Export Promotion Capital Goods (EPCG) Scheme

Chapter 5
Export Promotion Capital Goods
(EPCG) Scheme

45
 Foreign Trade Policy 2023

46
 Export Promotion Capital Goods (EPCG) Scheme

Export Promotion Capital Goods

(EPCG) Scheme
5.00 Objective (ii) Computer systems and software which are a part
of the Capital Goods being imported;
The objective of the EPCG Scheme is to facilitate import of
capital goods for producing quality goods and services and (iii) Spares, moulds, dies, jigs, fixtures, tools &
enhance India’s manufacturing competitiveness. refractories; and
(iv) Catalysts for initial charge plus one subsequent
5.01 EPCG Scheme charge.
(b) Import under EPCG Scheme shall be subject to an
(a) EPCG Scheme allows import of capital goods (except
Export Obligation (EO) equivalent to 6 times of duties,
those specified in negative list in Appendix 5 F) for pre-
taxes and cess saved on capital goods, to be fulfilled in
production, production and post-production at zero
6 years reckoned from date of issue of Authorisation.
customs duty. Capital goods imported under EPCG
Authorisation for physical exports are also exempt from (c) Import/procurement under EPCG scheme shall also
IGST and Compensation Cess, leviable thereon under be subjected to Average Export Obligation (AEO) as
the subsection (7) and subsection (9) respectively, of given in para 5.04(c) of FTP.
section 3 of the Customs Tariff Act, 1975 (51 of 1975), (d) Authorisation shall be valid for import for 24 months
as provided in the notification issued by Department of from the date of issue of Authorisation. Revalidation of
Revenue. Alternatively, the Authorisation holder may EPCG Authorisation shall not be permitted.
also procure Capital Goods from indigenous sources (e) In case Integrated Tax and Compensation Cess are
in accordance with provisions of paragraph 5.07 paid in cash on imports under EPCG, incidence of the
of FTP. Capital goods for the purpose of the EPCG said Integrated Tax and Compensation Cess would not
scheme shall include: be taken for computation of net duty saved provided
(i) Capital Goods as defined in Chapter 11 including Input Tax Credit is not availed.
in CKD/SKD condition thereof;

47
 Foreign Trade Policy 2023

(f) Import of items which are restricted for import shall to the duty saved. BG can be given by CSP or by
be permitted under EPCG Scheme only after approval any one of the users or a combination thereof, at
from Exim Facilitation Committee (EFC) at DGFT the option of the CSP; and
Headquarters. (v) Capital goods shall be installed within a Town of
(g) If the goods proposed to be exported under EPCG Export Excellence or PM MITRA.
Authorisation are restricted for export, the EPCG
Authorisation shall be issued only after approval for 5.03 Actual User Condition
issuance of Export Authorisation from Exim Facilitation
Imported capital goods shall be subject to Actual User
Committee (EFC) at DGFT Headquarters.
condition till export obligation is completed and Export
Obligation Discharge Certificate (EODC) is granted.
5.02 Coverage
(a) EPCG scheme covers manufacturer exporters with 5.04 Export obligation
or without supporting manufacturer(s), merchant
exporters tied to supporting manufacturer(s) and Following conditions shall apply to the fulfillment of Export
service providers. Name of supporting manufacturer(s) obligation:-
shall be endorsed on the EPCG Authorisation before (a) Export obligation shall be fulfilled by the Authorisation
installation of the capital goods in the factory / holder through export of goods which are manufactured
premises of the supporting manufacturer(s). In case by him or his supporting manufacturer / services
of any change in supporting manufacturer(s), the RA rendered by him, for which the EPCG authorisation
shall intimate such change to jurisdictional Customs has been granted.
Authority of existing as well as changed supporting
(b) For export of goods, EPCG Authorisation holder may
manufacturer(s) and the Customs at port of registration
export either directly or through third party(ies).
of Authorisation.
(c) EO under the scheme shall be, over and above, the
(b) Export Promotion Capital Goods (EPCG) Scheme
average level of exports achieved by the applicant
also covers a service provider who is certified as a
in the preceding three licensing years for the same
Common Service Provider (CSP) by the DGFT -
and similar products within the overall EO period
HQs, Department of Commerce in a Town of Export
including extended period, if any; except for categories
Excellence or Prime Minister Mega Integrated Textile
mentioned in paragraph 5.12(a). Such average would
Region and Apparel Parks (PM MITRA) subject to
be the arithmetic mean of export performance in the
provisions of Foreign Trade Policy/Handbook of
preceding three licensing years for same and similar
Procedures with the following conditions:
products. The Average Export Obligation (AEO) shall
(i) Common utility services like providing be fulfilled every financial year, till export obligation
Electricity, Water, Gas, Sanitation, Sewerage, is completed. Exports/supplies made over and above
Telecommunication, Transportation etc. shall not AEO shall only be considered for fulfillment of Export
considered for benefit of CSP; Obligation.
(ii) Export by users of the common service shall be (d) In case of indigenous sourcing of Capital Goods,
counted towards fulfillment of EO of the CSP specific EO shall be 25% less than the EO stipulated
provided the EPCG Authorisation details of the in Para 5.01. There shall be no change in average EO
CSP is mentioned in the respective Shipping bills imposed, if any, as stipulated in Para 5.04(c).
and concerned RA must be informed about the
(e) Exports under Advance Authorisation, DFIA, Duty
details of the users prior to such export;
Drawback, RoSCTL and RoDTEP Schemes would also
(iii) Such export will not count towards fulfillment be eligible for fulfilment of EO under EPCG Scheme.
of specific export obligation in respect of other
(f) Export obligation may be fulfilled both by physical
EPCG Authorisations of the user;
exports as well as deemed exports. Deemed export
(iv) Authorisation holder shall be required to submit supplies shall also be eligible for benefits available
Bank Guarantee (BG) which shall be equivalent under paragraph 7.03 of FTP.

