A Complete Guide to the Export Promotion of Capital Goods Scheme for Export-Oriented Businesses
By Jack 06-11-2025 15
The Export Promotion of Capital Goods Scheme is an important initiative by the Indian government designed to help businesses engaged in exports upgrade their production capabilities. This scheme enables exporters to import capital goods such as machinery, equipment, and tools at zero or reduced customs duty. The key goal is to enhance the competitiveness of Indian goods in the global market by improving production efficiency and reducing manufacturing costs.
This scheme falls under the Foreign Trade Policy framework and is managed by the Directorate General of Foreign Trade (DGFT). It benefits a wide range of industries, including manufacturing, engineering, pharmaceuticals, textiles, and more. By providing access to advanced technology at lower costs, exporters can meet international quality standards and scale their operations effectively.
Key Objectives of the EPCG Scheme
The primary purpose of the Export Promotion of Capital Goods Scheme is to facilitate the import of capital goods required for producing high-quality goods and services for export. The major objectives include:
- Encouraging modernization of Indian industries by promoting the use of advanced technologies.
- Reducing production costs and improving export competitiveness.
- Helping exporters meet global standards in manufacturing and quality.
- Supporting the government’s vision of increasing India’s share in global exports.
These objectives directly contribute to the broader mission of making India a manufacturing hub under initiatives like Make in India and Aatmanirbhar Bharat.
Eligibility Criteria for the EPCG Scheme
Exporters who wish to avail benefits under the Export Promotion of Capital Goods Scheme must meet specific eligibility requirements. The scheme is open to:
- Manufacturer exporters producing goods for export.
- Merchant exporters tied with a supporting manufacturer.
- Service providers involved in export of services.
Applicants must also commit to fulfilling an export obligation equivalent to six times the duty saved amount, within a set period (usually six years). This obligation ensures that the benefits gained from duty savings are balanced by foreign exchange earnings through exports.
Benefits of the Export Promotion of Capital Goods Scheme
Businesses that qualify for this scheme can enjoy several significant advantages, such as:
- Reduced or Zero Customs Duty: Importers can bring in capital goods at concessional duty rates, leading to substantial cost savings.
- Upgradation of Technology: The scheme helps Indian exporters access the latest global technologies, improving product quality and operational efficiency.
- Improved Profit Margins: Lower import costs translate to higher profitability and better pricing in international markets.
- Flexibility in Sourcing: Both new and second-hand capital goods (not older than 10 years) can be imported under certain conditions.
- Support for Services Sector: The scheme isn’t limited to manufacturing; service exporters, including healthcare, hospitality, and software industries, can also benefit.
These benefits make the scheme a strategic tool for businesses seeking to boost export performance while minimizing capital investment costs.
Process to Apply for the EPCG License
The application process for the Export Promotion of Capital Goods Scheme is streamlined through the DGFT’s online portal. The key steps include:
- Filing the Application: Exporters must submit their application online using the ANF 5A form.
- Supporting Documents: Necessary documents like Importer Exporter Code (IEC), project report, and proforma invoice must be uploaded.
- DGFT Review: The DGFT reviews the application and, if satisfied, issues an EPCG authorization specifying the eligible duty savings and export obligation.
- Import of Capital Goods: Once authorized, the importer can proceed with customs clearance under the reduced duty rate.
- Fulfillment of Export Obligation: The exporter must achieve the required export targets within the validity period to maintain compliance.
Export Obligation and Compliance Requirements
Under this scheme, the export obligation is a crucial part of compliance. Exporters are required to export goods or services worth six times the duty saved amount within six years from the date of issue of the EPCG license. This obligation ensures that the duty concessions granted by the government are compensated by foreign exchange inflow through exports.
Failure to meet the export obligation may result in penalties, payment of saved duties with interest, or cancellation of the license. Hence, maintaining detailed records and timely submission of export documents is essential.
Role of Advance License EODC in Export Obligation
The Advance License EODC (Export Obligation Discharge Certificate) is a critical document for exporters under both the Advance Authorization and EPCG schemes. It serves as official proof that the exporter has fulfilled their export obligation within the stipulated time.
Once the exporter meets the export target, they can apply for the EODC with relevant documentation, such as shipping bills, bank realization certificates, and export invoices. The DGFT reviews these records before issuing the certificate. Having a valid Advance License EODC ensures that the exporter’s records remain compliant and free from any legal or financial liabilities.
This connection between the EPCG and Advance License EODC emphasizes the importance of proper documentation and compliance management in international trade operations.
Documents Required for EPCG Authorization
When applying for the Export Promotion of Capital Goods Scheme, exporters must prepare and submit several essential documents, including:
- Copy of Importer Exporter Code (IEC).
- Detailed project report outlining export potential.
- Chartered Engineer Certificate for machinery valuation.
- Self-certified copies of PAN and GST registration.
- Proforma invoice from the machinery supplier.
- Previous export performance records, if applicable.
Accurate documentation is key to ensuring faster approval and avoiding delays during verification.
Importance of EPCG Scheme for Indian Exporters
The Export Promotion of Capital Goods Scheme has become a cornerstone policy for export-oriented businesses. It plays a vital role in building a strong industrial base, enhancing productivity, and enabling Indian firms to compete globally. By lowering the cost of capital goods, the scheme encourages exporters to adopt new technologies, diversify products, and expand into new markets.
With proper use of this scheme and compliance with the associated regulations, exporters can significantly boost their international presence while ensuring sustainable business growth.
Conclusion
The Export Promotion of Capital Goods Scheme is a valuable opportunity for Indian exporters aiming to enhance their competitiveness and modernize operations. By strategically using this scheme along with proper documentation, including the Advance License EODC, businesses can reduce costs, improve production efficiency, and achieve greater success in global markets.
Whether you’re a manufacturer, service provider, or merchant exporter, this scheme can be a transformative tool to elevate your business to the next level of export excellence.
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