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Export Promotion Capital Goods (EPCG) Scheme: Benefits for Exporters

Vikash

• 6 min read
Export Promotion Capital Goods (EPCG) Scheme
Export Promotion Capital Goods (EPCG) Scheme

How to file GSTR 2B is often one of the first questions exporters ask when they start dealing with GST and export benefits. While GSTR-2B helps you track eligible input tax credit, exporters in India can also reduce their overall cost by using government schemes like the export promotion capital goods scheme. This scheme is designed to support small and micro-sized businesses that want to grow exports without spending too much upfront on machinery or equipment.

This informative blog explains the EPCG scheme. You will learn what it is, how it works, who can apply, and how it benefits exporters. Everything is written in plain language, so even first-time exporters can understand it easily.

What Is the Export Promotion Capital Goods Scheme

The first thing most exporters want to know is what export promotion capital goods are and why this scheme matters.

The export promotion capital goods scheme is a government scheme that allows exporters to import capital goods at zero or reduced customs duty. In return, the exporter agrees to export goods or services worth a particular value over a fixed period.

In simple words, the government helps you buy machines or equipment at a lower cost so you can produce better products and increase exports.

When people ask what export promotion capital goods are, the answer is simple. These are machines, tools, and equipment used to make goods or provide services meant for export.

Which Are Capital Goods Under the Export Promotion Capital Goods

Understanding which are capital goods under export promotion capital goods is fundamental before applying.

Capital goods under this scheme include items used directly or indirectly in production, quality testing, packaging, or service delivery for exports.

Some common categories include:

  • Manufacturing machines.
  • Printing and packaging machines.
  • Textile and garment machinery.
  • Engineering tools and equipment.
  • Computers and software systems are used in export services.
  • Testing and quality control equipment.

These goods help improve production capacity and quality, which supports long-term export growth.

Examples of Export Promotion Capital Goods Under GST

Many small businesses find it easier to understand the scheme through real examples. Here are a few examples of export promotion capital goods under GST:

  • A garment exporter importing sewing and cutting machines.
  • A food exporter importing cold storage or processing machines.
  • A printing business importing advanced printing equipment for export orders.
  • An IT service exporter importing high-end servers.
  • A handicraft exporter importing polishing or finishing tools.

All these items qualify as export promotion capital goods if they are used to fulfill export obligations.

Export Promotion Capital Goods EPCG Scheme Explained Simply

The export promotion capital goods EPCG scheme works on a give-and-take principle.

Here is how it works in simple steps:

  • You import capital goods at zero or reduced customs duty.
  • You commit to exporting goods or services worth a fixed multiple of the duty saved.
  • You complete this export obligation within the given time.
  • Once obligations are met, no duty needs to be paid.

This system helps small exporters grow without heavy upfront investment.

Export Promotion Capital Goods vs EPCG

Many people get confused between export promotion capital goods vs EPCG. The truth is, they are closely connected.

  • Export promotion capital goods refers to the goods allowed under the scheme.
  • EPCG is the name of the scheme that governs their import and usage.

So, there is no real conflict in export promotion, capital goods vs EPCG. One explains the goods, and the other explains the policy.

Who Can Apply for the Export Promotion Capital Goods Scheme

The EPCG scheme is open to many types of exporters, including:

  • Manufacturer exporters.
  • Merchant exporters are tied to supporting manufacturers.
  • Service providers exporting services.
  • Small and micro-sized businesses.
  • Startups with export plans.

Even if you are new to exporting, you can apply as long as you meet basic compliance rules.

Filing an Export Promotion Capital Goods Scheme Application

Many exporters worry about filing an export promotion capital goods scheme application, but the process is quite structured.

Here is a simple overview:

  • Register with DGFT (Directorate General of Foreign Trade).
  • Ensure your IEC is active.
  • Prepare details of capital goods to be imported.
  • Submit export obligation projections.
  • Apply online through the DGFT portal.

Once approved, you receive an EPCG authorization that allows duty-free or reduced-duty imports.

How Export Promotion Capital Goods Application Fee Determined

Another common question is how the export promotion capital goods application fee is determined.

The application fee depends on:

  • The value of capital goods being imported.
  • The duty saved amount.
  • DGFT fee structure.

The fee is usually affordable and designed to encourage small exporters to apply without financial stress.

Supply Against Export Promotion Capital Goods Authorization

Supply against export promotion capital goods authorisation refers to the use of imported goods strictly for export-related activities.

