How to Claim EPCG Scheme in 2026: Capital Goods Import & EODC Closure
Definitive operational manual for the Export Promotion Capital Goods (EPCG) Scheme under Foreign Trade Policy 2023 to 2028 Chapter 5. From zero-duty capital machinery imports and Chartered Engineer nexus audits to block-wise monitoring and electronic EODC redemption (ANF 5B), we deliver practitioner-grade DGFT compliance.
The Export Promotion Capital Goods (EPCG) Scheme is India’s principal statutory incentive for upgrading manufacturing infrastructure. Governed by Chapter 5 of Foreign Trade Policy 2023 to 2028, it allows manufacturers, service providers and merchant exporters tied to supporting manufacturers to import modern capital equipment at zero customs duty. In exchange, the enterprise commits to generate export earnings equal to six times the duty saved over six years while maintaining historical export averages.
Verified as on September 2026 against Foreign Trade Policy 2023 to 2028 Chapter 5, Handbook of Procedures 2023, DGFT Public Notice No. 51/2025-26 and Trade Notice No. 34/2026-27.
The Short Answer: What is the EPCG Scheme
The Export Promotion Capital Goods (EPCG) Scheme is an export promotion mechanism administered by the Directorate General of Foreign Trade (DGFT) under Chapter 5 of Foreign Trade Policy 2023 to 2028. It permits Indian manufacturing and service enterprises to import capital machinery, testing equipment, packaging tools and quality control systems with 100% exemption from Basic Customs Duty, IGST and Compensation Cess. Alternatively, capital equipment can be procured domestically with zero duty under invalidation letters.
The rule that decides everything: Imported capital machinery carries an immutable six-month installation deadline. The importer must produce an independent Chartered Engineer Installation Certificate confirming the physical installation and operational commissioning of the machinery and submit it to the DGFT Regional Authority within six months of customs clearance. Missing this deadline triggers customs demand notices for 100% duty saved plus 15% annual compounding interest under Section 28 of the Customs Act 1962.
| Item Parameter | Statutory Provision |
|---|---|
| Scheme Name | Export Promotion Capital Goods (EPCG) Scheme |
| Governing Body | Directorate General of Foreign Trade (DGFT), Ministry of Commerce and Industry |
| Legal Basis | Foreign Trade Policy 2023 to 2028 (Chapter 5) and Handbook of Procedures 2023 (Chapter 5) |
| Who It Is For | Manufacturer exporters, merchant exporters tied to supporting manufacturers and notified service providers |
| Duty Benefit | Zero Basic Customs Duty, zero IGST and zero Compensation Cess on capital equipment imports |
| Specific Export Obligation | Six times the total customs duty saved, to be fulfilled within six years from authorisation issue date |
| Block-wise Milestones | Block 1 (Years 1 to 4): Minimum 50% of specific EO. Block 2 (Years 5 to 6): Remaining 50% of specific EO |
| Average Export Obligation | Mandatory maintenance of the preceding 3-year average annual export turnover over and above specific EO |
| Redemption Mechanism | Online filing in Form ANF 5B on dgft.gov.in for Export Obligation Discharge Certificate (EODC) |
Why We Are Writing This
In our advisory practice at Rasp International, we repeatedly witness exporters treating EPCG as a simple upfront customs waiver, only to face catastrophic recovery proceedings five years down the line. Between January and April 2026, DGFT cleared 4,273 pending EPCG closure files under Trade Notice No. 34/2026-27, revealing widespread deficiencies in installation certificates, block-wise milestone monitoring and annual average maintenance.
When an exporter defaults on an EPCG authorisation, customs does not simply collect the duty saved. Customs demands the entire duty waived, assesses mandatory 15% annual compounding interest from the date of import clearance and initiates recovery under Section 142 of the Customs Act. Rasp International structures EPCG filings with rigorous nexus validation and systematic milestone auditing so your enterprise captures the full capital upgrade benefit without regulatory exposure.
