Duty-free import authorisation

Category: Exports & Imports. From ₹9,999. Typical timeline: 30–60 days.

Overview

The Export Promotion Capital Goods (EPCG) scheme and Advance Authorisation let exporters import capital goods or input materials without paying customs duty, provided they meet a corresponding export obligation within a prescribed period — EPCG for machinery used to produce export goods, Advance License for duty-free raw material imports tied to a specific export order. Kanoons assesses which scheme fits the business, prepares the DGFT application with the export obligation computation, and tracks obligation fulfilment so the duty benefit is not later reversed with interest.

Who needs it

• A manufacturer investing in new machinery specifically to scale up export production
• An exporter with confirmed export orders needing duty-free raw material imports
• A business wanting to reduce landed cost of imported capital equipment used for export-linked manufacturing
• An existing EPCG/Advance License holder needing help tracking and closing the export obligation

Eligibility

• Manufacturer exporters or merchant exporters tied up with supporting manufacturers
• Businesses importing capital goods for pre-production, production or post-production of export goods (EPCG)
• Exporters needing duty-free import of inputs physically incorporated into an export product (Advance Authorisation)

Documents required

• IEC and RCMC (Registration-cum-Membership Certificate) from the relevant Export Promotion Council
• Proforma invoice for capital goods/inputs to be imported
• Export order or projected export turnover details supporting the obligation calculation
• Chartered Engineer certificate for EPCG capital goods, where required
• Bank guarantee/bond as prescribed for the authorisation

Process

1. Scheme assessment — Business needs are reviewed to determine whether EPCG (capital goods) or Advance Authorisation (inputs) is appropriate.
2. Export obligation computation — The export obligation (typically 6 times duty saved over 6 years for EPCG) is calculated based on the value of goods to be imported.
3. Application filing — Application is filed on the DGFT portal with supporting documents, proforma invoice and obligation computation.
4. Authorisation issuance — DGFT issues the EPCG/Advance Authorisation license, which is then registered with customs for duty-free clearance.
5. Obligation monitoring & redemption — Export obligation fulfilment is tracked and, on completion, a redemption/discharge application is filed with DGFT to close the authorisation.

Government fees

• EPCG/Advance Authorisation application fee (DGFT): Based on duty saved/CIF value, typically 0.2%-0.5% of the value subject to minimum and maximum caps prescribed by DGFT
• Bank guarantee/bond charges: Varies by bank and value of authorisation — billed separately by the bank

Professional fee

Starts at ₹9,999 depending on the value of the authorisation and complexity of the export obligation computation; covers scheme assessment, application drafting and filing.

Timeline

Application processing typically takes 30–45 working days from DGFT, depending on completeness of documentation and any clarification queries raised; obligation fulfilment itself runs over the license validity period (commonly up to 6 years for EPCG).

Deliverables

• EPCG/Advance Authorisation license from DGFT
• Customs registration of the authorisation for duty-free clearance
• Export obligation tracking sheet
• Redemption/discharge application at the end of the obligation period

Frequently asked questions

What is the export obligation under EPCG?

The standard export obligation under EPCG is to export goods/services equivalent to 6 times the duty saved on the imported capital goods, to be fulfilled within 6 years from the date of authorisation, subject to specific scheme variations.

What happens if the export obligation is not fulfilled?

Failure to fulfil the export obligation within the stipulated period requires payment of the duty saved along with applicable interest, and can also invite penal action under the Foreign Trade (Development and Regulation) Act.

Can Advance Authorisation be used for deemed exports?

Yes, Advance Authorisation can be issued for specified categories of deemed exports as well as physical exports, subject to conditions prescribed under the Foreign Trade Policy.

Common mistakes

• Underestimating the export obligation timeline and committing to machinery that cannot generate sufficient export turnover in time
• Not maintaining proper shipping bill linkage to the authorisation for obligation tracking
• Missing the redemption/discharge filing after fulfilling the obligation, leaving the authorisation technically open with DGFT
• Importing goods not matching the description approved in the authorisation, causing customs clearance disputes

Penalties for non-compliance

• Non-fulfilment of export obligation requires repayment of duty saved along with interest, currently levied at rates prescribed by customs from time to time
• Authorisation holders can face action under the Foreign Trade (Development and Regulation) Act, 1992 including denial of future DGFT benefits for continued default
• Customs can also initiate proceedings for mis-declaration if imported goods do not match the authorisation description

Legal references

• Foreign Trade Policy (current version) and Handbook of Procedures — govern EPCG and Advance Authorisation schemes
• Customs Act, 1962 and relevant notifications — govern duty exemption on import under these authorisations
• Foreign Trade (Development and Regulation) Act, 1992 — governs DGFT's regulatory powers and penalties for default