Key Takeaways

• EPCG compliance requires tracking both specific and applicable average export obligations.

• Export obligation is generally six times the eligible customs duties, taxes and cess saved, subject to the applicable policy provisions.

• Capital goods installation certificates and supporting evidence must be maintained and submitted within the prescribed timelines.

• Shipping bills, Bills of Entry, export realisation evidence and authorisation records should be reconciled regularly.

• Timely export obligation discharge and authorisation closure help prevent avoidable compliance issues.

Introduction

The Export Promotion Capital Goods (EPCG) Scheme is an important facility for Indian exporters and manufacturers looking to import eligible capital goods at concessional or zero customs duty, subject to applicable conditions. It supports investment in machinery, production equipment and technology while promoting export growth.

However, receiving an EPCG authorisation is only the beginning. Businesses must fulfil export obligations, install the imported equipment, maintain documentary evidence and complete the prescribed closure procedure.

In 2026, exporters should conduct a structured EPCG compliance audit to identify pending obligations, missing documents and approaching deadlines before these issues affect their business operations.

What Is an EPCG Compliance Audit?

An EPCG compliance audit is an internal review of an organisation’s EPCG authorisations, imports, capital goods utilisation, export performance, applicable average export obligation and regulatory documentation.

The purpose is to confirm that the business has complied with the Foreign Trade Policy (FTP), Handbook of Procedures (HBP), authorisation conditions and applicable Customs requirements.

Featured Snippet Answer: What is the EPCG compliance audit checklist?

An EPCG compliance audit checklist is a structured review of an exporter’s authorisation details, duty saved, capital goods installation, export obligation calculations, shipping bills, export proceeds, average export obligation and supporting documents. It helps identify compliance gaps, track deadlines and prepare for DGFT export obligation discharge and authorisation closure.

EPCG Compliance Audit Checklist for 2026

1. Verify EPCG Authorisation Details

Start by reviewing every active and pending EPCG authorisation held by the company.

Check the following:

• EPCG authorisation number and date of issue.

• Name of the authorisation holder and relevant IEC details.

• Description, quantity and value of approved capital goods.

• Applicable duty exemption and duty saved amount.

• Approved export products and relevant conditions.

• Import validity and export obligation completion dates.

• Amendments, extensions and other approvals, where applicable.

Maintain a separate compliance tracker for each authorisation rather than combining all licences into one record.

2. Review Capital Goods Installation

Installation compliance is a critical checkpoint for manufacturers and exporters.

Verify whether the imported capital goods have been installed and whether the prescribed installation certificate has been obtained from the appropriate Customs authority or an independent Chartered Engineer, as applicable.

Review:

• Bills of Entry and import documentation.

• Machinery invoices and equipment identification details.

• Installation certificate and submission acknowledgement.

• Installation location and relevant supporting records.

• Records of machinery relocation, disposal or other changes, where applicable.

Under the applicable HBP provisions, the installation certificate is generally required within six months from completion of import. Check the precise requirement applicable to the authorisation and any permitted exceptions.

3. Calculate Export Obligation Correctly

EPCG holders must monitor their specific export obligation (EO) and applicable average export obligation (AEO).

Under the standard EPCG framework, specific EO is generally six times the duties, taxes and cess saved, to be fulfilled within six years from the date of authorisation, subject to applicable provisions and exemptions.

The audit should confirm:

• Total export obligation imposed under each authorisation.

• Export obligation achieved against the prescribed target.

• Block-wise performance and deadlines, wherever applicable.

• Average export obligation requirements based on the applicable policy.

• Eligible exports, permitted adjustments and supporting evidence.

• Any approved extensions, reductions or special exemptions.

Do not assume that meeting the specific EO automatically fulfils the average EO requirement. Evaluate both independently.

4. Reconcile Shipping Bills and Export Evidence

Export data must be accurate, complete and traceable to the relevant EPCG authorisation.

Cross-check the following records:

• Shipping bills and export invoices.

• Export product descriptions and relevant classifications.

• FOB values and other applicable export calculations.

• Bank Realisation Certificates (e-BRCs) or other accepted realisation evidence, where required.

• Foreign exchange realisation and supporting bank records.

• DGFT or Customs records relating to eligible exports.

• Export obligation calculations maintained by the finance team.

Investigate discrepancies in product descriptions, values, dates or export records before submitting a discharge application.

5. Check Domestic Sourcing and Supporting Documents

EPCG capital goods may also be procured from eligible domestic manufacturers through prescribed procedures, including an Advance Release Order or an invalidation letter, where applicable.

For such transactions, verify:

• Relevant authorisation and procurement approvals.