Statutory Change Log & 2026 Regulatory Position
Recent public notices and procedural circulars impacting EPCG authorisations under Foreign Trade Policy 2023 to 2028:
| Date | Statutory Instrument | Regulatory Impact | Issuing Authority |
|---|---|---|---|
| 1 April 2026 | Trade Notice No. 34/2026-27 | Special pendency clearance drive for EODC issuance extended to 31 May 2026. Regional Authorities instructed to prioritize age-wise disposal, with 4,273 EPCG closure certificates issued in the preliminary drive. | DGFT |
| 6 March 2026 | Public Notice No. 51/2025-26 | Automatic statutory extension granted to 31 August 2026 for both export obligation periods and block-wise fulfilment windows expiring between 1 March 2026 and 31 May 2026, without composition fees. | DGFT / PIB |
| 15 January 2025 | Public Notice No. 42/2024-25 | Procedural guidelines for electronic reconciliation of third-party exports under EPCG via ICEGATE, streamlining ANF 5B verification. | DGFT |
What the EPCG Scheme Actually Covers
Under Para 5.01 of Foreign Trade Policy 2023, the EPCG Scheme covers capital goods required for pre-production, production and post-production of export goods. Capital goods include:
- Manufacturing Machinery: High-precision manufacturing equipment, processing lines, automated assembly tools and computer numerical control (CNC) machines.
- Dies, Moulds and Fixtures: Tooling equipment, specialized moulds, jigs, dies and patterns essential for bespoke product fabrication.
- Testing & Quality Control Systems: Laboratory testing equipment, spectrometers, environmental testing chambers and measurement apparatus.
- Pollution Control & Energy Conservation Equipment: Effluent treatment plant components, electrostatic precipitators and waste heat recovery units.
- Computer Systems & Software: Specialized software and computer hardware directly integrated into production machinery.
- Second-Hand Machinery Restriction: Under standard zero-duty EPCG provisions, second-hand capital goods are strictly prohibited. Only brand new capital goods can be cleared under the scheme.
The Twin Export Obligations: Specific and Average
Discharging an EPCG authorisation requires fulfilling two distinct statutory obligations concurrently. Misunderstanding this dual commitment is the leading cause of EODC rejection:
1. The Specific Export Obligation
Equals six times the total duty saved on imported machinery (Basic Customs Duty plus IGST and Cess). Must be discharged within six years from authorization issuance through physical or deemed exports of goods manufactured using the capital equipment.
- Block 1 (Years 1 to 4): Must fulfill at least 50% of the total specific export obligation.
- Block 2 (Years 5 to 6): Must fulfill the remaining 50% of the specific obligation.
2. The Average Export Obligation
The enterprise must maintain its historical export turnover (arithmetic mean of FOB export turnover achieved in preceding three financial years). Must be maintained in every single year until specific EO is discharged. Shipments count toward Specific EO only after annual average turnover is met.
Six Sector Use Cases
Practical deployment of EPCG machinery across India’s leading manufacturing sectors:
1. Precision Engineering & Auto Parts
Machinery: 5-axis CNC machining centres and turning lathes imported at zero customs duty. Duty saved: 18% to 28% of CIF value.
Operational Pitfall: Shipping bills filed under free export codes rather than EPCG Scheme Code 21, preventing credit on DGFT ANF 5B.
2. Technical Textiles & Garments
Machinery: High-speed automated weaving looms, circular knitting lines and laser cutting tables.
Operational Pitfall: Domestic market sales surges causing the enterprise to fall short of its historical 3-year export average, invalidating specific exports.
3. Leather Goods & Footwear
Machinery: Computerized upper cutting tables, automatic lasting machinery and sole moulding units.
Operational Pitfall: Exceeding the 6-month Chartered Engineer installation audit deadline, triggering immediate bond forfeiture notices.
4. Specialty Chemicals & Pharma
Machinery: Glass-lined reactors, HPLC analytical units and sterile packaging lines.
Operational Pitfall: Failure to substantiate technical nexus between imported analytical machinery and the exported formulation.
5. Food Processing & Cold Chain
Machinery: Continuous IQF freezing tunnels, multi-head weighers and modified atmosphere packaging lines.
Operational Pitfall: Including deemed supplies without obtaining formal Project Authority Certificates (PAC).
6. Cautionary Tale: Unlinked Shipping Bills
An auto-ancillary manufacturer in Western India saved 48 lakh duty on die-casting machinery and exported 5 crore of parts. However, logistics omitted the EPCG licence in Box 44 on ICEGATE. DGFT could not ingest unlinked shipping bills. Customs demanded the 48 lakh duty plus 15% annual compounding interest (82 lakh total), erasing two years of profits. Illustrative composite.
