Foreign Trade Policy 2023 · Chapter 5
EPCG Scheme: zero-duty machinery against an export obligation
The Export Promotion Capital Goods scheme lets exporters import machinery at zero customs duty — and, for physical exports, without IGST or compensation cess. In return, you export six times the duty saved within six years, with at least half in the first four. Machinery bought in India qualifies too, with a 25% lower obligation.
20+ years in Gujarat incentives300+ projects99% filing success
Zero customs duty on capital goods against exports worth six times the duty saved: at least half in the first four years, the balance by the end of year six.
- 0%customs duty and IGST on capital goods
- 6×duty saved, as exports
- 6 yrsto meet the obligation
On this page
What is the EPCG scheme?
EPCG — Export Promotion Capital Goods — lets exporters import capital goods for pre-production, production and post-production at zero customs duty under Chapter 5 of the Foreign Trade Policy 2023. Capital goods for physical exports are also exempt from IGST and compensation cess. The authorisation holder must export six times the duties, taxes and cess saved within six years.
- Legal basis
- Foreign Trade Policy 2023, Chapter 5, and Handbook of Procedures 2023, Chapter 5; administered by the Directorate General of Foreign Trade (DGFT) through its regional authorities.
- Who can apply
- Manufacturer exporters (with or without supporting manufacturers), merchant exporters tied to supporting manufacturers, and service providers.
- What you import
- Capital goods, including spares, moulds, dies, jigs, fixtures, tools, refractories, catalysts for the initial and one subsequent charge, and computer systems and software that form part of them — except the negative list in Appendix 5F.
- Export obligation
- 6× the duties, taxes and cess saved, within 6 years of the authorisation — at least 50% in years 1 to 4 — over and above your average exports.
- Import window
- Imports must be completed within 24 months of the date of issue.
- Actual user
- The machinery cannot be sold or transferred until the export obligation is met.
Gujarat exporters who use it most. Units buying machinery with a steady export order book — handled through the DGFT regional offices in Ahmedabad, Rajkot, Surat and Vadodara.
- Morbi — ceramic tiles and sanitaryware
- Surat — textiles and processing
- Rajkot, Jamnagar — engineering, brass parts
- Ankleshwar, Vapi — chemicals and dyes
- Ahmedabad, Vadodara — pharma, engineering
The export obligation: 6× duty saved in 6 years
The specific export obligation is six times the duties, taxes and cess saved on the capital goods, to be met within six years of the authorisation — at least 50% in the first four years and the balance in years five and six. It sits on top of your average exports of the three preceding years.
What counts toward the obligation
- Exports of goods — or services — that the capital goods can make, exported directly or through third parties.
- Physical exports, realised in freely convertible currency, and deemed exports.
- Exports made under Advance Authorisation, DFIA, duty drawback, RoSCTL and RoDTEP — they count here too.
The average export obligation
The specific obligation must be over and above the average exports you achieved in the three preceding licensing years for the same and similar products, maintained through the obligation period. Some sectors are exempt from the average; we check yours before you apply.
Duty saved includes IGST and compensation cess as well as basic customs duty — so the obligation is six times the whole amount, not just the basic duty.
When the export obligation is lower
Three cases cut the specific obligation: buying the machinery in India (25% less, so 4.5×), exporting green technology products (75%, so 4.5×), and units in the North East, Jammu & Kashmir or Ladakh (25%, so 1.5×).
Swipe sideways to see every column
| Case | Obligation | Multiple of duty saved |
|---|---|---|
| Normal | 100% | 6× |
| Capital goods bought from Indian manufacturersvia invalidation letter or advance release order; the supplier gets deemed-export benefits | 25% less | 4.5× |
| Exporters of green technology products | 75% | 4.5× |
| Units in the North East, J&K and Ladakh | 25% | 1.5× |
Reductions do not stack — the single most favourable one applies. Confirm your case with the regional authority before relying on it.
EPCG calculator: duty saved and export obligation
Enter the value of the machinery you plan to import. The calculator shows the customs duty and IGST you save, and the exports you must make against it: six times the duty saved, within six years.
Duty rates
Leave a rate blank to use the default shown in grey. The 10% social welfare surcharge on basic customs duty is applied automatically.
Duty saved under EPCG
—
Enter the value of the capital goods to see the duty saved and the exports you must make against it.
- Customs duty saved (BCD + surcharge)—
- IGST saved—
- Exports required: 6× the duty saved, within 6 years—
- Of which by the end of year 4 (50%)—
Indicative only. The duty saved is fixed on the authorisation from the actual tariff rates and values. The obligation is over and above your average exports of the last three years; machinery bought in India carries a 25% lower obligation.
Get this estimate checkedEPCG in numbers: two examples
Round numbers at 7.5% basic customs duty, the 10% surcharge and 18% IGST — an effective 27.7% on the machinery value.
Textile processor, Surat
Imports ₹10 crore of processing machinery and exports fabric.
- Duty and IGST saved₹2.77 crore
- Export obligation (6×)₹16.64 crore
- Block 1 — by the end of year 4₹8.32 crore
- Duty waived at import₹2.77 crore
At ₹4 crore a year of exports above its three-year average, the unit meets the obligation in a little over four years.