• Domestic supplier invoices and delivery records.

• Applicable duty-saved calculations.

• Installation and utilisation evidence.

• Documentation supporting export obligation fulfilment.

Ensure that records for imported and domestically sourced capital goods are properly linked to the relevant authorisation.

6. Prepare for DGFT Closure and EODC

Once the applicable export obligations are fulfilled, review whether the authorisation is ready for closure.

The compliance team should verify:

• Completion of specific and applicable average export obligations.

• Availability of prescribed export and realisation evidence.

• Installation certificate submission and acknowledgement.

• Reconciliation of the authorisation with relevant DGFT and Customs records.

• Availability of any required CA, cost accountant or other prescribed certificates.

• Completion of applicable declarations and online filing requirements.

• Receipt of the EODC or other formal closure confirmation.

If an old authorisation has already been redeemed but still appears open on the portal, review the prescribed process for updating its status.

7. Review Pending Deadlines and Potential Liabilities

Prepare an exception report covering incomplete installation certificates, shortfalls in export obligation, pending block requirements, expired timelines and unresolved portal discrepancies.

Where obligations cannot be completed within the prescribed period, examine whether an extension or another permitted remedy is available under the applicable rules.

Failure to fulfil EPCG conditions may result in recovery of duty benefits, applicable interest and other consequences under the relevant legal provisions. Assess each case individually instead of assuming that every shortfall attracts the same treatment.

Common EPCG Compliance Mistakes

Businesses should avoid these frequent errors:

• Tracking export performance without checking the applicable average EO.

• Missing installation certificate submission requirements.

• Reporting exports without reconciling supporting evidence.

• Ignoring authorisations approaching their completion dates.

• Failing to preserve import, installation and export documentation.

• Assuming that portal status alone confirms final closure.

• Delaying action on export obligation shortfalls until the deadline expires.

Best Practices for EPCG Compliance in 2026

Establish a central authorisation register with responsible personnel, obligation targets, deadlines and document status. Conduct quarterly internal reviews and involve finance, logistics, export documentation and plant operations teams.

Retain organised digital copies of authorisations, Bills of Entry, shipping bills, certificates and correspondence. Where a discrepancy arises, document the issue and corrective action taken.

Always verify the latest applicable DGFT notifications, FTP provisions, HBP requirements and authorisation-specific conditions before filing.

FAQs

1. Is an EPCG compliance audit mandatory?

A separate internal audit may not be expressly mandatory in every case. However, reviewing compliance is a practical way to verify obligations and prepare for prescribed regulatory filings.

2. What is the standard EPCG export obligation?

The standard specific export obligation is generally six times the eligible duties, taxes and cess saved, to be fulfilled within six years from authorisation issuance, subject to applicable provisions.

3. Is an installation certificate required under EPCG?

Generally, yes. The applicable HBP provisions prescribe an installation certificate, ordinarily within six months from completion of import, subject to relevant conditions and exceptions.

4. What happens if export obligation is not fulfilled?

The authorisation holder may face recovery of duty benefits, applicable interest and other consequences under the relevant provisions. Available extensions or remedies should be assessed promptly.

5. Can EPCG export obligation deadlines be extended?

Extensions may be available in specified circumstances under the applicable Handbook of Procedures. Eligibility, documentation and applicable fees or conditions should be verified before applying.

6. What is EODC in EPCG?

EODC stands for Export Obligation Discharge Certificate. It is the prescribed confirmation issued by the competent authority after the relevant export obligation discharge requirements have been satisfied.

7. How often should exporters review EPCG compliance?

A quarterly review is a practical approach, supplemented by checks before important deadlines, extension applications and final closure filings.

Conclusion

EPCG compliance requires continuous monitoring, accurate export obligation calculations and complete supporting documentation. Exporters and manufacturers should not wait until the authorisation approaches expiry to identify gaps.

A systematic audit in 2026 can help businesses detect shortfalls early, organise records and pursue timely export obligation discharge and authorisation closure.

Need Assistance With EPCG Compliance?

A V International provides import-export consulting and DGFT compliance support to help businesses review EPCG documentation, assess export obligation status, organise supporting records and navigate applicable discharge and closure procedures.

Contact A V International for professional assistance with EPCG compliance reviews and other DGFT-related requirements.

Written By

Akash Bhangare

Having more than 10 years of experience in EPR Compliance, Legal Metrology, DGFT Regulations, and Import Export Consulting Services in India.

Associated with A V International, a company with over 35 years of expertise in Environmental Compliance, EPR Registrations, Licensing, and Regulatory Approvals.