Documents Required for EPCG Application & Closure
The DGFT Common Digital Platform validates EPCG applications against customs, municipal and engineering databases. The following documents must be prepared with technical rigor:
| Document | What the Authority Verifies | The Mismatch That Causes Rejection |
|---|---|---|
| Proforma Invoice & Technical Catalog | CIF value, country of origin, machinery model and detailed technical specifications | Generic equipment descriptions (such as “machinery parts”) lacking individual serial numbers and capacity parameters |
| Chartered Engineer Nexus Certificate (Appendix 5A) | Independent engineering certification establishing that the capital asset is indispensable for producing the export product | Certificate issued by a non-empanelled engineer or missing quantitative input-to-output conversion metrics |
| Past 3-Year Export Turnover Statement (CA Certified) | Audited financial verification of FOB export earnings achieved in the preceding three financial years for average EO baseline | Inclusion of ineligible trading exports or third-party shipments without valid supporting manufacturer disclaimers |
| Factory Registration / Industrial Consent | Valid factory licence, Udyam MSME registration and State Pollution Control Board consent to operate | Plant premises address in pollution consent differing from the physical manufacturing address recorded on the IEC |
| Chartered Engineer Installation Certificate (Appendix 5B) | Physical proof of machinery installation, factory inspection, operational serial numbers and commissioning date | Submission past the statutory six-month deadline from customs clearance, triggering automated bond invocation |
How to Claim and Close an EPCG Licence, Stage by Stage
A successful EPCG lifecycle requires structured execution from initial capital planning to final bond redemption:
Stage 1: Pre-Application Audit & Nexus Structuring
Perform a thorough engineering nexus audit. Confirm that the proposed capital machinery directly manufactures, tests or packages the finished export goods. Calculate projected duty savings across Basic Customs Duty, IGST and Cess to establish the Specific Export Obligation. Compute historical three-year export performance to establish the Average EO baseline.
Stage 2: Filing Form ANF 5A on dgft.gov.in
Log into the DGFT Common Digital Platform using an organizational Class 3 Digital Signature Certificate. Select ‘Services’ -> ‘EPCG’ -> ‘Apply for EPCG’. Input machinery descriptions, HS codes, CIF values and port of import registration. Upload the Chartered Engineer Nexus Certificate (Appendix 5A), past export turnover certificate and factory licences. Pay the DGFT portal fee via Bharatkosh. The electronic EPCG authorisation is issued by the Regional Authority upon administrative verification.
Stage 3: Customs Registration & Zero-Duty Clearance
Register the electronic EPCG licence on ICEGATE at the designated port of customs clearance. Execute a Customs Bond backed by a Bank Guarantee (15% to 100% depending on status; Star Export Houses are completely exempt from Bank Guarantees). File the Bill of Entry under the EPCG notification scheme code to clear machinery with zero duty.
Stage 4: Commissioning & Installation Audit within 6 Months
Within six months from the date of import clearance through customs, physically install and commission the machinery. Engage an independent Chartered Engineer to conduct an on-site factory audit. Generate the Installation Certificate in Format Appendix 5B detailing machinery serial numbers and date of commissioning and submit it electronically to the DGFT Regional Authority.
Stage 5: Export Obligation Execution & Monitoring
Execute export shipments. Mandatorily instruct your Customs Broker to declare the EPCG Licence Number, Date and Port of Registration in Box 44 of every shipping bill on ICEGATE. Maintain the three-year average export turnover every single year. Monitor fulfillment against the Block 1 milestone (50% by Year 4) and Block 2 milestone (remaining 50% by Year 6).
Stage 6: EODC Redemption via Form ANF 5B
Once both specific and average obligations are satisfied, log into dgft.gov.in and file Form ANF 5B under ‘Closure of EPCG Authorisation’. Link shipping bills, bills of entry, electronic bank realisation certificates (e-BRCs) and Chartered Accountant statements. Upon scrutiny, the Regional Authority issues the electronic Export Obligation Discharge Certificate (EODC), transmitting it automatically to ICEGATE to cancel the customs bond and release any pledged bank guarantee.
