Export Promotion Capital Goods Scheme

If you are a new MSME owner looking to expand your export capabilities, the EPCG Scheme can be a game-changer. It allows you to import capital goods such as machinery, equipment, and technology at reduced or zero customs duty, provided you commit to exporting goods worth a specific value. The scheme is part of India's broader strategy to promote exports, encourage technological upgradation, and support the growth of export-oriented industries.

Let’s understand how it can help your business.

What is the Export Promotion Capital Goods Scheme?

The Export Promotion Capital Goods (EPCG) Scheme was first operationalised on 1 April 2015 under the Foreign Trade Policy 2015-20. It enables you to import capital goods required for manufacturing export products at zero or concessional customs duty, provided you meet certain export obligations within a specified period.

Objectives of the EPCG Scheme

• Facilitate the import of capital goods for producing high-quality goods and services.
• Increases the competitiveness of Indian manufacturing in global markets.
• Support technological upgradation for export-oriented units.
• Encourage MSMEs to expand their export footprint.

Key Features of the EPCG Scheme

• You can import capital goods for pre-production, production, and post-production at zero customs duty.
• The scheme covers both new and second-hand capital goods, including spares, jigs, fixtures, tools, moulds, dies, and software that are part of capital goods.
• The scheme also gives you exemptions from IGST and Compensation Cess on imported capital goods.
• You can choose to procure capital goods from Indian suppliers instead of importing, if you prefer.
• You must fulfill an export obligation equal to six times the amount of duty saved, to be completed within six years from the date of authorization.
• The export obligation can be reduced if you meet a large part of your target early, use green technology, or your business is in special regions like the North Eastern states.
• The scheme helps you upgrade your technology and production capacity, making your business more competitive in global markets.
• Both manufacturer and merchant exporters, as well as service providers, are eligible to apply.
• There is no fixed interest rate since the scheme is not a loan but a customs duty exemption; however, failure to fulfill obligations may attract penalties or interest on unpaid duties.
• The authorisation for import is valid for 24 months from the date of issue.
• You can procure capital goods from domestic sources as well, following the scheme's guidelines.

Financial Assistance Offered Under the EPCG Scheme

Eligibility Criteria for the EPCG Scheme

Eligibility 

As a new MSME owner, you are eligible if:

• You are a manufacturer or exporter (with or without supporting manufacturers).
• You are a merchant exporter tied to a supporting manufacturer.
• You are a service provider (including Common Service Providers).
• You possess a valid Importer Exporter Code (IEC).
• Your business activity is not listed in the scheme’s negative list.

Non-Eligibility

You are not eligible if:

• You wish to import capital goods listed in the scheme’s negative list.
• Your business does not have a valid IEC.
• You cannot commit to or fulfill the required export obligation within the six-year period.
• You are importing capital goods for purposes not related to export-oriented production.

Documents Required for the EPCG Scheme

For Issuance of an EPCG Authorisation:

• Self-certified copy of your MSME certificate or Industrial License.
• Self-certified copy of Service Tax Registration (if you provide services).
• If not registered for Service Tax, a declaration and Registration-cum-Membership Certificate (RCMC).
• Certificate from a Chartered Engineer confirming the machinery details.
• Certificate from a Chartered Accountant or Cost Accountant confirming financial details.

For Import of Spares/Tools for Existing Machinery:

• List of imported and installed machinery certified by a Chartered Engineer or Central Excise authority.

For Export-Oriented Units (EOU/SEZ):

• Self-certified ‘No Objection Certificate’ from the Development Commissioner showing details of capital goods imported and their depreciated value.

For the Amendment of EPCG Authorisation

• Chartered Engineer’s certificate for any changes in import/export items.
• If importing restricted items, clearance copy from the Empowered Committee (EFC).

For Invalidation (Indigenous Sourcing)

• Proforma invoice of the indigenous item you want to invalidate.

For the Closure of EPCG Authorisation

• TR-6 Challan for regularization.
• Certificate from a Chartered Accountant confirming closure.

How to Apply for the Export Promotion Capital Goods Scheme

Step 1: Obtain a valid IEC (Importer Exporter Code) if you don’t already have one.

Step 2: Prepare all required documents, including the Chartered Engineer’s Certificate.

Step 3: Register on the DGFT (Director General of Foreign Trade) online portal.

Step 4: Fill out the EPCG application form and upload the necessary documents.

Step 5: Submit your application online and pay the prescribed application fee.

Step 6: Wait for the DGFT to process your application and issue the EPCG Authorisation.

Step 7: Once approved, import the capital goods as per the authorisation and start fulfilling your export obligation.

Benefits of the EPCG Scheme

• Reduced Capital Costs
  You can import advanced machinery and technology at zero or concessional duty, lowering your initial investment.
• Boosted Export Competitiveness
  Access to modern capital goods enhances the quality and quantity of your exports, making you more competitive globally.
• Encouragement for Technological Upgradation
  The scheme incentivises you to upgrade your production facilities, improving efficiency and product standards.
• Flexibility in Procurement
  You can import both new and second-hand capital goods, and also procure from domestic sources, giving you more options.

Real-World Examples of the EPCG Scheme

• Textile MSME upgrading looms for export
• Engineering MSME importing CNC machines
• IT MSME acquiring servers for international service delivery

Related Government Support Plans with the EPCG Scheme

Final Words

If you are an MSME owner aiming to expand your export business, the EPCG Scheme is a valuable tool to access world-class technology at minimal upfront cost. By fulfilling the export obligations, you not only contribute to your business growth but also to India’s export economy.