Tile maker, Morbi
Buys a ₹6 crore kiln from an Indian manufacturer against an EPCG authorisation.
- Duty saved (notional customs duty)₹1.66 crore
- Obligation multiple4.5× — 25% less
- Export obligation₹7.49 crore
- Obligation over 6 years₹7.49 crore
The supplier gets deemed-export benefits; the buyer carries a lighter obligation than for an imported kiln.
How to get an EPCG licence, step by step
Apply online to DGFT, import within 24 months, file the installation certificate within six months of completing imports, export block by block, and redeem the authorisation with an Export Obligation Discharge Certificate (EODC).
Get the basics in place
An IEC linked to your DGFT profile, a registered digital signature, GST details for the branches that will use the authorisation, and a valid RCMC from your export promotion council.
Before applyingApply online on the DGFT portal
File the EPCG application (ANF-5A) with the capital goods, tariff classification, duty saved, sector and any reduced-obligation claim, and pay the fee.
Authorisation issued
The regional authority issues the authorisation with the duty saved and the export obligation; details are sent to Customs electronically.
Import within 24 monthsRegister at the port and execute the bond
Register the authorisation with Customs and execute a bond — with a bank guarantee or letter of undertaking, depending on your export track record — then import duty-free.
File the installation certificate
Confirm that the machinery is installed at the declared premises within six months of completing imports; a one-time 12-month extension is available on a ₹5,000 composition fee.
Within 6 monthsExport and redeem
Track exports block by block, then apply for redemption with shipping bills and realisation proof; the regional authority ordinarily issues the Export Obligation Discharge Certificate within 30 days of complete documents.
EODC
Compliance through the six years
- Block-wise tracking
- At least 50% of the obligation by the end of year 4; the balance by the end of year 6.
- Average exports
- Keep total exports above your three-year average, every year of the obligation period.
- Extensions
- The obligation period can be extended twice, by a year each, on a composition fee of 2% of the duty saved in proportion to the unfulfilled obligation.
- Clubbing
- Two or more EPCG authorisations of the same holder can be clubbed for redemption.
- Actual user condition
- The capital goods stay with the authorisation holder until the obligation is met.
- Shortfall
- Pay the duties, taxes and cess saved in proportion to the unmet obligation, with interest — which is why we test the order book before you commit.
EPCG vs MOOWR: which one fits?
EPCG waives duty on capital goods but binds you to exports. MOOWR only defers duty, but asks for no exports at all. If your export book comfortably covers six times the duty, EPCG usually wins; if exports are uncertain, MOOWR is safer.
EPCG
Duty on capital goods waived outright.
- Export obligation: 6× duty saved in 6 years
- Capital goods only
- Administered by DGFT
- Best for established exporters
MOOWR
Duty deferred — nil on exported content.
- No export obligation
- Capital goods and raw materials
- Administered by Customs
- Best for regular importers
Where EPCG holders get caught
- Counting exports you already make.Only exports above your three-year average count toward the specific obligation.
- Missing block 1.Half the obligation is due by the end of year four, not year six.
- Forgetting IGST in the maths.The obligation is six times all duties, taxes and cess saved.
- Late installation certificate.Due within six months of completing imports.
- Moving the machinery.The actual user condition applies until redemption.
- Leaving redemption for later.Unredeemed authorisations keep the bond alive and block new ones.
EPCG across Gujarat’s exporting belts
EPCG is a central scheme administered by the DGFT through its regional authorities, so the taluka category plays no part — the authorisation, the 6-times export obligation and the six-year clock are the same for a unit in Sanand as for one in Dahej. What differs by belt is the export product, the port the machinery lands at and the shipping bills that will redeem the obligation. These are the exporting belts where we handle EPCG files most often.
South Gujarat
Bharuch, Ankleshwar, Jhagadia, Panoli and Dahej; Surat, Hazira and Sachin; Vapi and Sarigam. Chemical, pharma and textile exporters whose machinery lands at Hazira or Dahej and whose exports move through the same ports, which keeps the nexus between the machine and the export product easy to evidence.
Ahmedabad belt
Sanand, Changodar, Bavla, Vatva and Naroda; Kadi, Mehsana and Becharaji. Auto-component and engineering exporters, typically supplying overseas OEMs on multi-year contracts that make the block-one obligation (half of the total by the end of year four) a realistic target.
Vadodara
Vadodara, Halol, Savli, Waghodia and Nandesari. Capital-goods makers exporting a share of output and selling the rest in India — the profile where EPCG and MOOWR are compared line by line before the first import.
Kutch
Gandhidham, Anjar, Mundra and Bhuj, beside Mundra and Kandla. Steel, pipe and timber exporters with large machinery imports: the duty saved is high, so the obligation is too, and the average export obligation from the previous three years has to be carried alongside it.
Also served. Saurashtra — Rajkot, Morbi and Jamnagar — where engineering and ceramic exporters ship through Pipavav and Kandla.