Approaching an EPCG block milestone or need to close an open authorisation?
Our DGFT engineering desk audits shipping bill linkages, reconciles historical averages and prepares Form ANF 5B for rapid EODC issuance.
Message our EPCG advisory team on WhatsApp: +91 8218043048 | View DGFT Advisory Services
Where EPCG Authorisations Go Wrong
EPCG defaults occur almost exclusively due to procedural oversights during the six-year monitoring window. The following table identifies common failure points and their regulatory consequences:
| Operational Failure | What You See on Portal / Customs | What Actually Broke |
|---|---|---|
| Missing Installation Certificate Deadline | Demand notice issued by Customs invoking full bond value plus interest | The Chartered Engineer installation certificate was not submitted to the Regional Authority within six months of import clearance. |
| Average EO Baseline Deficit | “Specific export obligation rejected due to annual average default” | The firm achieved export sales but failed to maintain its historical 3-year average turnover; exports were absorbed into the average rather than specific EO. |
| Shipping Bill Scheme Code Omission | Shipping bills do not populate on the DGFT ANF 5B closure screen | Customs broker failed to declare EPCG licence number and date in Box 44 of the shipping bill during export filing on ICEGATE. |
| Block 1 Milestone Default | Notice to pay composition fee or initiate recovery proceedings | Exporter failed to complete 50% of the specific export obligation within the first four years and did not file for an extension before Year 4 expired. |
| Unauthorized Machinery Transfer | Customs show-cause notice and seizure of capital assets | Capital machinery was moved to a new branch plant without obtaining prior endorsement and factory registration amendment from the Regional Authority. |
What the EPCG Scheme Will Not Do
Understanding the statutory boundaries of EPCG prevents strategic miscalculations in manufacturing investments:
- EPCG does not allow zero-duty import of second-hand capital equipment: Under Chapter 5 of Foreign Trade Policy 2023, second-hand machinery is strictly prohibited from zero-duty import under EPCG.
- EPCG does not forgive export obligations if global market demand collapses: The statutory obligation remains binding regardless of commercial headwinds, unless the enterprise petitions the Policy Relaxation Committee (PRC) at DGFT Headquarters for special extension.
- EPCG does not permit exports without realization proof: Shipments where export proceeds are not realized within RBI timeframes and confirmed via electronic bank realisation certificates (e-BRCs) are disqualified from discharging the obligation.
Related DGFT Licensing & Compliance Services
Explore our integrated compliance advisory services to keep your export-import enterprise fully compliant and operationally efficient:
Advance Authorisation Scheme
Duty-free import of raw materials and manufacturing consumables based on Standard Input Output Norms with full EODC redemption support.
Explore Advance Authorisation
IEC Registration & Compliance
Ten-digit Importer Exporter Code issuance, PAN alignment, mandatory annual renewals and portal de-activation recovery.
View IEC Details
RCMC Registration Across 37 EPCs
Mandatory Registration Cum Membership Certificate filings with Export Promotion Councils and Commodity Boards to access export incentive schemes.
Explore RCMC Details
Star Export House Recognition
Status Holder accreditation unlocking 100% bank guarantee waivers on EPCG authorisations and green channel customs clearance.
View Status Holder Guide
Class 3 Digital Signature Certificate
DGFT-compliant cryptographic USB hardware tokens for secure electronic signing of EPCG filings and ANF 5B redemption packages.
View DSC Details
Authorised Dealer (AD) Code Registration
Electronic bank AD code registration and IFSC mapping across ICEGATE customs EDI locations for direct export proceeds reconciliation.
Read AD Code Guide
Frequently Asked Questions
What is the Export Promotion Capital Goods (EPCG) Scheme?
The EPCG Scheme is a statutory export facilitation programme governed by Chapter 5 of Foreign Trade Policy 2023 to 2028. It permits Indian manufacturers and service providers to import capital goods at zero customs duty against an obligation to export finished products equal to six times the duty saved over six years.
Who is eligible to apply for an EPCG licence?
Manufacturer exporters with registered factory premises, merchant exporters tied to supporting manufacturers whose manufacturing units are endorsed on the licence and notified service providers (such as hospitality, healthcare and software engineering) are eligible to apply.
What is the export obligation timeline under EPCG?
