EPCG: importing capital goods at zero duty against an export obligation

This guide is for manufacturers and service providers planning to buy machinery, tools or equipment for production that will be exported. It explains how the Export Promotion Capital Goods (EPCG) scheme lets you import capital goods at zero duty, how the export obligation is calculated and tracked, and how to close the authorisation.

What EPCG gives you

Under Chapter 5 of the Foreign Trade Policy (FTP) 2023, an EPCG authorisation lets you import capital goods for pre-production, production and post-production at zero customs duty. The exemption covers basic customs duty as well as IGST and compensation cess. Capital goods here include machinery in CKD or SKD form, computer systems and software, spares, moulds, dies, jigs, fixtures, tools and refractories, and catalysts for the initial charge plus one subsequent charge. You can also source capital goods domestically under the scheme.

The authorisation is valid for import for 24 months from the date of issue, and revalidation is not allowed.

The export obligation

In return for the duty saved, you take on two obligations.

Specific export obligation

You must export goods (or services) worth six times the duties, taxes and cess saved on the capital goods, within six years from the date the authorisation is issued. Exports count only once the proceeds are realised in freely convertible currency (or as otherwise permitted), so the obligation is effectively measured in realised export value.

For example, if the duty saved on a machine is ₹20 lakh, your specific obligation is ₹1.2 crore of exports within six years.

Block-wise fulfilment

The six years are divided into blocks. At least 50% of the specific obligation must be met in the first block of years one to four, and the balance in years five and six. If you miss the first block target, you need an extension of the block (on payment of a composition fee) or you must pay duty proportionate to the shortfall. Check the current block rules and fees in Chapter 5 of the Handbook of Procedures.

Average export obligation

The specific obligation is over and above your average export obligation: the average level of exports of the same and similar products you achieved in the three preceding licensing years. You must maintain this average every year. Several sectors are exempt from the average obligation, including handicrafts, handlooms, agriculture, aquaculture, fisheries, animal husbandry, dairying, floriculture, horticulture, poultry, sericulture, carpets, coir and jute.

Reduced obligations

Situation	Specific export obligation
Normal case	6 times duty saved in 6 years
Capital goods sourced from indigenous manufacturers	25% less than the normal obligation
Green technology products (exporters of products such as battery electric vehicles, vertical farming equipment, wastewater treatment and recycling, rainwater harvesting and green hydrogen)	75% of the normal obligation
Units in the North East, Jammu and Kashmir and Ladakh	25% of the normal obligation

Check the full list of green technology products in the FTP before you apply, and confirm with your DGFT regional authority that your product qualifies.

Post-export EPCG

If you would rather not carry an export obligation from day one, the post-export option lets you pay duty on the capital goods at import and get it back later as a transferable duty credit scrip, in proportion to the obligation you fulfil. The specific obligation is 85% of the normal six-times obligation. This suits exporters who are unsure of their export volumes or who want to avoid tying up a bond. Since April 2026 (DGFT Trade Notice 02/2026-27) these scrips are generated electronically on the DGFT portal and sent to ICEGATE.

How to apply and use EPCG

1. Prepare the details. List the capital goods, their value and the duty saved, the export products, and your average exports for the past three years.
2. Apply online. File in form ANF 5A on the DGFT portal with your digital signature and pay the fee. The authorisation is issued by your DGFT regional authority.
3. Register at the port and execute a bond. Register the authorisation with customs before import and execute the bond (with bank guarantee if customs requires it).
4. Install the machinery. Submit an installation certificate, usually from an independent Chartered Engineer or the jurisdictional GST authority, within the time the Handbook of Procedures allows.
5. Export and keep records. Declare the EPCG authorisation on your shipping bills, keep e-BRCs, and track progress against each block and the average obligation every year.
6. Redeem. Apply on the DGFT portal for the Export Obligation Discharge Certificate (EODC) with export and realisation evidence. Once issued, customs releases your bond.

The capital goods are subject to the actual user condition until the EODC is issued: you cannot sell or transfer them before that without permission.

2026 extension

DGFT Public Notice 51/2025-26 of 6 March 2026 automatically extended to 31 August 2026 any EPCG export obligation period or block period that was due to expire between 1 March and 31 May 2026, without an application or composition fee. If your period fell outside that window, the normal extension rules apply.

EPCG with other benefits

Exports made towards an EPCG obligation can still claim RoDTEP (or RoSCTL for apparel) and duty drawback on inputs, provided each scheme's own conditions are met. EPCG covers capital goods; it does not stop you using Advance Authorisation for inputs.

Common mistakes

• Underestimating the average obligation. Exporters focus on the six-times target and forget the annual average, which can be the harder test.
• Missing the first block. Monitor progress every year, not just in year four. Set reminders on the policies and licences dashboard.
• Unrealised exports. Unpaid shipments do not count. Protect credit sales with ECGC cover.
• Selling or moving machinery early. Moving capital goods to another unit or selling them before the EODC breaches the actual user condition.
• Default. If you fail the obligation, you pay the duty saved in proportion to the shortfall, with interest, and risk being placed on the denied entity list.

Related on Exportsmitra

• Advance Authorisation: importing inputs duty-free for exports
• RoDTEP: how the scheme works and how to claim it
• e-BRC: the electronic bank realisation certificate
• ECGC credit insurance: which policy suits your business

Sources

• DGFT portal: Foreign Trade Policy 2023 Chapter 5, Handbook of Procedures and ANF forms
• PIB: Foreign Trade Policy 2023 announced (green technology EO, dairy exemption, PM MITRA)
• PIB: export obligation periods for AA and EPCG extended to 31 August 2026
• Invest India: EPCG scheme FAQ (post-export EPCG)

Last checked 1 October 2026. Rules change: confirm with your DGFT regional authority before you act.