- Sanand
- Changodar
- Becharaji
- Halol
- Bharuch
- Dahej
- Jhagadia
- Hazira
- Gandhidham
- Mundra
- Anjar
Your VGIP 2026 package is unaffected by the customs route you choose: capital, interest and power tariff subsidy, EPF reimbursement and the electricity duty exemption are claimed on the same project as usual.
EPCG scheme: questions we get asked
What is the EPCG scheme?
Export Promotion Capital Goods is a DGFT scheme under Chapter 5 of the Foreign Trade Policy 2023. It allows import of capital goods for pre-production, production and post-production at zero customs duty; capital goods for physical exports are also exempt from IGST and compensation cess. In return the holder must export six times the duties, taxes and cess saved within six years.
What is the full form of EPCG, and is an EPCG licence the same as an authorisation?
EPCG stands for Export Promotion Capital Goods. An EPCG licence, also spelt EPCG license, is the common name for the EPCG authorisation that the Directorate General of Foreign Trade (DGFT) issues under Chapter 5 of the Foreign Trade Policy 2023; both terms mean the same document.
What is the export obligation under EPCG?
Six times the duties, taxes and cess saved on the capital goods, to be fulfilled within six years of the authorisation, with at least 50% in years one to four. It is over and above the average exports of the three preceding licensing years for the same and similar products.
How is duty saved calculated under EPCG?
It is the total of basic customs duty, the social welfare surcharge, IGST and compensation cess that the capital goods would otherwise attract. At 7.5% basic duty and 18% IGST that is about 27.7% of the value, so ₹10 crore of machinery saves about ₹2.77 crore and carries an obligation of about ₹16.64 crore.
Is IGST exempt under EPCG?
Yes, for capital goods imported under an EPCG authorisation for physical exports: paragraph 5.01 of the Foreign Trade Policy 2023 exempts them from IGST and compensation cess as well as customs duty.
Can machinery bought in India be taken under EPCG?
Yes. Capital goods can be sourced from Indian manufacturers against an invalidation letter or advance release order. The specific export obligation is then 25% lower (4.5 times the duty saved), and the supplier gets deemed-export benefits.
How long is an EPCG authorisation valid?
Imports must be completed within 24 months of the date of issue. The export obligation runs for six years from issue, and the installation certificate is due within six months of completing imports.
What happens if the EPCG export obligation is not met?
The period can be extended twice by a year each on a composition fee of 2% of the proportionate duty saved on the unfulfilled obligation. If it still is not met, the holder pays the duties, taxes and cess saved in proportion to the shortfall, with interest.
Which exports count toward the EPCG obligation?
Exports of goods or services that the capital goods can produce, made directly or through third parties, including deemed exports; physical exports must be realised in freely convertible currency. Exports under Advance Authorisation, DFIA, drawback, RoSCTL and RoDTEP also count.
Who can apply for an EPCG licence?
Manufacturer exporters with or without supporting manufacturers, merchant exporters tied to supporting manufacturers, and service providers. The applicant needs an IEC linked to its DGFT profile, a registered digital signature, GST details and a valid RCMC.
When is the EPCG export obligation reduced?
For capital goods bought from Indian manufacturers (25% less), for exporters of green technology products (75% of the normal obligation) and for units in the North East, Jammu and Kashmir and Ladakh (25% of the normal obligation).
EPCG or MOOWR — which is better?
EPCG waives duty on capital goods but requires exports of six times the duty saved; MOOWR defers duty on capital goods and inputs with no export obligation. Exporters with a steady order book usually gain more from EPCG; units with uncertain exports are safer under MOOWR.
Legal basis and official sources
This page follows Chapter 5 of the Foreign Trade Policy 2023 and of the Handbook of Procedures 2023, and DGFT’s EPCG guidance.
Foreign Trade Policy 2023
Scheme, eligibility, the 6× obligation, average exports, domestic sourcing and reduced obligations. The current chapter text as published by DGFT.
Open Chapter 5 (PDF)Handbook of Procedures 2023
Application, installation certificate, block-wise fulfilment, extensions, clubbing and redemption. The current chapter text as published by DGFT.
Open Chapter 5 (PDF)DGFT — EPCG scheme
Apply for EPCG authorisations, amendments, invalidation and EODC on the DGFT portal.
Open DGFTNotes. Duty rates in the examples are illustrative; the duty saved is fixed on your authorisation from actual tariff rates. Sector-specific relaxations and exemptions from the average export obligation are notified by DGFT from time to time. DGFT re-issues the chapter PDFs when the policy is amended; the current versions are always listed on its Foreign Trade Policy and Handbook of Procedures pages.
We file EPCG authorisations, stress-test the order book against the obligation before you commit, and track every block until the EODC is in hand.
- EPCG vs MOOWR vs Advance Authorisation on your numbers
- ANF-5A filing, port registration and bond or LUT
- Installation certificate and block-wise tracking
- Extensions, clubbing and EODC redemption
Buying machinery for export production?
Send us the machinery list and your export numbers. We test the obligation against your order book, compare it with MOOWR, and file the route that saves the most.