Do You Need EPCG (Export Promotion Capital Goods) Licence? A Practical Starting Point
The Export Promotion Capital Goods (EPCG) scheme allows Indian exporters to import new or second-hand capital goods — machinery, equipment, spares, tools — at zero Basic Customs Duty, provided an export obligation is fulfilled over six years. Done right, the scheme materially lowers capital deployment cost for manufacturing scale-up. Done wrong, it creates a multi-year contingent liability, blocks bank credit through Bank Guarantees, and exposes directors to FTDR proceedings.
What You're Really Buying
The Export Promotion Capital Goods (EPCG) scheme is a Foreign Trade Policy (FTP) benefit administered by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry, Government of India. It permits the import of capital goods — including machinery, plant and equipment, tools, jigs, fixtures, moulds, dies, and related spares up to prescribed limits — at zero Basic Customs Duty (BCD), provided the importer fulfills a stipulated export obligation (EO) over a period of six years from the date of licence issuance. The EPCG scheme is governed by Chapter 5 of the Foreign Trade Policy 2023 (currently in force) and the corresponding Handbook of Procedures (HBP).
For the full scope, current process and what PNPC includes, see the dedicated EPCG (Export Promotion Capital Goods) Licence service page.
When You'd Need This
- You are a manufacturer-exporter planning to import capital goods (machinery, equipment, tools) that attract Basic Customs Duty — and your projected export revenue over six years is at least six times the duty saved, making the EO commercially achievable
- You are scaling manufacturing capacity for export markets and the capital goods investment is material enough that the duty saving significantly improves project IRR or reduces payback period
- You are a service exporter — hotel, hospital, software company, tour operator — importing capital goods (kitchen equipment, medical devices, servers, tourist vehicles) for use in export-linked service delivery; the EPCG scheme specifically covers service exporters
- You operate in a sector where EPCG-eligible goods have significant BCD exposure — engineering goods, food processing, textile machinery, hospitality equipment, medical devices
Before You Assume You Need This
- a.
- The capital goods you plan to import already qualify for zero or very low duty under an existing exemption notification, a Free Trade Agreement (FTA) preferential rate, or a project import concessional rate — the incremental EPCG benefit may not justify the compliance overhead
- You operate as an Export Oriented Unit (EOU) — EOUs import capital goods duty-free under the EOU scheme itself; using EPCG on top creates a dual-compliance situation with conflicting EO obligations
Common Questions
What is the Export Promotion Capital Goods (EPCG) scheme in simple terms?
The EPCG scheme allows Indian exporters to import capital goods — machinery, plant, equipment, tools, dies, moulds, spares — without paying Basic Customs Duty (BCD) at the time of import, provided they commit to export goods or services worth at least six times the duty saved over a period of six years. The benefit is a direct upfront cash saving on the capital investment — the duty that would otherwise be paid to Customs is instead channelled into creating additional export capacity.
What does 'capital goods' mean for EPCG purposes — what can and cannot be imported under this scheme?
For EPCG purposes, capital goods include: new or second-hand machinery, plant and equipment, accessories, tools, jigs, fixtures, moulds, dies, and related spares (up to the limit prescribed in the licence conditions) that are used for manufacturing or service provision for export. Capital goods do not include: inputs or raw materials consumed in the manufacturing process (those are covered by Advance Authorisation); office equipment used for general administration not directly related to export production; personal computers used for non-manufacturing purposes; and goods explicitly placed on the Negative List under the relevant Customs Notifications. The FTP and Handbook of Procedures define the eligible categories — PNPC confirms the specific goods' eligibility before the application.
How is the Export Obligation under EPCG computed?
The Export Obligation is computed as: EO = 6 × (BCD foregone on CIF value of capital goods imported under the licence). The EO is expressed in Indian Rupees (FOB value of exports). Exports under any shipping bill from the licensed premises may count toward the EO — the exports do not need to be of the specific product made by the imported machinery, in most cases.
Working With PNPC Global
Speak with a PNPC Chartered Accountant before importing capital goods — we will assess whether EPCG is the right scheme, compute your Export Obligation, and tell you honestly whether the EO is achievable given your export profile. The duty saving is real; so is the six-year compliance commitment. We manage both.
PNPC Global has advised Chennai, Bangalore and Hyderabad businesses since 1986. Explore the full Registrations & Licences practice for related services, or go straight to the EPCG (Export Promotion Capital Goods) Licence page for specifics.
This is a general explainer, not a substitute for checking today's rules with PNPC or the relevant authority — figures and deadlines move, so none are quoted here as fixed.