The total Specific Export Obligation must be completed within six years from the date of licence issue. It is structured in two blocks: at least 50% must be fulfilled in Block 1 (Years 1 to 4) and the remaining 50% must be fulfilled in Block 2 (Years 5 to 6).
What is the Average Export Obligation and how is it calculated?
The Average Export Obligation is the arithmetic mean of FOB export turnover achieved in the three financial years prior to licence issuance for the same or similar products. This historical average must be maintained in each year of the six-year period until the specific obligation is cleared.
What happens if an importer fails to install the machinery within 6 months?
Failure to submit the Chartered Engineer Installation Certificate within six months from customs clearance is treated as a breach of customs bond conditions. Customs initiates recovery of the entire duty saved plus 15% annual compounding interest from the date of import.
Can second-hand capital machinery be imported under EPCG?
No. Under Chapter 5 of Foreign Trade Policy 2023, second-hand capital goods are strictly prohibited from zero-duty import under the standard EPCG scheme. Only brand new machinery and testing equipment are permitted.
Can capital machinery be procured from domestic manufacturers under EPCG?
Yes. An EPCG licence holder can procure capital goods domestically by obtaining an Invalidation Letter or Advance Release Order from the DGFT Regional Authority, allowing domestic equipment manufacturers to supply machinery with deemed export benefits.
Can the export obligation period be extended if an exporter defaults?
Yes. The Regional Authority can grant an initial two-year extension upon payment of prescribed composition fees, provided the request is filed before the original six-year period expires. Further relaxations require approval from the Policy Relaxation Committee at DGFT Headquarters.
How is an EPCG licence closed on the DGFT portal?
Closure is executed online through dgft.gov.in by filing Form ANF 5B under ‘Closure of EPCG’. The exporter reconciles shipping bills, bills of entry, e-BRCs, installation certificates and CA turnover statements to obtain an electronic Export Obligation Discharge Certificate (EODC).
What is the Bank Guarantee requirement for clearing EPCG machinery at customs?
Manufacturers typically execute a customs bond backed by a 15% to 100% bank guarantee depending on their track record. Exporters holding Star Export House status (One Star to Five Star) are completely exempt from executing bank guarantees under Para 2.29 of HBP 2023.
How Rasp International Handles EPCG Licensing & EODC Closure
Rasp International is an ISO 9001:2015 certified EXIM and customs advisory firm located at A-39, New Agra Colony, Agra, Uttar Pradesh 282005. With a family trade legacy dating back to 2005, we have advised more than 500 exporters across India on capital goods licensing, customs classification, installation compliance and EODC redemption.
Our engineering and trade desk prepares technical nexus certificates, manages portal filings, coordinates customs bond execution, monitors block-wise milestones and executes final ANF 5B closures before Regional Authorities. We ensure your capital expansion remains an asset rather than a compliance liability.
Upgrade Your Capital Infrastructure with Zero Duty
Whether you are planning a capital goods import or require urgent audit defence for an open EPCG authorisation, our DGFT specialists deliver end-to-end technical certainty.
Statutory Sources & Regulatory References
- Foreign Trade Policy 2023 to 2028, Chapter 5 (Export Promotion Capital Goods Scheme), Directorate General of Foreign Trade
- Handbook of Procedures 2023, Chapter 5 (EPCG Operational & Procedural Guidelines)
- DGFT Public Notice No. 51/2025-26 dated 6 March 2026: Automatic Extension of EPCG Export Obligation Periods to 31 August 2026
- DGFT Trade Notice No. 34/2026-27 dated 1 April 2026: Special Disposal Drive for Expedited EODC Issuance
- CBIC Notification No. 26/2023-Customs: Exemption of Customs Duties and IGST on EPCG Capital Goods Imports
- Customs Act 1962, Section 28 (Recovery of Duties) and Section 142 (Recovery of Sums Due to Government)
Disclaimer: This statutory guide is prepared for commercial decision-making and trade compliance guidance based on official regulations published by the Directorate General of Foreign Trade and Central Board of Indirect Taxes and Customs. Exporters must verify specific customs tariff notifications and regional authority requirements before importing capital equipment.
Related Resources: DGFT Consultants & Licensing Services | Advance Authorisation Guide | IEC Registration & Compliance | Star Export House Recognition