India has constantly placed a strong emphasis on boosting exports in order to increase its market share internationally. The Export Promotion Capital Goods Scheme is a dependable program for expanding a business abroad. EPCG provides concessions, subsidies, and other benefits to help manufacturers, merchant exporters, and service providers increase their competitiveness and customer base.
We guide you through every step of EPCG registration as an exporter, from its primary benefits and qualifying requirements to the comprehensive process for getting you started.
Introduction to the EPCG Scheme
One of the significant programs under the foreign trade policy of India is the Export Promotion Capital Goods Scheme, with the objective of promoting exporters and enhancing the country's presence in the world. The scheme enables businesses to import necessary capital goods like machinery, tools, and equipment at the lowered or exempted customs duties after they reach the particular threshold limit for exports. By encouraging investment in advanced production technology, this program assists Indian exporters to increase the quality of their products and expand their market coverage across the world.
Benefits of EPCG Registration
Registering under the EPCG Scheme offers several strategic advantages for exporters:
- Zero or reduced customs duty on the import of capital goods required for production.
- Enhances the competitiveness of Indian products for global markets as manufacturers could use modern equipment.
- Manufacturer and exporter units can increase their production without considerable capital expenditure on machinery.
- Encourages technological upgrades, improving overall efficiency and product quality.
- Both flexibility in satisfaction of export obligation by way of direct exports, supplies to SEZs, or deemed exports.
These benefits make EPCG registration a valuable tool in the government’s broader export promotion strategy.
Eligibility Criteria for the EPCG Scheme
Not every business can avail of the scheme. The following categories are eligible to apply:
- Manufacturer exporters, either directly or through supporting manufacturers.
- Merchant exporters, tied up with supporting manufacturer exporters.
- Service providers exporting services such as tourism, logistics, education, healthcare, and more.
Eligibility also extends to exporters under certain export-oriented units (EOUs), SEZs, and those engaged in export promotion through technology-intensive sectors.
Capital Goods Covered under the Scheme
The capital goods scheme under EPCG allows the import of equipment and machinery required for manufacturing:
- Production machinery
- Packaging equipment
- Testing and quality control instruments
- Computer systems and software
- Spares (up to 10% of the value of capital goods)
Both new and, under specific conditions, second-hand capital goods are covered. This extensive list enables manufacturer exporters to modernize production facilities across various industries.
The Concept of Export Obligation
In exchange for customs duty exemption, exporters must commit to an export obligation equivalent to six times the duty saved on imported capital goods. This obligation must be fulfilled within six years from the date of issue of the EPCG license.
There are two parts to this:
- Average Export Obligation (AEO) – Maintain the average level of exports achieved in the past.
- Specific Export Obligation (SEO) – Linked to the value of duty saved on imported goods.
Failing to meet this obligation can lead to penalties and the recovery of duty with interest.
Step-by-Step EPCG Registration Process
How exporters can apply for the EPCG license through the DGFT portal:
- Register on DGFT Portal using a valid IEC (Importer Exporter Code).
- Navigate to the EPCG section and choose ‘Apply for EPCG Authorization’.
- Fill out the application form with company and export details.
- Attach required documents (see below).
- Pay the application fee online.
- Submit and track the application through the portal.
- On approval, download the digital EPCG license.
Essential Documents for EPCG Application
The following documents are required to file the EPCG Application:
- Importer Exporter Code (IEC)
- RCMC (Registration-Cum-Membership Certificate)
- Digital Signature Certificate (DSC)
- Chartered Engineer Certificate detailing the necessity of capital goods
- Proforma invoice of the machinery
- Manufacturing and export performance statements
- Project report or business plan (for new units)
- Agreement between merchant and exporter manufacturer, if applicable
These documents verify the authenticity of your business and its export promotion capabilities.
Validity of EPCG License
The EPCG license remains valid for 18 months from the date of issue for importing capital goods. However, the export obligation period extends to six years, giving exporters ample time to fulfill their commitments.
Post-License Formalities
After receiving the EPCG license, the exporter must:
- Import and install the capital goods at the registered manufacturing unit.
- Obtain and submit an Installation Certificate from an independent Chartered Engineer within six months of installation.
- Maintain annual performance records to monitor average export obligation.
- Report any change in address, machinery, or manufacturing unit to DGFT.
Redemption and Closure of the EPCG License
Once the export obligation is met:
- Submit an application for redemption to the DGFT with relevant export documentation and shipping bills.
- Include a Chartered Accountant’s certificate confirming duty saved and obligation fulfilled.
- On verification, DGFT issues a redemption letter, formally closing the EPCG license.
Redemption is a crucial step in concluding the capital goods scheme process, clearing you of any further liability.
Conclusion
EPCG Scheme is a valuable stimulus for Indian exporters looking to enhance production facilities and increase international outreach. With proper planning, documentation, and timely compliance, merchant exporters as well as manufacturer exporters can use the scheme to their advantage.
Whether you're an emerging manufacturer and exporter or a seasoned exporter manufacturer, EPCG registration could be your gateway to better efficiency, reduced costs, and successful participation in global trade.