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+919812320574Enquiry Us
sahil@sahiljainassociate.com
A manufacturer imports expensive machinery under the EPCG scheme because the business plans to increase exports.
The machinery arrives. Production improves. Orders start coming in.
A few years later, someone asks a simple question: “Have we completed all the obligations connected with the EPCG authorisation?”
That is when the real problem can begin.
EPCG compliance is not something you should think about only when an obligation is nearing its deadline. It needs to be tracked from the beginning, with proper records and regular reviews.
The Export Promotion Capital Goods (EPCG) scheme allows eligible businesses to import capital goods for pre-production, production or post-production purposes at a concessional or zero customs duty, subject to the conditions of the scheme.
The major benefit comes with an important responsibility: the authorisation holder must meet the applicable export obligation within the prescribed framework.
In simple terms, you receive a benefit today and commit to meeting specific export-related conditions.
That commitment needs to be managed carefully.
The best time to seek professional advice is before you make the application.
Businesses should understand the obligations connected with the proposed authorisation, the nature of the capital goods, export plans and documentation requirements.
This allows you to assess whether the scheme actually fits your business plans.
Once the machinery has been imported, compliance does not stop.
You need to maintain appropriate records and keep track of the conditions attached to the authorisation.
This is where a structured internal process becomes useful.
Waiting until the final stage is risky.
If exports have been slower than expected, you may discover too late that your business needs to take corrective action.
Regular monitoring gives you time to identify the gap and understand the available options under the applicable rules.
The exact requirements depend on the authorisation and applicable regulations, but businesses may need to monitor matters such as:
Export obligation
Imported capital goods
Authorisation conditions
Supporting export documents
Shipping and export records
Relevant customs documentation
Records supporting fulfilment of obligations
Reporting and application requirements
Closure or redemption documentation
The important part is maintaining a clear connection between the authorisation, imported machinery and exports made against the obligation.
Suppose a manufacturing company imports machinery under EPCG because it expects exports to increase substantially.
During the first year, international orders are strong. The second year is slower, and management becomes focused on domestic sales.
The business continues operating but stops actively monitoring its export obligation.
By the time management reviews the EPCG position, it has to spend significant time collecting old shipping documents and calculating the outstanding obligation.
A better approach would have been to review EPCG compliance every quarter.
The company could then see its progress clearly and take action much earlier if exports were falling behind expectations.
EPCG compliance is closely connected with documentation.
A business may genuinely believe it has fulfilled its obligation, but if supporting records are incomplete or difficult to trace, proving compliance can become unnecessarily difficult.
We recommend maintaining a dedicated EPCG file—physical or digital—with the relevant authorisation, import records, export documentation, calculations and correspondence.
The purpose is simple: you should be able to understand your EPCG position without reconstructing years of transactions.
India's exports of goods and services remained a major part of economic activity.
According to the Ministry of Commerce and Industry, India's total exports of goods and services during FY 2024–25 were estimated at about US$820.93 billion, showing the scale of India's participation in international trade.
For businesses using export-linked schemes, the opportunity is significant—but so is the importance of maintaining proper compliance systems.
This is advice we believe deserves more attention.
The EPCG benefit should not be the reason you buy machinery.
The machinery should make commercial sense for your business first.
If the equipment does not improve production, quality, capacity or export potential, the duty benefit alone should not drive the investment decision.
Before proceeding, look at the complete picture: machinery cost, financing, expected production, export demand, operating expenses and the obligations attached to the scheme.
Tax or customs benefits should support a good business decision—not create one.
Several problems can arise if the obligations are not monitored properly.
A business may have difficulty proving fulfilment, miss an important procedural requirement, struggle to produce supporting documents or discover an export shortfall too late.
The financial impact depends on the specific circumstances and applicable rules.
There is also a practical cost: management time.
Reconstructing several years of export records is far more difficult than maintaining them correctly from the start.
Sahil Jain & Associates – Chartered Accountants supports businesses with accounting, taxation, audit and compliance-related requirements.
For clients dealing with EPCG obligations, our approach is to first understand the authorisation and the business's export activity, then help organise the relevant records and monitor the compliance position.
We believe clients should know where they stand instead of discovering their compliance position when a deadline is approaching.
Before engaging a professional, ask:
EPCG compliance cannot be understood by looking at one document.
The authorisation, imported goods, export activity and supporting records need to be considered together.
A compliance review should not happen only at the end.
Regular monitoring can help identify potential gaps while there is still time to respond.
Your records should make it easy to connect exports with the relevant obligation.
A professional should help you create a system that makes this process manageable.
You should understand what your current position is, what remains to be done and where potential problems may exist.
Good advice should give you clarity, not create more confusion.
EPCG compliance means meeting the conditions and obligations attached to an EPCG authorisation, including the applicable export obligation and required documentation and procedures.
The consequences depend on the specific authorisation, the extent of non-fulfilment and the applicable rules. There may be financial or procedural consequences, so businesses should seek professional advice rather than waiting until the obligation period ends.
Maintain a dedicated record of the EPCG authorisation, imported capital goods and exports counted toward the obligation. Regularly reconcile your export records with the applicable obligation and retain supporting documents.
EPCG can be a useful scheme for businesses investing in capital goods with an export focus.
But the benefit comes with responsibilities that need to be managed throughout the life of the authorisation.
If your business is planning to use EPCG, has already imported machinery under the scheme or needs help reviewing an existing obligation, Sahil Jain & Associates – Chartered Accountants can help you understand and organise your compliance requirements.
Contact our team today for a review of your EPCG position and get a clear picture of the documentation, obligations and next steps relevant to your business.
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