of first block EO period
along with composition fee as under :-

Duty Saved value of EPCG Composition fee to be

Authorisation issued levied (in Rupees)
Up to ₹2 Crores 5,000
More than ₹2 Crores to 10 Crores 10,000
Above ₹10 Crores 15,000

RA may consider the request for extension of block-wise EO period, received

after 6 months, but within 6 years from date of issue of authorisation, with
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 composition fee as under :-

Duty Saved value of EPCG Composition fee to be

Authorisation issued levied (in Rupees)
Up to ₹2 Crores 10,000
More than ₹2 Crores to 10 Crores 20,000
Above ₹10 Crores 30,000

Application made beyond 6 years, for extension of block-wise EO period for

regularization purpose, shall also be considered by RA concerned, with
composition fee as under :-

Duty Saved value of EPCG Composition fee to be

Authorisation issued levied (in Rupees)
Up to ₹2 Crores 15,000
More than ₹2 Crores to 10 Crores 30,000
Above ₹10 Crores 45,000

No refund of earlier paid Composition Fee shall be admissible.

Where EO of the first block is not fulfilled in terms of para (a) above, except
in cases where the EO prescribed for first block is extended by the RA, the
Authorisation holder shall, within 6 months from the expiry of the block,
pay duties of customs (along with applicable interest as notified by DOR)
proportionate to duty saved amount on total unfulfilled EO of the first
block..

(d) (i) Authorisations issued from 1st April, 2002 upto 31st August, 2004 shall
be governed by provisions of paragraph 5.8 of HBP Vol.1 (RE-02) as
amended from time to time.

(ii) Authorisations issued from 1st September, 2004 upto 17th April, 2013
shall be governed by provisions of paragraph 5.8 of HBP Vol.1 (RE-12) as
amended till 17.04.2013.

(iii) Authorisations issued from 18th April, 2013 till issue of Notification
of FTP 2015-20 shall be governed by provisions of paragraph 5.8 of HBP Vol.
1 as amended vide PN No. 1 dated 18.04.2013.

(iv) Authorisations issued from 1st April, 2015 till 4th December, 2017
shall be governed by provisions of paragraph 5.14 of HBP as amended vide
PN No. 1 dated 01.04.2015.

i. Para 5.13(c) amended vide Public Notice No. 15/2024-25 dated 25.07.2024.

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 (v) Authorisations issued from 5th December, 2017 till 31 st March 2023
shall be governed by provisions of paragraph 5.14 of HBP as amended vide
PN No. 43 dated 05.12.2017.

(e) Notwithstanding sub-para (d) above, sub-para (c) above shall also be
applicable for authorisations issued under FTP (2015-20)

5.14 Report for EO fulfilment

Authorisation holder shall submit to RA concerned a report on fulfilment of export
obligation through online mode after expiry of first block period of four years and
continuously till the expiry of valid EO period. Such report shall contain a
statement with details of Shipping bill/Invoice number/Bill of Export/FIRC
number with date and number, as applicable, duly certified by Chartered
Accountant/Cost Accountant/ Company Secretary for evidencing fulfillment of
specific as well as average EO (wherever applicable).

5.15 Automatic Reduction/Enhancement upto 10% Duty saved

amount and pro rata Reduction/Enhancement in export obligation
If authorisation issued has been utilized for import of goods:-

(a) In excess of duty saved amount indicated on the authorisation by not more
than 10%, the authorisation shall be deemed to have been enhanced by
that proportion. Customs shall automatically allow clearance of such goods
without endorsement by RA concerned. The authorisation holder shall
furnish additional fee to cover excess imports effected, in terms of duty
saved amount, to RA concerned, at the time of application for EODC. Export
obligation shall automatically stand enhanced proportionately.
(b) In excess of duty saved amount indicated on the authorisation by more than
10%, the RA concerned, as per its delegated powers, may allow
enhancement in duty saved amount of the EPCG authorisation. The
Authorisation holder shall furnish additional BG/LUT to the Customs
Authority.

(c) Less than the duty saved amount indicated on the authorisation, the export
obligation shall stand reduced on pro-rata basis with reference to actual
utilization of the authorisation.

i. Para 5.13(e) added vide Public Notice No. 15/2024-25 dated 25.07.2024.
ii. Para 5.14 amended vide Public Notice No. 24 dated 20.09.2024.

