EPCG Scheme Explained

1. EPCG Scheme Explained: A Complete EPCG Scheme Explained: A Complete Guide for Beginners in Guide for Beginners in Export Export Business Business agarawaldhruv4 If you’re new to the export business and looking for ways to modernize your production facilities without spending a fortune, the Export Promotion Capital Goods (EPCG) Scheme could be your game-changer. The EPCG Scheme allows Indian exporters to import capital goods at zero or concessional customs duty, helping them enhance production quality, reduce costs, and stay globally competitive. In this guide, we’ll break down everything you need to know about EPCG, from eligibility and benefits to application and compliance. What is the EPCG Scheme? What is the EPCG Scheme? The Export Promotion Capital Goods (EPCG) Scheme is a government initiative under the Foreign Trade Policy (FTP) that enables import of capital goods required for producing high-quality export products. These capital goods can include machinery, equipment, and even certain tools necessary for manufacturing goods meant for export. The objective of the EPCG Scheme is to promote exports by facilitating the import of modern technology at a lower cost. In simple terms, it’s a duty exemption scheme — you can import machinery without paying customs duty, as long as you commit to exporting goods worth several times the duty saved. Who Can Who Can Apply for an EPCG License? Apply for an EPCG License? The EPCG License can be availed by:    Manufacturer exporters (direct exporters) Merchant exporters tied to a supporting manufacturer Service providers in export sectors like hospitality, healthcare, education, logistics, etc. Essentially, anyone engaged in export activities and requiring machinery for production or service delivery can benefit from this scheme.

2. Key Benefits of the EPCG Scheme Key Benefits of the EPCG Scheme 1.Zero or Concessional Duty on Imports Import capital goods at 0% or reduced customs duty, significantly lowering your investment costs. 2.⚙️Technology Upgradation Access advanced machinery to produce globally competitive goods. 3.Improved Profit Margins Lower input costs mean better pricing and profitability for exporters. 4.Support for MSMEs Ideal for MSMEs planning to expand or modernize their production setup. Export Obligation Under EPCG Export Obligation Under EPCG Every EPCG authorization comes with an export obligation (EO)— a commitment to export goods worth 6 times the duty saved within a specified period (usually 6 years from the date of issue). For example: If you save ₹10 lakh in import duty under EPCG, you must export goods worth ₹60 lakh within 6 years. Failure to meet this obligation can result in penalties or payment of saved duty with interest, so compliance is crucial. Eligible Capital Goods Eligible Capital Goods Under the EPCG Scheme, the following types of capital goods can be imported:     Production machinery and equipment Computer systems and software for production Tools, molds, and spare parts for manufacturing Equipment for quality control, R&D, and testing However, consumables, raw materials, and second-hand capital goods (in most cases) are not allowed. How to Apply for an EPCG License How to Apply for an EPCG License

3. Here’s a step-by-step outline for applying for an EPCG License through the DGFT (Directorate General of Foreign Trade) portal: 1.Register on the DGFT portal using your IEC (Importer Exporter Code). 2.Fill out the online EPCG application form (ANF 5A). 3.Upload required documents, including a Chartered Engineer certificate, proforma invoice, and supporting manufacturer details (if applicable). 4.Pay the prescribed application fee via online payment. 5.Submit and track your application through the DGFT portal until approval. Once approved, your EPCG authorization will specify the duty saved amount, export obligation, and reporting timelines. Documents Required for EPCG Application Documents Required for EPCG Application       Importer Exporter Code (IEC) Registration-cum-Membership Certificate (RCMC) Chartered Engineer Certificate Project report or justification for import Copy of proforma invoice for machinery PAN card and GST registration details Compliance & Redemption Compliance & Redemption To close or redeem your EPCG License, you must:    Maintain detailed export records. Submit regular EO (Export Obligation) progress reports. Apply for redemption to DGFT after fulfilling export obligations. After verification, DGFT will issue a Redemption Letter or EODC (Export Obligation Discharge Certificate), confirming compliance under the EPCG Scheme. Key Takeaways Key Takeaways     The EPCG Scheme is a powerful tool for exporters to upgrade production facilities. It offers customs duty exemption on import of capital goods. A 6x export obligation must be fulfilled within 6 years. Proper documentation and timely reporting are essential to avoid penalties.

4. Conclusion Conclusion For beginners in export business, the EPCG Scheme offers an excellent opportunity to modernize production capacity and stay globally competitive. By securing an EPCG License, you can reduce capital investment costs, boost efficiency, and meet international quality standards —all while contributing to India’s export growth.