CHAPTER 5

EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME

5.01 Policy

Policy relating to EPCG Scheme is given in Chapter 5 of FTP.

5.02 Application Form

An application for grant of an authorisation may be made by Registered

Office or Head Office or a Branch Office or Manufacturing Unit of an eligible
exporter to RA concerned in ANF 5A along with documents prescribed
therein.

5.03 Nexus Certification

(a) RA concerned shall, on the basis of nexus certificate from an

Independent Chartered Engineer (CEC) submitted by the applicant in
Appendix 5A, issue EPCG authorisation. Reasonable wastage, if any,
anticipated at the time of installation of capital goods will also be
certified by the Chartered Engineer in the nexus certificate and the
same would be mentioned in the condition sheet of the EPCG
authorisation at the time of issue. For issuance of such certificate, the
Chartered Engineer shall act only in the domain of his/her
competence.

(b) RA shall thereafter forward a copy of the EPCG authorisation to the

concerned Jurisdictional Customs Authority. The wastage so
permitted at the time of issuance of authorisation would be allowed
to be sold as scrap/waste on payment of applicable duty.

(c) An application for amendment in the list of import item(s) including

addition(s)/deletion(s), if any, may be filed with RA concerned
provided the authorisation is valid for import. The applicant would
give justification for seeking such amendment(s) along with fresh
nexus certificate from an independent Chartered Engineer.

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(d) An application for amendment in the list of export item(s) including
addition(s)/deletion(s) if any, may be filed with RA concerned
provided the Export Obligation period of the authorisation is valid
and the CG has nexus with export product. The applicant would give
justification for seeking such amendment(s) along with fresh nexus
certificate from an independent Chartered Engineer.

5.04 Certificate of Installation of Capital Goods

(a) 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. The
authorization holder shall be permitted to shift capital goods during
this period to other units mentioned in the IEC and RCMC of the
authorization holder subject to production of fresh installation
certificate.

(b) 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.

5.05 Port of Registration

EPCG Authorisation shall be issued with a single port of registration as per

paragraph 4.37 of HBP, for imports. However, exports can be made from
any port specified in paragraph 4.37 of HBP.

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5.06 Import of spares, tools, refractories and catalysts

(a) Applications for procurement of capital goods covered under sub-

paragraphs (a) (iii) and (iv) of paragraph 5.01 of FTP shall contain a
list of plant/machinery installed in factory/premises of the applicant
for which such capital goods are required, duly certified by Chartered
Engineer or Jurisdictional Customs Authorities.”

(b) In case of import of spares, EPCG authorisation shall not specify list
of spares but shall indicate:

(i) Name of plant /machinery for which spares are required.

(ii) Value of duty saved allowed under the authorisation.
(iii) Description of product to be exported and value of export
obligation.

(c) Authorisation holder shall maintain a register of stock &

consumption of capital goods covered under sub-paragraphs (a) (iii)
and (iv) of paragraph 5.01 of FTP imported under the scheme and at
the time of final redemption of export obligation, authorization
holder shall submit certificate from independent Chartered Engineer
confirming their use in the installed capital goods on the basis of such
register.

5.07 Conversion of EOU/ Relocated SEZ Units to DTA Unit under EPCG
Scheme

(a) An EOU/ a relocated SEZ unit, while converting to a DTA Unit, may
apply for an EPCG authorisation along with documents prescribed.
‘No Objection Certificate’ should be produced from the concerned
Development Commissioner.

(b) The export obligation period for a unit which converts from EOU /
SEZ Scheme to EPCG Scheme would be the same as is available to a
direct EPCG Authorisation Holder as per Paragraph 5.01 of Foreign
Trade Policy (FTP).

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(c) If a standalone EOU / SEZ unit wishes to de-bond from EOU to EPCG
Scheme, there shall be no requirement for maintenance of average
export obligation and the unit shall be required to maintain only
specific export obligation equivalent to six times of the proportionate
duty saved amount of the depreciated value of capital goods for
which the Authorisation has been obtained.

(d) In case one unit of a firm / company opts to de-bond from EOU to
EPCG Scheme, while other unit(s) are DTA units, then the average
export obligation in respect of the authorisations issued to the firm /
company (other than de-bonding unit) shall remain unchanged and
the average EO, after de-bonding of the unit, shall be fixed by
excluding the exports made by the de-bonded unit from the total
exports of the firm / company, which runs concurrently for all the
units of the firm / company. In such a case, specific EO equivalent to
six times of the proportionate duty saved amount on the depreciated
value of the Capital Goods would be imposed on the de-bonding unit
shifting to the EPCG Scheme.