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5.16 Extension in Export Obligation Period
(a) Extension in Export Obligation Period of EPCG authorisation issued prior to
Notification of Foreign Trade Policy 2023 shall be governed by relevant
provisions of HBP applicable on the date of issue of authorisation.
(b) In case of extension of Export obligation period beyond 6 years, two
extensions, from date of expiry, of one year each or two years in one go at
the choice of authorisation holder, may be considered by RA concerned
with composition fee as under:

Duty Saved value of EPCG Composition fee to be

Authorisation issued levied (in Rupees)
Up to ₹2 Crores 20,000
More than ₹2 Crores to 10 Crores 30,000
Above ₹10 Crores 60,000

No refund of earlier paid Composition Fee shall be admissible.

(c) Request for extension in EO Period shall be made to RA concerned within 6

months from the date of expiry of original EO Period. However, RA may
consider the request for extension received after 6 months, but within the
extendable validity of EO period, with a late fee of Rs. 10,000/-. The request
for extension for regularisation purpose, from 6th to 8th year, may also be
considered after expiry of EO period on payment of late fee of Rs. 15,000/-.
This fee is in addition to the composition fee that may be payable on account
of shortfall in export obligation. However, EO extension, beyond 8 years
from date of issue of authorisation, shall not be allowed by RA under this
provision.
(d) Notwithstanding sub-para (a) above, sub-paras (b) and (c) above shall also
be applicable for authorisations issued under FTP (2015-20).
(e) For implementation of all PRC decisions involving levy of Composition Fee
while allowing extension in block-wise/EO period and/or regularisation of
exports already made, the applicable Composition Fee shall be as under :-

Duty Saved value of EPCG Composition fee to be

Authorisation issued levied (in Rupees)
Up to ₹2 Crores 30,000
More than ₹2 Crores to 10 Crores 60,000
Above ₹10 Crores 1,00,000
No refund of earlier paid Composition Fee shall be admissible.
i. Para 5.16(b) amended vide Public Notice No. 15/2024-25 dated 25.07.2024
ii. Para 5.16(e) added vide Public Notice No. 15/2024-25 dated 25.07.2024.
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5.17 Relief in Average Export Obligation
(a) To provide relief to exporters of those sectors where total exports in that
sector/product group has declined by more than 5% as compared to the
previous year, average export obligation for the year may be reduced
proportionate to reduction in exports of that particular sector/product
group during the relevant year as against the preceding year. However, in
case export decline is continuous over consecutive years, the base year for
calculation of eligibility and calculation of reduction in average export
obligation will be taken as the year after which the exports have shown
continuous decline.

(b) The sectors /product groups for which this relaxation is to be allowed shall
be conveyed by the DGFT to all the RAs within seven months of the end of
the previous financial year and the RAs shall re-fix the annual average EO
for previous year accordingly for exporters in that sector/ product group.

5.18 Maintenance of Annual Average Export Obligation

The excess exports done towards the average export obligation fulfilment of an
EPCG authorisation during a year can be used to offset any shortfall in the Average
EO done in other year(s) of the EO period or the block period as the case may be
provided Average EO imposed is maintained on an overall basis, within the block
period or the EO period as applicable.

5.19 Automatic EO extension in the event of ban on export product

Whenever a ban/restriction is imposed on export of any product, export
obligation period in respect of EPCG authorisations already issued prior to
imposition of ban on such export products would stand automatically extended
for a period equivalent to duration of such ban, without any composition fee.
Authorisation holder would not be required to maintain average EO as well for the
ban period.

5.20 Export Obligation Discharge Certificate (EODC)

(a) Authorisation holder shall apply for online EODC in ANF 5B with documents
prescribed therein as a proof of EO fulfillment.

(b) On being satisfied, RA concerned shall issue EODC to the EPCG authorisation
holder and an online copy will be forwarded to ICEGATE through API message
exchange for further action by Jurisdictional Customs Authorities with whom
BG/LUT has been executed.

(c) RA shall process such applications ordinarily within 30 days. Shortcomings, if

any, shall be pointed out normally in one go. Once documents are complete in all
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respects, export obligation shall be discharged within 30 days of receipt of
complete documents /information.

5.21 Regularization of bonafide default and exit from EPCG scheme

(a) Authorisation holder shall have the option to surrender the unutilised
authorisation at any point of time. In such cases no penalty or fees shall be
levied.
(b) In case, EPCG authorisation holder fails to fulfill prescribed export
obligation, he shall pay customs duty/taxes/cess in proportion of shortfall
in export obligation along with applicable interest as prescribed by Customs
Authority. Such facility can also be availed by EPCG authorisation holder to
exit at his option.
(c) In case of domestic sourcing of capital goods through invalidation
letter/ARO, the duties, taxes and cess payable shall be with reference to the
notional Customs duties/taxes/cess saved on the FOR value of capital goods
(including spares, jigs, fixtures, dies and moulds).
(e) Authorisation holder can also provisionally pay duty and interest suo-
moto on the basis of self/own calculation as per the procedure specified in
paragraph 4.50 of HBP.

