EPCG License Under DGFT: Rules and Procedures Explained

For Indian manufacturers, exporters, and service providers planning to expand their production capacity, importing advanced capital goods can involve significant upfront costs. The EPCG Scheme provides an important framework under India’s Foreign Trade Policy for obtaining eligible capital goods at zero customs duty, subject to specified export obligations and compliance requirements.

The scheme is administered by the Directorate General of Foreign Trade (DGFT), and businesses need to understand the authorization process, export obligation, installation requirements, reporting requirements, and eventual redemption before using the benefit. Recent DGFT updates have also changed certain compliance procedures, making it important for businesses to follow the latest applicable rules rather than relying on older practices.

What Is an EPCG License?

An EPCG License is an authorization issued under the Export Promotion Capital Goods Scheme that allows eligible businesses to import capital goods at zero customs duty, subject to the conditions prescribed under the Foreign Trade Policy and Handbook of Procedures.

The scheme covers manufacturer exporters, merchant exporters linked with supporting manufacturers, and service providers. Certain Common Service Providers certified by DGFT Headquarters can also fall within the EPCG framework subject to specific conditions.

Capital goods imported under the scheme are subject to the Actual User condition until the applicable export obligation has been completed and the Export Obligation Discharge Certificate (EODC) is granted.

For Indian businesses, this makes EPCG particularly relevant when modern machinery, production equipment, or other eligible capital goods are required to improve manufacturing capacity or support export-oriented operations.

Key Rules Under the EPCG Scheme

The central feature of the EPCG Scheme is the export obligation attached to the duty benefit.

Under the current Foreign Trade Policy framework, the specific export obligation is generally equivalent to six times the duties, taxes and cess saved on the capital goods, to be fulfilled over the applicable export obligation period. The obligation is in addition to the applicable average export obligation, wherever such average obligation applies.

The scheme also provides that exports can be made directly or through third parties. Eligible physical exports, deemed exports and certain exports made under other specified export promotion schemes can contribute towards fulfilment, subject to the applicable provisions.

Another important consideration is the Average Export Obligation (AEO). For eligible applicants, the average is generally based on export performance for the preceding three licensing years for the same or similar products. DGFT's Appendix 5E provides the methodology for calculating this obligation, including special treatment where a company has existed for fewer than three preceding financial years.

Who Can Apply for EPCG Authorization?

The EPCG Scheme is relevant to several categories of exporters and service providers, including:

• Manufacturer exporters
• Merchant exporters tied to supporting manufacturers
• Eligible service providers
• Certain DGFT-certified Common Service Providers

The supporting manufacturer must be appropriately endorsed on the authorization before installation of capital goods at the supporting manufacturer's premises. Any subsequent change in supporting manufacturer arrangements also requires compliance with the applicable DGFT and Customs procedures.

Businesses should therefore establish their eligibility and export plans before purchasing or importing capital goods under EPCG.

How to Apply for an EPCG License

The application process is conducted through the DGFT online system. The current DGFT EPCG exporter manual identifies ANF-5A as the application form for EPCG authorization. Applicants need an active IEC and must use the DGFT Customer Portal with the required electronic authentication facilities.

A practical application process generally involves the following stages:

1. Assess eligibility

The applicant should first determine whether its business activity, proposed capital goods and export plans satisfy the EPCG provisions.

2. Identify eligible capital goods

The machinery or equipment proposed for import or indigenous procurement should be examined against the applicable EPCG requirements. Correct classification and valuation are particularly important because the duty saved amount directly affects the export obligation.

3. Prepare the EPCG application

The business submits the required information through the DGFT portal using ANF-5A, along with applicable supporting documentation and declarations.

4. Obtain authorization

After examination of the application and compliance with the applicable requirements, DGFT issues the EPCG authorization where approved.

5. Import or procure capital goods

The authorization can then be used for eligible importation or permitted indigenous sourcing, subject to the conditions attached to the authorization.

6. Install the capital goods

The machinery must be installed at the approved premises in accordance with the applicable requirements, and the required installation documentation must be submitted through the prescribed process.

7. Fulfil export obligation

The authorization holder must maintain proper export documentation and ensure that the required specific and average export obligations are fulfilled within the prescribed period.

8. Apply for redemption

Once the applicable export obligation and other conditions have been completed, the exporter can apply for redemption through the prescribed DGFT process.

