EPCG Scheme India 2026: How Manufacturers Import Capital Goods at Zero Duty
The EPCG (Export Promotion Capital Goods) scheme allows Indian manufacturers and service exporters to import capital goods — machinery, equipment, and components — at zero Basic Customs Duty. In return, the importer commits to fulfilling an export obligation equal to 6× the duty saved over 6 years. For a ₹1 crore machine, the saving typically exceeds ₹10 lakh.
Last updated: May 2026
What Is the EPCG Scheme?
EPCG (Export Promotion Capital Goods) is a scheme under India's Foreign Trade Policy 2023–28 administered by DGFT (Directorate General of Foreign Trade). It allows eligible exporters to import capital goods at 0% Basic Customs Duty.
The scheme is designed to help Indian manufacturers modernise their production infrastructure and become more competitive in export markets — by removing the customs duty barrier on importing advanced machinery and equipment.
| Parameter | Details |
|---|---|
| Scheme | EPCG — Export Promotion Capital Goods |
| Administered by | DGFT, Ministry of Commerce and Industry |
| Policy basis | Foreign Trade Policy 2023–28 |
| Duty benefit | 0% Basic Customs Duty on capital goods |
| IGST | Payable (claimable as ITC for GST-registered importers) |
| Export obligation | 6× duty saved in 6 years |
| Licence validity (import) | 36 months from issue |
| EO fulfilment period | 6 years from licence issue |
Who Is Eligible for EPCG?
Eligibility for EPCG is defined broadly under the Foreign Trade Policy, but there are clear boundaries:
- Manufacturer-exporters with their own manufacturing facility are the primary beneficiaries. They must have a valid IEC code, RCMC from the relevant Export Promotion Council (EEPC for engineering goods, AEPC for textiles, FIEO for general exports, etc.), GST registration, and a clean DGFT track record with no pending defaults.
- Merchant-exporters can apply if they are tied to a supporting manufacturer who will actually use the imported capital goods. The manufacturer must also hold a valid RCMC.
- Service exporters — including hotels, hospitals, and software firms — are eligible under service-specific EPCG provisions.
Who is not eligible? Pure importers or traders with no export activity, anyone importing consumer goods (EPCG is capital goods only), and applicants already availing advance authorisation for the same goods. For manufacturers bringing in capital goods import to India, EPCG is typically the first scheme to evaluate.
| Type | Eligible? | Condition |
|---|---|---|
| Manufacturer-exporter | ✅ Yes | Must have IEC + RCMC |
| Merchant-exporter | ✅ Yes | Must be tied to a manufacturer |
| Service exporter (IT, hotel) | ✅ Yes | RCMC from relevant council |
| Pure trader (no exports) | ❌ No | Export history or projection required |
| Import of consumer goods | ❌ No | Capital goods only |
What Capital Goods Can You Import?
Capital goods eligible under EPCG include machinery, equipment, instruments, tools, dies, moulds, jigs and fixtures, data processing equipment, components, and spare parts up to 10% of total CIF value. Products explicitly excluded are second-hand capital goods (unless specifically permitted under policy), consumables, raw materials, and goods restricted under the Import Licensing schedule.
Common examples of EPCG-eligible imports include:
- CNC machining centres and lathes
- Injection moulding machines
- Textile looms and garment finishing equipment
- Printing presses and converting machinery
- Pharmaceutical packaging lines
- Industrial robots and automation systems
- Generators and power backup equipment
- Testing and quality control equipment
- Cold storage and refrigeration units
Most capital goods fall under HS Chapters 84 (machinery), 85 (electrical equipment), and 90 (instruments). Normal BCD under these chapters ranges from 7.5% to 15%. If you are importing machinery to India, verifying EPCG eligibility before placing your order can reduce landed cost by 8–15%.