5.08 Sourcing of Capital Goods Manufactured Indigenously

(a) EPCG authorisation holder intending to source capital goods

manufactured indigenously shall make a request to the RA for
invalidation of EPCG authorisation for direct import / issuance of
Advance Release Order (ARO) for availing deemed export benefits as
given in paragraph 7.03 of FTP read with paragraph 7.02(c) of HBP.

(b) This request can be made either along with application or during the
validity period of EPCG Authorisation.

(c) Applicant shall give the name and address of the manufacturer(s) of
capital goods.

(d) RA concerned will issue the invalidation letter / ARO, in

quadruplicate.

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5.09 Issuance of Advance authorisation for import of inputs

Indigenous manufacturer intending to supply capital goods to EPCG

authorisation holder may apply to RA for issuance of Advance
authorisation for import of inputs including components required for
manufacture of capital goods to be supplied to EPCG authorisation holder.

5.10 Conditions for fulfilment of Export Obligation

In addition to conditions in paragraph 5.04 of FTP, the following conditions

shall also be applicable for fulfilment of export obligation:

(a) Name of the supporting manufacturer as well as the exporter shall be

indicated on export documents.

(b) EPCG authorisation holder may export either directly or through

third party(ies).

(c) In case the Authorization Holder wants to export through a third

party, export documents viz., shipping bills / Bill of exports etc. shall
indicate name of both authorization holder and supporting
manufacturer, if any, along with EPCG authorization number. BRC,
GR declaration, export order and invoice should be in the name of
third party exporter. The goods exported through third party should
be manufactured by the EPCG Authorisation Holder or the supporting
manufacturer where the capital goods imported under the
authorisation have been installed. Proceeds realised through normal
banking channel from third party exporter’s account to the
authorisation holder’s account on account of such exports only shall
be counted towards fulfilment of export obligation.

(d) The EPCG authorization holder shall submit the following additional
documents for discharge of EO through third party (ies):

(i) A copy of agreement entered into between the authorization

holder and the ultimate exporter undertaking to export the
goods manufactured by the authorization holder/supporting

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 manufacturer for fulfilment of the export obligation against
the EPCG authorization in question.

(ii) Proof of having despatched the goods from authorization

Holder’s factory premises to the ultimate exporter/port of
export viz. (a) ARE 1 certificate issued by Central Excise / Tax
invoice for export prescribed under the GST rules with due
authentication by the Customs verifying the exports along with
the shipping bill number, date and EPCG authorization number
or (b) Invoice duly incorporating the relevant EPCG
authorization number & date at the time of dispatch in case the
unit is not registered with Central Excise / GST.

(iii) Lorry Receipt (LR) /Logistical evidence for transportation of

goods from the premises of the authorization holder to the
third party/port of export.

(iv) An undertaking from the 3rd party on a stamp paper, declaring

that the products exported for fulfillment of EO by them on
behalf of the license holder as per details given in the
statement of exports, were manufactured by the
license holder.

(v) Financial evidence for having received proceeds through

normal banking channel from third party exporter’s account to
the authorization holder’s account on account of such exports
towards such third party supplies.

(vi) Disclaimer certificate from third party that they shall not use
such proceeds towards EO fulfillment of any EPCG
authorization (s) obtained by them.

5.11 Realization of Export proceeds

Export proceeds shall be realized in freely convertible currency except for

deemed exports supplies under Chapter 7. Exports to SEZ units /Supplies
to developers/ co-developers irrespective of currency of realization, would

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also be counted for discharge of Export Obligation. Realization in case of
supplies to SEZ units shall be from foreign currency account of the SEZ unit.

5.12 Calculation of Average Export Obligation

While calculating Average Export Obligation, exports counted/being

counted for fulfilling specific EO against EPCG Authorisations within valid
EO Period (whether original or extended) that have been made in the
preceding 3 years will not be taken into account.

5.13 Exemption from maintenance of average export obligation

(a) In case of export of goods relating to the following the EPCG

authorisation holder shall not be required to maintain average export
obligation:

(i) Handicrafts,
(ii) Handlooms,
(iii) Cottage & Tiny sector,
(iv) Agriculture,
(v) Aqua-culture (including Fisheries), Pisciculture,
(vi) Animal husbandry,
(vii) Floriculture & Horticulture,
(viii) Poultry,
(ix) Viticulture,
(x) Sericulture,
(xi) Carpets,
(xii) Coir, and
(xiii) Jute

(b) However, this exemption from maintenance of average export

obligation shall not be allowed for import of fishing trawlers, boats,
ships and other similar items.

