EPCG Scheme is a very Beneficial Export Promotion Scheme through which

Capital Goods required for Export Production is allowed Duty Free.

Objective
The objective of the EPCG Scheme is to facilitate import of capital goods for
producing quality goods and services and enhance India’s manufacturing
competitiveness.
As per Para 5.01 of Foreign Trade Policy, EPCG Scheme allows import of capital
goods (except those specified in negative list in Appendix 5 F) for pre-production,
production and post-production at zero customs duty.
Capital goods imported under EPCG Authorisation for physical exports are also exempt
from IGST and Compensation Cess upto 31-03-2019 only
Capital goods for the purpose of the EPCG scheme shall include:
(i) Capital Goods as defined in Chapter 9 including in CKD/SKD condition thereof;
(ii) Computer systems and software which are a part of the Capital Goods being
imported;
(iii) Spares, moulds, dies, jigs, fixtures, tools & refractories; and
(iv) Catalysts for initial charge plus one subsequent charge.
Import of capital goods for Project Imports notified by Central Board of Excise
and Customs is also permitted under

Meaning of Capital Goods:

“Capital Goods” means any plant, machinery, equipment or accessories required for
manufacture or production, either directly or indirectly, of goods or for rendering
services, including those required for replacement, modernisation, technological up-
gradation or expansion. It includes packaging machinery and equipment, refrigeration
equipment, power generating sets, machine tools, equipment and instruments for
testing, research and development, quality and pollution control.
Capital goods may be for use in manufacturing, mining, agriculture, aquaculture,
animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture and
viticulture as well as for use in services sector.

Coverage of EPCG Scheme

> Manufacturer exporters with or without supporting manufacturer(s),
> Merchant exporters tied to supporting manufacturer(s) and service providers.
> Name of supporting manufacturer(s) shall be endorsed on the EPCG Authorisation
before installation of the capital goods in the factory / premises of the supporting
manufacturer (s).
> Export Promotion Capital Goods (EPCG) Scheme also covers a service provider
who is designated / certified as a Common Service Provider (CSP) by the DGFT,
Department of Commerce or State Industrial Infrastructural Corporation in a Town of
Export Excellence subject to provisions and conditions of Foreign Trade Policy 2015-
2020.
Intimation of Blockwise Fulfiment of Export Obligation
As per Para 5.14 of HBP
(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, by secured electronic filing using digital signatures.
(c) Where EO of the first block is not fulfilled in terms of the above proportions, except in
cases where the EO prescribed for first block is extended by the Regional Authority
subject to payment of composition fee of 2% on duty saved amount proportionate to
unfulfilled portion of EO pertaining to the block, the Authorization holder shall, within 3
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.
Conditions for Export Obligation
As per Para 5.04 of FTP :
Following conditions shall apply to the fulfilment of EO:-
(a) EO shall be fulfilled by the authorisation holder through export of goods which
are manufactured by him or his supporting manufacturer / services rendered by
him, for which the EPCG authorisation has been granted.
(b) EO under the scheme shall be, over and above, the average level of exports
achieved by the applicant in the preceding three licensing years for the same and
similar products within the overall EO period including extended period, if any; except
for categories mentioned in paragraph 5.13(a) of HBP. Such average would be the
arithmetic mean of export performance in the preceding three licensing years for same
and similar products.
(c) In case of indigenous sourcing of Capital Goods, specific EO shall be 25%
less than the EO stipulated in Para 5.01.
(d) Shipments under Advance Authorisation, DFIA, Drawback scheme or reward
schemes under Chapter 3 of FTP; would also count for fulfillment of EO under
EPCG Scheme.
(e) Export shall be physical export. However, supplies as specified in paragraph 7.02
(a), (b), (e), (f) & (h) of FTP (Deemed Exports) shall also be counted towards fulfillment
of export obligation, along with usual benefits available under paragraph 7.03 of FTP.
(f) EO can also be fulfilled by the supply of ITA-I items to DTA, provided realization is in
free foreign exchange.
(g) Royalty payments received by the Authorisation holder in freely convertible currency
and foreign exchange received for R&D services shall also be counted for discharge
under EPCG.
(h) Payment received in rupee terms for such Services as notified in Appendix 5D shall
also be counted towards discharge of export obligation under the EPCG scheme.
Validity for Import
Vide Public Notice No. 47/2015-20; Dated the 16th November, 2018, Para 5.01(d) of
FTP was amended to extended Validity period for import from 18 months to 24
months.
Actual User Condition
As per Para 5.03 of FTP, Imported CG shall be subject to Actual User condition till
export obligation is completed and EODC is granted.
Certificate of Installation of Capital Goods
Public Notice No. 31/2015-20, Dated 29th August, 2018; Dated the 29th August,
2018
Para 5.04(a) of HBP:
Authorization holder shall produce, within six months 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 at factory / premises of authorization holder or his
supporting manufacturer(s).
The RA may allow one time extension of the said period for producing the certificate
by a maximum period of 12 months with a composition fee of Rs.5000/-.
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.
Para 5.04(b) of HBP
In the case of import of spares, the installation certificate shall be submitted by the
Authorization holder within a period of three years from the date of import.
Shifting of Capital Goods imported under EPCG Scheme
Public Notice No. 31/2015-20, Dated 29th August, 2018; Dated the 29th August,
2018
Para 5.04(a) of HBP:
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.
Indigenous Sourcing of CG: Benefits  to Domestic Supplier
Para 5.07 of FTP
A person holding an EPCG authorisation may source capital goods from a domestic
manufacturer. Such domestic manufacturer shall be eligible for deemed
export benefits under paragraph 7.03 of FTP and as may be provided under GST
Rules under the category of deemed exports.
Such domestic sourcing shall also be permitted from EOUs and these supplies shall be
counted for purpose of fulfilment of positive NFE by said EOU as provided in Para 6.09
(a) of FTP.
The Domestic Supplier to EPCG Authorization holder has to Collect and Pay GST and
then claim such GST paid as Deemed Export Refund.
Monitoring of Export Obligation
Para 5.15 of HBP
Authorisation holder shall submit to RA concerned by 30th April of every year, report on
fulfilment of export obligation by secured electronic filing using digital signatures/ or hard
copy thereof.