EPCG vs Normal Import: Cost Comparison
Below is a side-by-side comparison for importing a ₹1 crore (CIF) capital goods item under normal import rules versus under the EPCG scheme.
| Cost Component | Normal Import | With EPCG |
|---|---|---|
| CIF Value | ₹1,00,00,000 | ₹1,00,00,000 |
| Basic Customs Duty (7.5%) | ₹7,50,000 | ₹0 |
| Social Welfare Surcharge (10% of BCD) | ₹75,000 | ₹0 |
| IGST 18% (on AV + BCD + SWS) | ₹19,44,600 | ₹18,00,000* |
| Total Upfront Cost | ₹1,27,69,600 | ₹1,18,00,000 |
| Effective Duty Saving | — | ₹8,25,000 (BCD + SWS) |
| Export Obligation Created | — | ₹49,50,000 (6× ₹8,25,000) |
*IGST under EPCG is still payable but claimable as ITC for GST-registered businesses.
The net benefit of EPCG is ₹8.25 lakh in direct duty savings. For exporters who would have that export turnover anyway, this is free money. Use our Import Duty Calculator to model the exact saving for your machine value and HS code.
How to Apply: 8-Step Process
- Check Eligibility. Confirm you are a manufacturer-exporter or service exporter with a valid IEC and RCMC from the relevant Export Promotion Council. Without both, DGFT will reject the application outright.
- Identify Capital Goods and HS Code. List the machinery or equipment to import with full technical specifications and 8-digit HS codes. Spare parts can be included up to 10% of total CIF value. Incorrect HS codes cause delays and possible rejection.
- Calculate Duty Savings and Export Obligation. Export obligation = 6× the duty saved (BCD + SWS). The minimum EO fulfilment period is 6 years from the EPCG licence issue date. Calculate this before applying so you understand the commitment.
- Gather Documents. You will need: IEC certificate, RCMC, GST registration, bank certificate, CA certificate of existing export turnover, and technical specifications/catalogue of the capital goods. Incomplete document sets are the #1 reason for processing delays.
- Apply on DGFT e-COM Portal. Login to dgft.gov.in → Services → Ecom → EPCG Scheme → New Application. Upload all documents and submit digitally. The portal validates your IEC and RCMC in real time.
- Pay DGFT Application Fee. Fee = 0.1% of duty saved, with a minimum of ₹5,000 and maximum of ₹1,00,000. Pay online via the DGFT portal using net banking or UPI.
- Import Capital Goods Within Validity. The EPCG licence is valid for import for 36 months from the date of issue. When filing customs clearance at the port, quote the EPCG licence number to claim zero BCD. Your CHA or freight forwarder must be informed in advance.
- Fulfil Export Obligation and Redeem. File EO fulfilment evidence with DGFT via the EODC (Export Obligation Discharge Certificate) portal. Annual returns on export performance are mandatory — failure to file is treated as a default even if the EO is physically fulfilled.
For the full EPCG application checklist and DGFT portal walkthrough, see our detailed EPCG Scheme Guide.
Worked Example: ₹1.25 Crore CNC Machine
Below is a complete worked example for importing a 5-axis CNC machining centre from Germany under the EPCG scheme.
Product: 5-axis CNC machining centre (HS 8457.10) from Germany
CIF value: USD 1,50,000 = ₹1,24,50,000 (at ₹83/USD)
Without EPCG:
- BCD 7.5%: ₹9,33,750
- Landing charges (1%): ₹1,24,500
- Assessable Value: ₹1,35,08,250
- SWS (10% of BCD): ₹93,375
- IGST 18%: ₹25,22,423
- Total Upfront Duty: ₹35,49,548
- Total Landed Cost: ₹1,59,99,548
With EPCG:
- BCD: ₹0
- SWS: ₹0
- IGST 18% (on CIF + landing only): ₹22,65,510 (claimable as ITC)
- DGFT Application Fee: ₹5,000 (minimum)
- Total Upfront Cash Saving on Duty: ₹10,27,125 (BCD + SWS saved)
- Export Obligation Created: ₹61,62,750 (6× ₹10,27,125)
Summary: For a manufacturer already exporting ₹60–70 lakh/year in goods, EPCG saves ₹10.27 lakh upfront with zero additional export burden.
Use our Landing Cost Calculator to estimate your EPCG saving on your specific machine value.
Export Obligation: How to Calculate and Fulfil
The export obligation is the heart of the EPCG scheme. Understanding it before applying prevents costly surprises later.
Formula: Export Obligation = 6 × (Basic Customs Duty saved + Social Welfare Surcharge saved)
EO is fulfilled through exports of goods or services from India. Crucially, the exports need not be related to the imported capital goods — any export from India counts. A pharmaceutical company importing a packaging line under EPCG can fulfil the EO by exporting active pharmaceutical ingredients, not just packaged medicines.
