EPCG Compliance Checklist to Avoid Penalties.

1. Pre-Import Stage (Before Applying/Importing)

A. Eligibility & Documentation

• Confirm that the capital goods (CG) are essential for producing the export product/service.
• Prepare a clear process flow / technology justification to support EPCG application.
• Verify the HS codes of export products and capital goods for correctness.
• Collect detailed technical specifications, drawings, brochures from the supplier.
• Check Negative list of capital goods along with updated Notifications on DGFT’s Website in this regard.

B. Nexus Certificate

• Obtain Nexus Certificate from the jurisdictional DGFT.
• Ensure that the certificate specifically includes model numbers, capacity, and specs.
• Verify that EPCG authorization lists the same machinery as per supplier invoice.
• Keep evidence explaining how CG are used for export production (photos, process write-ups).

2. Import Stage (During Import)

A. Bill of Entry Compliance

• Ensure the EPCG Authorization Number is declared correctly in the Bill of Entry.
• Use correct duty exemption notifications (e.g., Customs Notification 16/2015).

B. Record Keeping

• Maintain:
  • Original Bills of Entry
  • Invoices & packing lists
  • EPCG Authorization & amendments
  • Freight/insurance documents

C. Capital Goods Handling

• Check that serial numbers and specifications match the EPCG Authorization.
• Do not move goods to another unit without prior DGFT approval.

3. Post-Import Stage – Installation & Commissioning

Installation Certificate (Mandatory)

• Install machinery within 6 months of import (extendable to 12 months with DGFT approval).
• Get IC from:
  • Independent Chartered Engineer
  • OR technical head of the unit (as permitted)
• Ensure the IC contains:
  • Exact location
  • Serial/model numbers
  • Date of installation
  • Confirmation of operational status
• Submit IC to DGFT within 6–12 months depending on category.
• If delayed, immediately apply for condonation with composition fee.

4. Export Obligation (EO) Monitoring

A. Maintain Export Records

• Maintain block-wise EO records (1st block: 50%, 2nd block: remaining 50%).
• Keep:
  • Shipping bills
  • e-BRCs
  • Sales invoices
  • Foreign inward remittances

B. Regular DGFT Updates

• File annual EO statements as required.
• Respond immediately to any DGFT queries or deficiency letters.
• Track the 6-year EO period; plan exports accordingly.

5. Machinery Usage & Movement

A. No Diversion Rule

• Machinery must not be:
  • Sold
  • Transferred
  • Loaned
  • Sent to job work without proper intimation

B. If Relocation is necessary

• Obtain prior DGFT permission for:
  • Shifting machinery
  • Adding supporting facilities
  • Changing factory address

6. Amendments & Corrections

• Apply for post-facto nexus correction if machinery specs were wrongly mentioned.
• Apply for revalidation/extension of EPCG Authorization if EO cannot be completed in time.
• Apply for installation delay condonation with composition fee, if applicable.
• Keep a record of all communications with DGFT and customs.

7. Redemption / EODC Stage

Pre-EODC Compliance

• Ensure:
  • Nexus Certificate
  • Installation Certificate
  • Export documents
  • Shipping bills & e-BRCs
  • Chartered Accountant certification

are all complete and reconciled.

DGFT Application

• Apply for EODC/Redemption before expiry of EO period.
• Upload all documents in DGFT online system.
• Rectify any deficiencies immediately if the DGFT RA raises queries.

8. Internal Controls & Audit

• Conduct internal audit every 6 months to track compliance.
• Keep physical photos/videos of installed machinery as evidence.
• Maintain a file for each EPCG authorization with complete documents.
• Train staff responsible for EPCG compliance in:
  • DGFT guidelines
  • FTP changes
  • Customs requirements

Critical Red Flags That Trigger Penalties (Must Avoid)

Installation Certificate not submitted

Machinery not installed / partially installed

Machinery transferred to another unit without DGFT approval

Exports not meeting the prescribed obligation

Using capital goods for domestic production only

Delay in applying for redemption (leading to duty demand)

Incorrect HS code / mismatch with EPCG authorization

Failure to maintain documentation for 6–10 years

Summary: How to Avoid Penalties

Maintain proper documentation
Ensure timely installation
Submit IC and export evidence
Monitor block-wise EO
Apply for extensions/condonations when needed
Never transfer or sell machinery without approval
File EODC on time to the Customs Department for cancellation of Bond and BG.