DGFT Licenses — EPCG & Advance Authorization

DGFT export-promotion schemes can shift the economics of an entire manufacturing project. EPCG (Export Promotion Capital Goods) lets you import machinery without paying customs duty; Advance Authorization waives duty on raw materials going into export goods. The savings on a ₹10 crore plant can easily run into crores. The catch sits on the other side — every rupee saved becomes a six-rupee export commitment, tracked across years, backed by a bond or bank guarantee.

Get the scheme choice right, file the application clean, and track the export obligation as imports happen — the licence closes with an EODC and the BG comes back. Get it wrong, and the duty saved becomes payable with 15% annual interest, the BG is encashed, and the licence is cancelled. This page walks through how each scheme works, what the FY 2026-27 rules look like, and where most exporters lose track.

At a Glance

• Who needs it: Manufacturer-exporters and merchant-exporters tied to a manufacturer, importing capital goods or raw materials used in export production.
• Governing framework: Foreign Trade Policy 2023, Handbook of Procedures, and DGFT public notices issued through the year.
• Issuing authority: DGFT regional authority via the online portal with a Class-3 DSC and an active IEC.
• EPCG export obligation: Six times the duty saved, fulfilled within six years — 50% in the first four years, balance in the next two.
• Advance Authorization EO: As per SION or self-declared norms; default 18 months from licence date, value-addition usually 15% or higher.
• Bond / bank guarantee: Bond is universal; BG depends on status — One-Star Export House and above qualify for full BG waiver.
• Customs registration: Each licence must be registered at the port of first import on ICEGATE before any duty-free clearance.
• Stackability: EPCG exports remain RoDTEP-eligible; AA exports have ongoing RoDTEP restrictions per current DGFT notice.

What's New for FY 2026-27

DGFT has continued its push toward fully paperless administration. A few changes affect both fresh applications and clean-up of old licences.

• DGFT IT 2.0 stable: The upgraded portal now handles EPCG, AA, DFIA and EODC filings end-to-end; document upload limits have been expanded and SCN responses run online.
• Amnesty Scheme closed: The one-time amnesty window for old EPCG / AA shortfall closed in March 2025; legacy licences now go back through standard PRC condonation or duty + interest payment.
• RoDTEP alignment: RoDTEP has been extended through FY 2026-27 for most tariff lines, but AA-export exclusions continue under current public notices — verify before each shipment.
• e-BRC matching: Bank realisation certificates flow automatically from AD banks to the DGFT portal and auto-match against shipping bills; manual BRC reconciliation is no longer accepted for EODC.
• SION revisions: Several product-specific SIONs were revised through 2025; old SIONs are grandfathered for licences issued before each revision date.
• Fully dematerialised licences: All licences issued in FY 2026-27 are electronic — physical paper scrips have been formally retired across schemes.

Why Pick the Right DGFT Scheme

Three schemes look similar on paper — EPCG, Advance Authorization, DFIA — and exporters routinely apply for the wrong one. The right pick depends on what duty you are saving on, and whether exports come before or after imports.

• Machinery vs raw materials: EPCG covers capital goods — production machinery, testing equipment, packaging lines, certain spares. AA covers raw materials, components and consumables that physically enter the export product.
• Pre-export or post-export: AA is taken before exports against future shipments. DFIA is post-export and is freely transferable. Standard EPCG is pre-export and tied to the IEC.
• Cash-flow vs flexibility: AA with self-declared norms gives flexibility but invites norms-committee scrutiny. DFIA is cleaner administratively but only works once exports are done. EPCG locks you into a six-year horizon.
• Domestic procurement option: If equipment or input is available in India, an invalidation letter plus Advance Release Order lets the domestic supplier claim deemed-export benefits while the licence stays with you.
• Export plan reality: A licence with 6× duty saved is only useful if exports are credible. Apply for what you can realistically ship — extensions and condonation are uphill battles, not the default.

How It Actually Works

Each scheme runs on the same five-act structure — pick, apply, import, export, close. The detail differs by scheme, but the discipline is the same.

Step 1: Eligibility check and scheme matrix

Start with the equipment list or bill of materials, expected exports over the next three to six years, country mix, currently outstanding licences, and your status-holder category. This gets mapped against EPCG / AA / DFIA / deemed-export and a written recommendation is produced. If you already hold an open licence, the new one cannot overlap on the same product code unless invalidation is properly handled.

Step 2: Application drafting and DGFT filing

The Aayat Niryat Form (ANF) is filed online with the project report, technical specifications, SION reference (or norms-committee request where SION does not exist), CA certificate of past exports, IEC, RCMC from the relevant Export Promotion Council, and Class-3 DSC. The nominal application fee is paid online. DGFT typically issues the licence in 15-30 working days where the file is clean and SION fits.