(c) Goods, excepting tools imported under EPCG scheme by sectors

specified in sub-paragraph (a) above, shall not be allowed to be

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 transferred for a period of five years from date of imports even in
cases where export obligation has been fulfilled.

5.14 Block-wise Fulfilment of EO

(a) The Authorisation holder under the EPCG scheme shall, while
maintaining the average export obligation, fulfill the specific export
obligation over the prescribed block period in the following
proportions:

Period from the date of issue Minimum export obligation

of Authorisation to be fulfilled
Block of 1st to 4th year 50%
Block of 5th and 6th year Balance EO

(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.

(d) (i) Authorisations issued from 1st April, 2002 upto 31st August, 2004
shall be governed by provisions of paragraph 5.8 of HBP Vol. 1 (RE-
02) as amended from time to time.

(ii) Authorisations issued from 1st September, 2004 upto 17th April,
2013 shall be governed by provisions of paragraph 5.8 of HBP Vol. 1
(RE-12) as amended till 17.04.2013.

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 (iii) Authorisations issued from 18th April, 2013 till issue of
Notification of FTP 2015-20 shall be governed by provisions of
paragraph 5.8 of HBP Vol. 1 as amended vide PN No. 1 dated
18.04.2013.

(iv) Authorisations issued from 1st April, 2015 till 4th December
2017 shall be governed by provisions of paragraph 5.14 of HBP as
amended vide PN No. 1 dated 01.04.2015.

5.15 Monitoring of Export Obligation

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.

5.16 Automatic Reduction/ Enhancement upto 10% Duty saved

amount and pro rata Reduction/ Enhancement in export
obligation

If authorization issued has been utilized for import of goods: –

(a) in excess of duty saved amount indicated on the authorization by not

more than 10%, the authorization shall be deemed to have been
enhanced by that proportion. Customs shall automatically allow
clearance of such goods without endorsement by RA concerned. The
authorization holder shall furnish additional fee to cover excess
imports effected, in terms of duty saved amount, to RA concerned,
within one month of excess imports taking place. Export obligation
shall automatically stand enhanced proportionately.

(b) in excess of duty saved amount indicated on the authorization by

more than 10%, the RA concerned, as per its delegated powers, may
allow enhancement in duty saved amount of the EPCG authorization.
The Authorisation holder shall furnish additional BG/LUT to the
Customs Authority.

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(c) less than the duty saved amount indicated on the authorization, the
export obligation shall stand reduced on pro-rata basis with
reference to actual utilization of the authorization.

5.17 Extension in Export Obligation Period

(a) Extension in Export Obligation Period of EPCG authorization issued

prior to Notification of FTP 2015-20 RE 2017 shall be governed by
relevant provisions of HBP applicable on the date of issue of
authorisation.

(b) Extension in Export Obligation Period of EPCG authorization issued

prior to Notification of FTP 2015-20 shall be governed by relevant
provisions of HBP Vol 1 applicable on the date of issue of
authorization.

(c) In case of zero duty EPCG Authorizations, two extensions of one year
each in export obligation period may be considered by RA
concerned, on payment of composition fee equal to 5% and 10%
respectively of proportionate duty saved amount on unfulfilled
export obligation for the first/second year of extension or an
enhancement in export obligation imposed to the extent of 10%
/20% respectively of the total export obligation imposed under the
authorization for first/second year of extension, as the case may be,
at the choice of the exporter. Minimum composition fee will be
Rs.10,000.

(d) Request for extension in EO Period shall be made to RA within 90

days from the date of expiry of original EO Period. However, RA may
consider the request for extension received upto 180 days with
additional composition fee of Rs.5,000.

5.18 Provision for Units under BIFR/Rehabilitation

(a) Deleted

(b) Deleted
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5.19 Relief in Average Export Obligation

(a) To provide relief to exporters of those sectors where total exports in

that sector/product group has declined by more than 5% as
compared to the previous year, average export obligation for the year
may be reduced proportionate to reduction in exports of that
particular sector/product group during the relevant year as against
the preceding year. However, in case export decline is continuous
over consecutive years, the base year for calculation of eligibility and
calculation of reduction in average export obligation will be taken as
the year after which the exports have shown continuous decline.