The current DGFT system includes functionalities for EPCG application, amendment, installation certificates, block extensions, closure, and other related processes.

Role of EPCG Consultants in Compliance

Managing an EPCG authorization does not end when the license is issued. Businesses have to monitor imports, installation, export performance, block-wise obligations, supporting documentation and final redemption.

This is where EPCG Consultants can assist businesses with procedural and documentation-related requirements. Professional assistance may cover eligibility assessment, application preparation, export obligation calculations, documentation review, DGFT correspondence, installation certificate requirements and EODC-related documentation.

The value of professional support is particularly relevant where businesses have multiple authorizations, supporting manufacturers, indigenous procurement, amendments or complex export transactions.

However, the exporter remains responsible for ensuring that the information submitted to DGFT and the actual transactions comply with the applicable rules.

EPCG Certificate and Export Obligation Discharge

The term EPCG Certificate is commonly used in business discussions for documentation associated with EPCG compliance. In the formal redemption process, exporters apply for redemption of the EPCG authorization and issuance of the applicable Export Obligation Discharge Certificate.

The current ANF-5B form requires details such as the EPCG authorization, duty saved amount, installation certificate, export obligation period and physical or deemed exports/services used to meet the obligation.

Maintaining accurate records from the beginning can therefore make the eventual redemption process significantly more manageable.

Recent EPCG Compliance Update

A significant compliance change came through DGFT Public Notice No. 24/2024-25 dated 20 September 2024. The earlier requirement for annual reporting of export obligation fulfilment was replaced with reporting after expiry of the first four-year block and subsequently until expiry of the valid export obligation period. The report is to be submitted online and supported by certification from a Chartered Accountant, Cost Accountant or Company Secretary, as applicable.

DGFT also issued Public Notice No. 51/2025-26 on 6 March 2026, providing an automatic extension up to 31 August 2026 for specified EPCG authorizations whose relevant export obligation periods were expiring between 1 March and 31 May 2026. This was a specific temporary measure and should not be treated as a general extension applicable to every EPCG authorization.

Therefore, businesses should always verify the current status and validity of their individual authorization before assuming that an extension or relaxation applies.

Common Compliance Mistakes to Avoid

Businesses using an EPCG authorization should pay particular attention to:

• Incorrect calculation of duty saved value
• Selecting inappropriate capital goods
• Delays in installation documentation
• Failure to monitor block-wise export obligations
• Incorrect treatment of average export obligation
• Incomplete shipping bill or export records
• Failure to maintain supporting documents
• Delayed redemption application
• Assuming temporary DGFT relaxations apply automatically to all authorizations

A structured compliance tracker can help exporters monitor authorization validity, imports, installation, export performance and pending DGFT requirements.

FAQs on EPCG License Under DGFT

1. What is an EPCG License?

An EPCG License is a DGFT authorization that enables eligible exporters and service providers to obtain eligible capital goods at zero customs duty, subject to prescribed export obligations and other conditions.

2. What is the EPCG Scheme used for?

The EPCG Scheme is primarily intended to facilitate the import or permitted indigenous procurement of capital goods for improving production capacity and export competitiveness.

3. What is the export obligation under EPCG?

Under the current FTP framework, the specific export obligation is generally six times the duties, taxes and cess saved on eligible capital goods, subject to the applicable provisions and additional average export obligation requirements where applicable.

4. What is an EPCG Certificate?

Businesses often use the term EPCG Certificate when referring to EPCG-related authorization or discharge documentation. For final compliance, the exporter applies for redemption and the applicable Export Obligation Discharge Certificate through DGFT.

5. Can exports through third parties count toward EPCG obligation?

Yes. The Foreign Trade Policy permits EPCG holders to fulfil export obligations through direct exports or through third parties, subject to the applicable conditions and documentation.

6. Why should businesses work with EPCG Consultants?

EPCG Consultants can help businesses understand eligibility, prepare applications, organize documentation, monitor export obligations and manage procedural requirements associated with EPCG authorization and redemption.

Conclusion

The EPCG framework can support Indian exporters seeking to modernize machinery and strengthen export-oriented production, but the duty benefit comes with defined compliance responsibilities. Understanding the export obligation, average export obligation, installation requirements, reporting rules and redemption procedure is essential before applying.

For businesses planning to use the EPCG Scheme, professional guidance from Exim Advisory can help bring greater structure to the authorization and compliance process while keeping documentation aligned with applicable DGFT requirements.