A Comprehensive Guide to the EPCG Scheme for Indian Exporters

Are you constantly seeking ways to enhance your production capabilities and compete globally? You’re in luck – the government’s EPCG scheme is a powerful tool designed specifically for businesses like yours. 

In its full form, EPCG stands for Export Promotion Capital Goods, an initiative by the Indian government to facilitate the import of capital goods at reduced or zero customs duty¹. The scheme can directly bolster your capacity to produce high-quality goods for international markets.

In this read, we’ll delve into the EPCG benefits and guide you through how to apply for an EPCG license online to leverage these advantages in your export growth. We’ll also explore how your choice of global shipping services can significantly enhance your efforts.

What is the EPCG Scheme?

The EPCG scheme directly promotes export growth by offering significant financial incentives to Indian exporters who import capital goods to manufacture export-oriented products. 

It actively supports the manufacturing sector by allowing the import of capital goods at zero or concessional customs duties. Here are some of the goods involved²:

• Machinery 
• Equipment
• Spares
• Fixtures
• Jigs
• Tools
• Molds
• Dies

Having an EPCG license reduces initial investment costs, meaning that more exporters can penetrate international markets and attract more buyers through quality goods at competitive prices. In turn, India’s overall exports stand to grow. 

The EPCG license

The EPCG license is an authorization issued by the Director General of Foreign Trade (DGFT) to eligible Indian exporters. This document serves as your gateway to accessing the benefits of the EPCG scheme, meaning that you can import capital goods required for pre-production, production, and post-production at lower costs. 

By waiving or significantly reducing these import charges, the EPCG license significantly lowers your initial capital investment and enhances the financial viability of your export operations. 

EPCG license scheme benefits

The EPCG scheme offers several benefits, providing significant support for enhancing your global competitiveness:

• Financial advantages: The scheme allows for the duty-free import of capital goods, substantially freeing up capital that can be used for other crucial aspects of your business growth.
• Cost reduction: Lower customs charges decrease your overall international shipping charges from India. This directly translates to reduced overall production costs, thereby enhancing your export competitiveness by enabling you to offer more attractive pricing in international markets.
• Streamlined export processes: While the initial application requires diligence, you stand to enjoy smoother post-export EPCG scheme operations and potentially faster shipment customs clearance for your goods.

How EPCG fits in India’s export growth engine

The EPCG scheme plays a vital role in the Indian government’s comprehensive export promotion strategies, working in tandem with other initiatives to incentivize and boost exports. 

Schemes like the Remission of Duties and Taxes on Export Products (RoDTEP) scheme complement EPCG by providing additional financial benefits and reducing the tax burden on exporters, further enhancing their competitiveness. 

How to get an EPCG license from DGFT

Eligibility 

The EPCG scheme is primarily designed for manufacturers and merchant exporters who intend to produce goods in quantity and sell a large portion overseas2. 

As such, if you are not a heavy exporter or do not expect to produce goods at scale, you should consider whether you can fulfil the scheme’s export obligations before applying for a license. 

Required documents for the EPCG license

For successful EPCG license registration, you will need to prepare and submit several key documents2:

• Import Export Code (IEC): This is your business identification number for engaging in any import-export activities in India issued by the DGFT³.
• PAN card: The ten-digit alphanumeric number on your Permanent Account Number (PAN) card serves as your tax identification⁴.
• Proforma invoice: A detailed invoice from your capital goods supplier outlining the specifications, value, and other relevant details of the goods to be imported.
• Digital signature: A valid digital signature certificate (DSC) is essential for submitting your application and documents online through the DGFT portal.
• GST registration certificate: A copy of your Goods and Services Tax (GST) registration certificate, if your business is registered under GST.
• Excise registration: This is required if your manufacturing unit is registered under central excise.
• Registration certificate from the Tourism Department: Businesses in the tourism sector availing the EPCG scheme may need to provide this certificate.
• Brochure: A brochure or technical literature providing details about the capital goods being imported may be requested.
• Registration cum Membership Certificate (RCMC): A copy of the RCMC certificate issued by the relevant Export Promotion Council (EPC) or other recognized authority to prove that you’re a registered exporter from India.
• Self-certified copy and original of Certificate of Chartered Accountant: This determines your export obligations.
• Self-certified copy and original of Certificate of Chartered Engineer: This confirms that your imported capital goods do what you say they do.

How to apply for an EPCG license online

Applying for an EPCG licence online through the DGFT involves⁵:

1. DGFT website registration: Ensure you have your IEC and a valid digital signature certificate (DSC) for this step.
2. Online application filing: Navigate to the Online E-com application and fill out the form.
3. Document upload: Upload scanned copies of all the necessary documents. Ensure the documents are clear and in the prescribed format.
4. Submit your application: Use your digital signature to complete the application.
5. Verification and approval: The DGFT authorities will review your application and the submitted documents. If everything is in order, they will issue your EPCG license.

EPCG scheme export obligations

A primary consideration under the EPCG scheme revolves around export obligations. As a beneficiary of this scheme, your business will be obligated to export finished goods manufactured using the imported capital goods within a specific timeframe2. This timeframe is typically six years from the date your EPCG license is issued. 

The export obligation under the EPCG scheme is usually quantified as six times the duty saved on the imported capital goods, and it must be fulfilled by earning the equivalent foreign currency2. 

Therefore, careful planning of your production and export targets is crucial to ensure you can realistically meet these stipulated obligations within the given period.

Tips for success under EPCG

To ensure you successfully leverage the EPCG scheme benefits and meet your obligations, consider these tips:

• Thorough planning: Before applying, meticulously plan your export strategy and production targets to ensure you can realistically meet the export obligation under the EPCG scheme within the given timeframe.
• Accurate documentation: Maintain accurate and organized records of all import and export transactions related to your EPCG license to facilitate compliance and reporting.
• Leverage experienced logistics partners: Consider partnering with experienced international logistics services providers like DHL Express for worldwide shipping. Their expertise in shipment customs clearance can help ensure your export consignments move smoothly and efficiently, supporting your efforts to meet your export obligations on time.
• Stay updated: Keep abreast of any amendments or updates to the EPCG scheme and related regulations issued by the DGFT to ensure ongoing compliance.

Unlock your export potential with DHL Express

The EPCG scheme stands as a powerful catalyst for promoting exports and fueling your business’s growth by reducing the financial burden of importing essential capital goods. If you’re applying for the EPCG license, thorough planning, meticulous documentation, and a clear understanding of the export obligations are paramount. 

As you explore the opportunities presented by the EPCG scheme, remember that a reliable international shipping partner can significantly enhance your ability to maximize these benefits. At DHL Express, our fast delivery services and familiarity with the customs clearance process in India can help ensure your export operations run smoothly and efficiently. 

Embark on your export growth journey with express shipping today – open a business account with DHL Express and benefit from our professional guidance and expertise.