(b) The sectors /product groups for which this relaxation is to be

allowed shall be conveyed by the DGFT to all the RAs within seven
months of the end of the previous financial year, and the RAs shall re-
fix the annual average EO for previous year accordingly for exporters
in that sector / product group.

5.19A: Maintenance of Annual Average Export Obligation

The excess exports done towards the average export obligation

fulfilment of an EPCG authorization during a year can be used to
offset any shortfall in the Average EO done in other year(s) of the EO
period or the block period as the case may be provided Average EO
imposed is maintained on an overall basis, within the bock period or
the EO period as applicable.i

5.20 Automatic EO extension in the event of ban on export product

Whenever a ban/restriction is imposed on export of any product, export

obligation period in respect of EPCG authorisations already issued prior to
imposition of ban on such export products would stand automatically
extended for a period equivalent to duration of such ban, without any
composition fee. Authorisation holder would not be required to maintain
average E.O. as well for the ban period.

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5.21 Deleted

5.22 Redemption

(a) Authorisation holder shall apply for redemption in ANF 5B with

documents prescribed therein as a proof of EO fulfilment.

(b) On being satisfied, RA concerned shall issue a certificate of discharge

of export obligation to the EPCG authorisation holder and forward a
copy to Customs Authorities with whom BG/LUT has been executed.
A statement giving details of the documents submitted by the
authorisation holder towards evidence of EO fulfilment shall also be
enclosed with the certificate.

(c) RA shall process such applications ordinarily within 30 days.

Shortcomings, if any, shall be pointed out in one go. All
correspondence, thereafter, shall relate to these deficiencies only.
Fresh correspondence, if necessary, shall be within 15 days. Once
documents are complete, EO will be discharged within 30 days of
receipt of complete documents /information.

(d) Applications that remain outstanding beyond a period of 60 days

after receipt of complete documents shall be reported to the EPCG
Division at DGFT headquarters alongwith reasons thereof.

5.23 Regularization of Bonafide Default and Exit from EPCG Scheme

(a) In case, EPCG authorisation holder fails to fulfil prescribed export

obligation, he shall pay Customs Duty along with applicable interest
as prescribed by Customs Authority. Such facility can also be availed
by EPCG authorisation holder to exit at his option. The authorisation
holder will have the option to furnish valid duty credit scrips, issued
under Chapter 3 or Chapter 5 of FTP, for payment of the Customs
duty component.

(b) Authorisation holder can also pay duty and interest suo-motu on the
basis of self /own calculation as per the procedure specified in
paragraph 4.50 of HBP.
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5.24 Maintenance of Records

Every EPCG authorisation holder shall maintain, for a period of 2 years

from date of redemption, a true and proper account of exports/ supplies
made and services rendered towards fulfilment of export obligation.

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5.25 Re-Export / Repair/Replacement of Capital Goods Imported
under EPCG Scheme

(a) Capital Goods imported under EPCG scheme, which are found
defective or unfit for use, may be re-exported to foreign supplier
within three years from the date of clearance by Customs of such
goods, with permission of RA / Customs Authority. Consequently, EO
would be re-fixed.

(b) Capital Goods imported and found defective or otherwise unfit for
use may be exported, within two years from the date of clearance by
Customs of such goods, with permission of RA / Customs Authority
and Capital Goods in replacement thereof be imported under EPCG
scheme. In such cases, while allowing export, the Customs shall credit
the duty benefit availed which can be debited again at the time of
import of such replaced Capital Goods.

(c) Capital Goods imported under EPCG scheme, may be re-exported for
repairs abroad within three years from the date of clearance by
Customs of such goods, with permission of RA / Customs Authority.
The duty component on the expenditure incurred on the repairs as
well as the insurance and the freight, both ways shall be taken into
account for re-fixation of the EO.

5.26 Penal Action

In case of failure to fulfil export obligation or any other condition of

authorisation, authorisation holder shall be liable for action under FT
(D&R) Act, 1992, as amended, Orders and Rules made thereunder,
provisions of FTP/HBP, Customs Act, 1962, as amended from time to time
or any other law in force.

5.27 Clubbing of EPCG authorisations

(a) Clubbing of two or more EPCG authorisations issued to the same

authorisation holder would be permitted.

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(b) An application for clubbing can be made to RA concerned in ANF 5C.
Clubbing shall only be permitted in case export products endorsed on
the authorisations are same /similar and if authorisations are issued
by the same RA.

(c) Total export obligation would be re-fixed taking into account total of
duty saved amount of the clubbed authorisations.