Key rules include:

  • Goods must be used only for export production or services.
  • Selling or leasing without permission is not allowed.
  • Records must be maintained for audits.

It ensures the benefits are used correctly and not misused for domestic sales.

Procedure for Export Promotion Capital Goods Transfer to Domestic

Sometimes exporters want to shift their business focus. In such cases, understanding the procedure for export promotion of capital goods transfer to the domestic market is essential.

If you want to use EPCG goods for domestic purposes:

  • You must inform DGFT.
  • Pay the applicable customs duty with interest.
  • Follow approval and documentation rules.

This step ensures compliance and avoids penalties.

Export Obligation Under the EPCG Scheme

Export obligation is the heart of the EPCG scheme.

Key points include:

  • Export value is linked to the duty saved.
  • The time period is usually several years.
  • Can be fulfilled through goods or services.
  • Proper documentation is mandatory.

Failure to meet obligations may lead to penalties or duty recovery.

GST Compliance and EPCG Scheme

GST plays a significant role in export compliance. It is where understanding how to file GSTR 2B becomes useful again.

GSTR-2B helps exporters:

  • Track eligible input tax credit.
  • Match supplier invoices.
  • Avoid ITC mismatches.
  • Maintain clean GST records.

Good GST compliance supports smooth EPCG audits and export reporting.

Benefits of Export Promotion Capital Goods for Small Businesses

The export promotion capital goods scheme offers many benefits, especially for small and micro-sized businesses.

Key benefits include:

  • Lower cost of importing machinery.
  • Improved production quality.
  • Better global competitiveness.
  • Encouragement to scale exports.
  • Reduced financial pressure.

It makes it easier for small exporters to compete with larger players.

Common Mistakes to Avoid Under the EPCG Scheme

To make the most of the scheme, exporters should avoid these mistakes:

  • Missing export obligation deadlines.
  • Poor record keeping.
  • Using goods for non-export purposes.
  • Ignoring GST compliance.
  • Not tracking duty savings properly.

Staying organized helps avoid penalties and stress.

How Digital Tools Help Manage EPCG and GST

Managing EPCG obligations and GST filings manually can be difficult for small businesses.

And this is where tools like GimBooks help. GimBooks is a cloud-based and mobile-first bookkeeping platform designed for small and micro-sized businesses in India and the Middle East. It helps with:

  • GST-compliant invoicing
  • Easy bookkeeping
  • Tracking purchases and expenses
  • Better control over financial records

By keeping clean books and accurate GST data, exporters can manage EPCG obligations with more confidence.

Final Thoughts on Export Promotion Capital Goods Scheme

The export promotion capital goods scheme is a powerful support system for exporters who want to grow without high upfront costs. By understanding what export promotion capital goods are, following the correct application process, and staying compliant with GST, even small businesses can benefit greatly.

When combined with good accounting practices and tools, the scheme can help exporters build strong, sustainable export operations. With the proper planning, EPCG can become a long-term growth partner for your export journey.

To know more, explore the GimBooks expert blog section!

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FAQs about How to File GSTR 2B

1. How to file GSTR 2B if I am using the export promotion capital goods scheme?

To understand how to file GSTR 2B, you should know that GSTR-2B is an auto-generated statement. You do not file it manually. It is created based on supplier invoices uploaded in GSTR-1. Exporters using the export promotion capital goods scheme should review GSTR-2B regularly to check the eligible input tax credit and ensure all import and purchase invoices are reflected correctly.

2. What are export promotion capital goods, and who should use this scheme?

Export promotion capital goods refers to machinery or equipment imported for producing export goods or services. This scheme is ideal for small and micro-sized businesses that want to reduce customs duty costs while expanding their export operations. Manufacturers, service exporters, and merchant exporters can all benefit from it.

3. What are export promotion capital goods examples under GST?

Common examples of export promotion capital goods under GST include manufacturing machines, packaging equipment, testing tools, IT hardware for service exports, and printing machines. These goods must be used for export-related activities and comply with GST and EPCG rules.

4. How export promotion capital goods application fee determined?

Many exporters ask how the export promotion capital goods application fee is determined. The fee depends on the value of the capital goods and the duty saved. The DGFT sets this fee, and it is usually affordable to encourage participation from small and micro-sized businesses.

5. What happens if export promotion capital goods are transferred to domestic use?

If you want to use EPCG goods domestically, you must follow the procedure for exporting capital goods to domestic. It includes informing DGFT and paying the applicable customs duty with interest. Failing to do so can result in penalties and compliance issues.