Annual EO reporting: The importer must file Annual Returns on the DGFT portal every year showing exports made against the EPCG licence. Failure to file is treated as a deemed default even if the EO is physically fulfilled. Set a calendar reminder 30 days before the annual due date.
EO extension: If you cannot fulfil the EO within 6 years, DGFT allows extension by 2 years with a 2% penalty on the unfulfilled amount, and a further 2 years with a 4% penalty. Total maximum period is 10 years.
If EO is not fulfilled: You must pay the duty saved + customs interest at 15% per annum from the import date + possible penalty. This can exceed the original duty amount if the delay is long.
| Machine CIF Value | Estimated BCD Saved (7.5%) | SWS Saved | Total Duty Saved | Export Obligation (6×) |
|---|---|---|---|---|
| ₹50 lakh | ₹3,75,000 | ₹37,500 | ₹4,12,500 | ₹24,75,000 |
| ₹1 crore | ₹7,50,000 | ₹75,000 | ₹8,25,000 | ₹49,50,000 |
| ₹2 crore | ₹15,00,000 | ₹1,50,000 | ₹16,50,000 | ₹99,00,000 |
| ₹5 crore | ₹37,50,000 | ₹3,75,000 | ₹41,25,000 | ₹2,47,50,000 |
Frequently Asked Questions
What is the EPCG scheme in India?
EPCG (Export Promotion Capital Goods) is a scheme under India's Foreign Trade Policy 2023–28 that allows manufacturer-exporters and service exporters to import capital goods — machinery, equipment, components, and spare parts — at zero Basic Customs Duty. The importer commits to fulfilling an export obligation equal to 6× the duty saved, within 6 years. It is administered by DGFT and available for goods under Chapters 84, 85, and 90 of the Customs Tariff.
How much can I save with EPCG?
Savings depend on CIF value and HS code. For most capital goods, BCD is 7.5% (plus 10% Social Welfare Surcharge on BCD = effective 8.25% saving on CIF). For a ₹1 crore machine, you save approximately ₹8.25 lakh in direct duty. For a ₹5 crore production line, the saving exceeds ₹41 lakh. IGST is still payable under EPCG but is claimable as Input Tax Credit by GST-registered businesses.
What is the export obligation under EPCG?
Export obligation under EPCG is 6× the duty saved (Basic Customs Duty + Social Welfare Surcharge). This must be fulfilled within 6 years from the date of EPCG licence issue. The exports can be any goods or services from India — they do not need to be produced on the imported machine. Annual Return must be filed on the DGFT portal every year to avoid deemed default.
Who can apply for EPCG?
Manufacturer-exporters (those who manufacture and export goods), merchant-exporters tied to supporting manufacturers, and service exporters (software companies, hotels, hospitals) are eligible. You need a valid IEC (Import Export Code), RCMC (Registration-cum-Membership Certificate) from the relevant Export Promotion Council, and GST registration. Pure traders with no export activity are not eligible.
How long does it take to get an EPCG licence?
EPCG licence applications submitted through DGFT's e-COM portal are typically processed in 5–15 business days for manufacturer-exporters with clean track records. Merchant-exporter applications linked to a supporting manufacturer may take 15–30 days. Corrections or document deficiencies can extend the timeline. The licence is valid for 36 months for importing the capital goods.
Can I import second-hand machinery under EPCG?
Generally no — EPCG is intended for new capital goods. Second-hand or refurbished machinery is not eligible under standard EPCG provisions. Importing used machinery requires a separate route under the Foreign Trade Policy with age limits (typically not more than 10 years old for most machinery) and a Chartered Engineer certificate. Check the latest FTP 2023–28 notifications for category-specific rules.
What happens if I don't fulfil the export obligation?
If you fail to fulfil the EPCG export obligation within the 6-year period: (1) You must pay the full duty saved plus customs interest at 15% per annum calculated from the date of import. (2) DGFT may impose additional penalty. The EPCG licence can be extended for 2 + 2 extra years with 2% and 4% penalty respectively on the unfulfilled amount. Redemption (EODC) requires submitting export evidence to your DGFT Regional Authority.