(d) On Clubbing, authorisations for all purpose shall be deemed to be a

single EPCG authorisation. Export obligation period for clubbed
authorisations shall be reckoned from first authorisation issue-date.

(e) Average export obligation for clubbed authorisations would be

highest of average export obligations endorsed on individual
authorisations so clubbed.

(f) Clubbing would be permitted during valid EOP including extended

period, if any. However, clubbing in case of all authorisations where
EO period is over may be allowed for regularisation purposes
provided they have been issued under same policy period.

(g) In case of clubbing of EPCG authorizations where EO can be fulfilled

by export of alternate product(s)/service(s), the proportion of
alternate product(s)/service(s) for EO fulfilment / regularization will
be restricted to the lowest of the percentage of alternate product(s) /
service(s) allowed in the clubbed authorizations.

(h) EPCG authorisations issued prior to 1.4.2007 shall be governed by

provisions contained in Chapter 5 of HBP Vol.1 (RE-2006). The EPCG
Authorisations issued between 01.04.2007 and 17.04.2013 shall be
governed by provisions contained in Chapter 5 of HBP Vol.1 (RE-
2012, as amended). The EPCG Authorisations issued from 18.04.2013
till the issue of Notification of HBP 2015-20 shall be governed by
provisions contained in Public Notice No.1 dated 18.4.2013. The
EPCG Authorisations issued between Notification of HBP 2015-20 till
the Notification of HBP 2015-20 (RE 2017) shall be governed by
provisions contained in HBP 2015-20.
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5.28 Post Export EPCG Duty Credit Scrip(s)

(a) Exporters can exercise this option by filing an application in ANF5A

with the RA concerned by selecting the option for this Scheme.

(b) All applicable duties shall be paid in cash by the exporter at the time
of import of Capital Goods.

(c) RA shall issue an Authorisation specifying

(i) “Not for imports” on the body of the Authorisation;

(ii) Average EO, if any;
(iii) Specific EO @ 85% of the applicable specific EO, computed as if
the imports were to take the benefit of duty exemption; and
(iv) EOP, which shall commence from the Authorisation issue date.

(d) Exporter can file request in ANF 5 B, for issuance of Duty Credit
Scrip(s) in proportion to the EO completed within the specified
EOP. Only for first such request, proof of actual duty payments on
Capital Goods, nexus and installation certificate(s) of Capital Goods
shall be submitted alongwith proof of fulfilment of EO alongwith
proof of maintenance of Average EO. Subsequently, only proof of
fulfilment of specific EO (alongwith proof of maintenance of Average
EO) additionally completed vis-à-vis specific EO fixed {as in c(iii)
above} may be submitted, unless there have been any changes in
documents / proofs submitted earlier.

(e) RA shall issue freely transferable duty credit scrip(s) equivalent to

proportionate EO fulfilled.

(f) The computation of freely transferable Duty Credit Scrip(s) will be

based on basic Customs duty amount paid.

(g) Deleted

(h) All provisions of the existing EPCG Scheme shall apply insofar as they
are not inconsistent with this scheme.
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(i) The CG imported under paragraph 5.12 of FTP shall not be disposed
of till the date of last export for offsetting EO against such CG.

(j) In case of re-export of CG found defective or unfit for use as per the
provisions of paragraph 5.25 of HBP if the exporter claims drawback
on such re-export there would be no remission of duty under
paragraph 5.12 of FTP.

5.29 Green Technology Products

The Export Products covered under Paragraph 5.10 of FTP which provides
for reduced export obligation of 75% for green technology products are:

(i) Equipment for Solar Energy decentralized and grid

connected products,
(ii) Bio-Mass Gassifier,
(iii) Bio-Mass/Waste Boiler,
(iv) Vapour Absorption Chillers,
(v) Waste Heat Boiler,
(vi) Waste Heat Recovery Units,
(vii) Unfired Heat Recovery Steam Generators,
(viii) Wind Turbine,
(ix) Solar Collector and Parts thereof,
(x) Water Treatment Plants,
(xi) Wind Mill, Wind Mill Turbine / Engine,
(xii) Other Generating Sets - Wind powered,
(xiii) Electrically Operated Vehicles – Motor Cars,
(xiv) Electrically Operated Vehicles - Lorries and Trucks,
(xv) Electrically Operated Vehicles – Motor Cycles/Mopeds,
and
(xvi) Solar Cells.

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i Para 5.19A inserted vide Public Notice No.10/2015-20 dated 22.05.2018.

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