5.22 Maintenance of Records

Every EPCG authorisation holder shall maintain, for a period of 2 years from date
of redemption, a true and proper account of exports/ supplies made and services
rendered towards fulfillment of export obligation.

5.23 Re-Export / Repair/Replacement of Capital Goods Imported

under EPCG Scheme
(a) Capital Goods imported under EPCG scheme, which are found defective or
unfit for use, may be re-exported to foreign supplier within three years from the
date of clearance by Customs of such goods, with permission of RA/Customs
Authority. Consequently, EO would be re-fixed.

(b) Capital Goods imported and found defective or otherwise unfit for use may be
exported, within two years from the date of clearance by Customs of such goods,
with permission of RA / Customs Authority and Capital Goods in replacement
thereof be imported under EPCG scheme. In such cases, while allowing export, the
Customs shall credit the duty benefit availed which can be debited again at the
time of import of such replaced Capital Goods.

(c) Capital Goods imported under EPCG scheme, may be re-exported for repairs
abroad within three years from the date of clearance by Customs of such goods,
with permission of RA / Customs Authority. The duty component on the
expenditure incurred on the repairs as well as the insurance and the freight, both
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ways shall be taken into account for re-fixation of the EO.

5.24 Penal Action

In case of failure to fulfil export obligation or any other condition of
authorisation, authorisation holder shall be liable for action under FT (D&R) Act,
1992, as amended, Orders and Rules made thereunder, provisions of FTP/HBP,
Customs Act, 1962, as amended from time to time or any other law in force.

5.25 Clubbing of EPCG authorisations

(a) Clubbing of two or more EPCG authorisations issued to the same
authorisation holder would be permitted.

(b) An application for clubbing can be made to RA concerned in ANF 5C. Clubbing
shall only be permitted in case export products endorsed on the authorisations are
same/similar and if authorisations are issued by the same RA.

(c) Total export obligation would be re-fixed taking into account total of duty
saved amount of the clubbed authorisations.

(d) On Clubbing, authorisations for all purpose shall be deemed to be a single

EPCG authorisation. Export obligation period for clubbed authorisations shall be
reckoned from first authorisation issue date.

(e) Average export obligation for clubbed authorisations would be highest of

average export obligations endorsed on individual authorisations so clubbed.

(f) Clubbing would be permitted during valid EOP including extended period, if
any. However, clubbing in case of all authorisations where EO period is over may
be allowed for regularisation purposes provided they have been issued under
same policy period.

(g) In case of clubbing of EPCG authorisations where EO can be fulfilled by export

of alternate product(s)/service(s), the proportion of alternate
product(s)/service(s) for EO fulfillment/ regularization will be restricted to the
lowest of the percentage of alternate product(s)/service(s) allowed in the clubbed
authorisations.

(h) EPCG authorisations issued prior to 01.04.2007 shall be governed by

provisions contained in Chapter 5 of HBP Vol.1 (RE-2006).The EPCG
Authorisations issued between 01.04.2007 and 17.04.2013 shall be governed by
provisions contained in Chapter 5 of HBP Vol.1 (RE-2012, as amended). The EPCG
Authorisations issued from 18.04.2013 till the issue of notification of HBP 2015-
20 shall be governed by provisions contained in Public Notice No.1 dated
18.04.2013. The EPCG Authorisations issued between notification of HBP 2015-
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20 till the notification of HBP 2015-20 (RE-2017) shall be governed by provisions
contained in HBP 2015-20. The EPCG Authorisations issued between notification
of HBP 2015-20 (RE-2017) till the notification of HBP 2023 shall be governed by
provisions contained in HBP 2015-20 (RE-2017).
5.26 Green Technology Products
The Export Products covered under Paragraph 5.10 of FTP which provides for
reduced export obligation of 75% for green technology products are :
(i) Solar Energy Generating Systems and parts/Equipments thereof,
(ii) Wind Energy Generating Systems and parts/equipment thereof,
(iii) LED lights of various kind,
(iv) Vapour Absorption Chillers,
(v) Waste Heat Boiler,
(vi) Waste Heat Recovery Units,
(vii) Unfired Heat Recovery Steam Generators,
(viii) Water Treatment Plants,
(ix) Battery Electric Vehicles (BEV) [other than Hybrid Electric Vehicles
(HEVs) and Plug-in Hybrid Electric Vehicle (PHEV)] of all types,
(x) Vertical Farming equipment,
(xi) Wastewater Treatment and Recycling,
(xii) Rainwater harvesting system and rainwater filters, and
(xiii) Green Hydrogen.

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