48
 Export Promotion Capital Goods (EPCG) Scheme

(g) Exports made from DTA units shall only be counted for domestic manufacturer shall be eligible for deemed export
calculation and/or fulfillment of AEO and/or EO. benefits under paragraph 7.03 of FTP, and as may be
(h) EO can also be fulfilled by the supply of ITA-I items to provided under GST Rules under the category of deemed
DTA, provided realization is in free foreign exchange. exports. Such domestic sourcing shall also be permitted
from EOUs and these supplies shall be counted for purpose
(i) Royalty payments received by the Authorisation holder
of fulfillment of positive NFE by said EOU as provided in
in freely convertible currency and foreign exchange
Para 6.08 (a) of FTP.
received for R&D services shall also be counted for
discharge under EPCG.
(j) Payment received in rupee terms for such Services as 5.08 Calculation of Export Obligation
notified in Appendix 5D shall also be counted towards In case of direct imports, EO shall be reckoned with
discharge of export obligation under the EPCG reference to actual duty /Taxes/Cess saved amount. In case
scheme. of domestic sourcing, EO shall be reckoned with reference
(k) Export proceeds realized in Indian Rupees as per para to notional Customs duty /Taxes/Cess saved on FOR value
2.52(d)(ii) are also counted towards fulfillment of as indicated in ARO / Invalidation letter.
export obligation.
(l) Only one benefit specified in paras 5.04(d), 5.09, 5.09 Incentive for early EO fulfillment
5.10 and 5.11 shall be admissible.
With a view to accelerating exports, in cases where
(m) Extension of EO period shall be permitted as prescribed Authorisation holder has fulfilled 75% or more of specific
in Handbook of Procedures. export obligation and 100% of Average Export Obligation
till date, if any, in half or less than half the original export
5.05
Provision for companies admitted obligation period specified, remaining export obligation
under the provisions of Insolvency and shall be condoned and the Authorisation redeemed by RA
Bankruptcy Code 2016 concerned.
A company holding EPCG authorizations and having been
admitted under the provisions of Insolvency and Bankruptcy 5.10 Reduced EO for Green Technology
Code 2016 for commencement of insolvency proceedings Products
and in respect of whom the resolution plan has been
For exporters of Green Technology Products, Specific EO
approved under Section 31 of IBC 2016 by Adjudicating
shall be 75% of EO as stipulated in Para 5.01(b). There
Authority may be permitted to relief, concessions and
shall be no change in average EO imposed, if any, as
waivers in accordance with the resolution plan approved/
stipulated in Para 5.04(c). The list of Green Technology
finalised by Adjudicating Authority/Appellate Authorities as
Products is given in Para 5.26 of HBP.
the case may be.

5.11 Reduced EO for North East Region and

5.06 LUT/Bond/BG in case of Agro units
UTs of Jammu & Kashmir and Ladakh.
LUT/Bond or 15% BG, as applicable, may be furnished
For manufacturing units located in Arunachal Pradesh,
for EPCG Authorisation granted to units in Agri-Export
Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim,
Zones provided EPCG Authorisation is taken for export of
Tripura, Jammu & Kashmir and Ladakh, specific EO shall
primary agricultural product(s) notified or their value added
be 25% of the EO, as stipulated in Para 5.01(b). There shall
variants.
be no change in average EO imposed, if any, as stipulated
in Para 5.04(c).
5.07 Indigenous Sourcing of Capital Goods
and benefits to Domestic Supplier 5.12 Exemption from maintenance of
A person holding an EPCG Authorisation may source average export obligation
capital goods from a domestic manufacturer either through
(a) In case of export of goods relating to the following,
Invalidation Letter or through Advance Release Order. Such

49
 Foreign Trade Policy 2023

the EPCG Authorisation holder shall not be required by sectors specified in sub-paragraph (a) above, shall
to maintain average export obligation. not be allowed to be transferred for a period of five
(i) Handicrafts, (ii) Handlooms, (iii) Industries covered years from date of imports even in cases where export
under Khadi and Village Industries Commission obligation has been fulfilled.
(KVIC) (iv) Agriculture (v) Aquaculture (including
Fisheries),Pisciculture, (vi) Animal husbandry and 5.13 Transitional Arrangements:
Dairying, (vii) Floriculture & Horticulture, (viii) Poultry, Authorisations issued during various policy periods viz.,
(ix) Viticulture, (x) Sericulture, (xi) Carpets, (xii) Coir, 2002-07, 2004-09, 2009-14, 2015-20 issued prior to
and (xiii) Jute 05.12.2017 and 2015-20 RE 2017 shall be governed
(b) However, this exemption from maintenance of average by corresponding Foreign Trade Policy provisions and
export obligation shall not be allowed for import of Handbook of Procedures, unless otherwise specifically
fishing trawlers, boats, ships and other similar items. stated.
(c) Goods, excepting tools imported under EPCG scheme

50