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EPCG Scheme: Latest Amendments in Customs & DGFT and Comparison with Old Rules (Complete Guide)

The Export Promotion Capital Goods (EPCG) Scheme is one of India’s most widely used export incentive schemes, allowing import of capital goods at zero Basic Customs Duty (BCD) against an undertaking to fulfil a prescribed Export Obligation (EO). With multiple amendments introduced by DGFT and Customs during 2024–2025, exporters must stay updated to avoid non-compliance, penalties, or delays in closing EPCG licences.

This article explains the latest changes, their practical impact, and a clear Old vs New comparison for quick understanding.

What is EPCG Scheme?

The EPCG Scheme, governed by the Foreign Trade Policy (FTP), enables eligible exporters to import capital goods required for pre-production, production, or post-production at zero Basic Customs Duty, subject to:

  • Meeting Export Obligation = 6 times the duty saved, and
  • Fulfilling EO within a 6-year period from the date of issue of the Authorisation.

Capital goods include plant and machinery, equipment, spares, moulds, dies, tools, and related fixtures.

Latest Amendments (2024–2025): What Has Changed?

1. Extension and Relaxation of Installation Certificate (IC) Timelines

Earlier, EPCG holders were required to submit the Installation Certificate within 6 months of import. Regional Authorities and Customs enforced this strictly, often leading to procedural delays.

New Change:
DGFT in 2024 issued updated instructions allowing longer and more flexible timelines for submission of Installation Certificates. Officers have been directed to accept ICs even when installation is delayed due to logistic or site-related issues.

Impact:

  • Reduced procedural defaults
  • More time for installation in large projects
  • Ease of compliance for small exporters

2. Reduction of Annual Average Export Obligation for 2023–24

Many product sectors experienced a decline in exports during 2023–24.

New Change:
DGFT has allowed re-fixation (reduction) of Annual Average EO for EPCG licences where the exporter’s sector witnessed a decline in exports.

Impact:

  • Lower EO burden
  • Easier closure of licences
  • Relief for struggling sectors

3. Standardised Fees and Composition Option for EO Extension

Earlier, exporters had to apply for EO extension on a case-by-case basis, with inconsistent fees and no clarity.

New Change:
DGFT introduced standard fees, simplified documentation, and composition fee options for regularising EO shortfall.

Impact:

  • Predictability in compliance cost
  • Faster approval cycles
  • Better for small and medium exporters

4. Clear Harmonisation Between DGFT and Customs on AD/CVD/IGST Applicability

There were frequent disputes earlier on whether Anti-Dumping Duty, Countervailing Duty, or IGST exemptions apply under EPCG.

New Change:
DGFT has clarified the interplay between EPCG benefits and Customs notifications, leading to uniform interpretation.

Impact:

  • Fewer disputes at ports
  • Smooth clearance of capital goods
  • Higher certainty for importers

5. DGFT Classification Now Treated as Binding on Customs

In multiple circulars and guidance updates, DGFT clarified that classification decisions issued by DGFT for EPCG imports are binding on Customs.

Impact:

  • Lower risk of classification disputes
  • Smooth assessment at Customs
  • Faster clearance and reduced litigation

Old Rules vs New Rules — Quick Comparison Table

AreaOld EPCG Rules (Before 2024)New EPCG Rules (2024–2025 Amendments)
Installation CertificateMandatory within 6 months, strictly enforcedFlexible and extended timelines allowed
Annual Average EOFixed based on past export performanceCan be reduced for 2023–24 if sector exports declined
EO Extension / ShortfallVariable, unclear fees, complex filingsStandardised fees + composition option available
Customs Duty InteractionFrequent disputes on AD/CVD/IGST treatmentClear DGFT–Customs harmonisation circulars
ClassificationCustoms and DGFT differed in interpretationDGFT classification treated as binding

Practical Compliance Tips for EPCG Holders

1. Update your EPCG licence records

Check whether your Regional Authority has applied Annual Average EO reduction (if eligible).

2. Submit pending Installation Certificates

Make use of the extended window and attach supporting documents in case of delays.

3. Plan for EO shortfall in advance

Opt for the composition fee mechanism instead of waiting until the final year.

4. Keep a file of all DGFT circulars

Share DGFT clarifications with Customs officers during import to avoid unnecessary queries.

5. Monitor all capital goods imported under EPCG

Maintain invoices, installation photos, CE certificates, and proof of usage.

Conclusion

The EPCG Scheme continues to be a powerful tool for exporters seeking to reduce capital costs. The 2024–2025 amendments focus on ease of compliance, reduction of Export Obligation burden, and removal of interpretational disputes between DGFT and Customs. With flexible timelines, reduced EO for specific years, and simplified extension options, exporters now have a much smoother compliance framework.

Businesses should take advantage of these changes to ensure timely EPCG closure and avoid unnecessary penalties.

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