EN 
EPCG stands for Export Promotion Capital Goods. The EPCG Scheme has been introduced by the Government of India (GOI) to allow the Import of capital goods (except those specified in the negative list in Appendix 5F) for pre-production, production, and post-production at Zero customs duty. These capital goods imported under the EPCG Authorization are exempt from IGST and Compensation Cess until 30th September 2021.
Under the EPCG scheme, a license is granted to exporters to import capital goods at a concessional rate of customs duty. The licensees must fulfil a specific export obligation (EO) as laid down in the scheme’s rules. Therefore, exporters are obligated to export a prescribed quantity of goods related to the capital goods imported under the scheme within a specified number of years from the license issue date.
In simple words, the EPCG scheme aspires to promote the quality of goods produced in India, ultimately improving the global demand and domestic demand for goods manufactured in India. Through this scheme, the Govt. also aspires to enhance the export competitiveness of India.
The definition of capital goods has been given under Chapter 9 (para 9.08) of the FTP 2015-20. However, in a nutshell, the following capital goods are eligible under the EPCG Scheme:
Further, the DGFT notified a list of capital goods permitted/ not permitted under the EPCG Scheme vide Public Notice No. 47/2015-2020 issued on 6th December 2017:
| S. No. | Name of Item | Import ability under EPCG Scheme |
| 1 | Cables | Cables Permitted only as an integral part of capital goods |
| 2 | Railway wagons (excluding specialized wagons) | Not permitted |
| 3 | Tractors | Not permitted |
| 4 | Trucks/ Tippers/ Dumpers and Spares including tyres | Permitted only to the mining sector |
| 5 | Motor cars, sports utility vehicles, all-purpose vehicles | Not permitted |
| 6 | Airport ground handling equipment | Not permitted |
| 7 | Furniture, carpets, crockery, marble, chandelier, tiles, flooring, doors of rooms, fixing panels | Permitted only to the hotel industry |
| 8 | Construction equipment | Permitted only for providing services |
| 9 | All construction materials, including cement, steel, etc. | Not permitted |
| 10 | Computers and printers | Not permitted |
| 11 | All second-hand capital goods | Not permitted |
| 12 | Capital Goods for export of electrical energy; supply of energy under chapter 7; supply of power in their unit and supply/ export of electricity transmission services | Not permitted |
1.1. Prerequisites for Application
Before applying for the EPCG scheme, the applicant should complete the following basic requirements:
1.2 Export Obligation (EO)
It is essential to fulfilling export obligations (Specific Export obligations) to avail of benefits under the EPCG Scheme. An export obligation means earning foreign exchange equal to six times the amount of customs duty saved. This shall be noted that the export obligation to be fulfilled shall be the specific one that is over and above the Average export obligation for an importer.
What if prescribed export obligations are not fulfilled?
If the exporter cannot meet exporter obligations, he shall be liable to pay Customs duty plus interest proportionately to the unfulfilled value of export obligation as defined at the time of issuance of the license.
EPCG Scheme has been operational in the country for many decades now, and it has been contributing to saving the initial capital costs which were required to be incurred by the importers at the time of import of capital goods in the country. EPCG Scheme has always been a part of the Foreign Trade Policy launched by the Indian Government every five years and also has been under the radar of the various developed countries along with various other incentives like MEIS, Advance Authorisation etc.
Various incentives have been under a question mark for many years now as various proceedings have already been initiated by developed countries against India, highlighting the various incentives as excess subsidies being given to the Indian companies, which are against the essence of the rules defined at the level of World Trade Organisation (WTO).
At present, because of the Pandemic disruption, the Foreign Trade Policy, along with various schemes, has been extended by the government up to 31st September 2021. The industry is visibly concerned about the continuation of the scheme and raising concerns with the government. However, there are chances that in the event of withdrawal of the EPCG scheme, a new scheme may be introduced that ratifies the WTO requirements along with providing the benefit to the Indian companies.
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