Step 3: Customs registration and BG execution

Once issued, the licence is registered at the port of first import on ICEGATE. A bond is executed in all cases. A bank guarantee is required only where the exporter is not a status holder — One-Star and above qualify for full BG waiver. Without registration, no import can clear duty-free against the licence.

Step 4: Imports and export-obligation tracking

Imports are flagged against the licence at the port and the duty saved accumulates against it. Exports must carry the licence number on the shipping bill with the correct scheme flag set. Each shipping bill counts toward EO only when product code, quantity and currency reconcile cleanly against the licence terms.

Step 5: e-BRC reconciliation and milestone review

AD-bank realisation certificates flow to DGFT through e-BRC and the portal auto-matches them to shipping bills. Mismatches — short realisation, write-offs, currency rounding — must be resolved before they pile up. A quarterly EO progress review confirms whether the 50% block-wise milestone is on track.

Step 6: EODC application and redemption

In the last six months of the EO block, the Export Obligation Discharge Certificate application is filed with the shipping-bill statement, e-BRCs, CA-certified reconciliation, and product-code matching. DGFT reviews, may seek clarifications, then issues the EODC. The bond is cancelled and the BG, if held, is released.

Step 7: Shortfall regularisation if EO falls short

Where EO is incomplete, two paths open up: pay proportionate duty saved plus 15% per annum interest from the original import date and close out, or apply to the Policy Relaxation Committee (PRC) for condonation in genuine cases. PRC orders set precedent — the application is drafted in the Committee's preferred format with case-law support.

A Real Example: EPCG on an Injection-Moulding Line

A plastics manufacturer in Vapi imports an injection-moulding line worth ₹4 crore from Germany under EPCG.

• Customs duty otherwise: Approximately ₹60 lakh at standard rates (BCD plus IGST without exemption).
• EPCG duty saved: ₹60 lakh — fully exempted on import against the licence.
• Export obligation: 6 × ₹60 lakh = ₹3.6 crore in exports of the licensed product over six years.
• Block 1 (first 4 years): 50% of EO = ₹1.8 crore must be shipped and realised.
• Block 2 (next 2 years): Balance ₹1.8 crore.
• Each shipping bill: Filed with the EPCG flag, the licence number, and the correct 8-digit ITC(HS) code.
• Bank guarantee: Not required — the company holds Two-Star status.

If by year six the exporter has shipped ₹3.2 crore against the ₹3.6 crore EO, the shortfall is about 11%. Two routes are available: deposit proportionate duty (~₹6.6 lakh) plus 15% per annum interest from the original import date — roughly ₹12-14 lakh combined — and close out; or apply to PRC with documented reasons such as export-market disruption, currency volatility or force-majeure events. Either way, the matter must be closed before the bond is cancelled and the licence formally redeemed.

What Backs Up Each Licence Through Its Life

The licence file lives for the full EO period plus three years of audit shadow. Keeping it audit-ready means assembling the same evidence DGFT and Customs will eventually ask for.

• Application file: ANF, project report, technical specifications, CA past-export certificate, RCMC, and original DGFT correspondence.
• Import register: Every bill of entry with duty-saved calculation tagged to the licence number and port of import.
• Export register: Every shipping bill with EO value, product-code match, currency and FOB value recorded.
• e-BRC log: AD-bank realisation certificates matched to each shipping bill, with any short-realisation noted.
• Bond/BG file: Original bond, BG copy, renewal correspondence, and cancellation request post-EODC.
• Annual statements: Yearly EO progress statements filed with DGFT in the prescribed format.
• CA reconciliation: Year-by-year CA-certified reconciliation matching shipping bills to duty saved.
• Closure dossier: EODC application, attachments, DGFT acknowledgement, EODC issue letter, and bond-cancellation proof.

Where It Goes Wrong

DGFT licence files fail at predictable points. Each item below has cost real exporters real money — typically discovered in year five or six, when fixing it is no longer cheap.

• Wrong product code: Exporting at 4-digit ITC(HS) when the licence is at 8-digit means the shipping bill does not count toward EO. Caught at EODC stage, when it is too late to amend.
• Forgetting block-wise milestone: The 50% milestone by year four is a hard rule. Falling short triggers proportionate duty + interest even if the year-six total is met.
• Missing BG renewal: Bank guarantees expire if not renewed. A lapsed BG forces fresh execution and sometimes a fresh show-cause.
• Selling EPCG capital goods early: Within the EO period, capital goods cannot be sold. Transfers between factories of the same IEC need prior DGFT permission.
• Ignoring old licences: Bond / BG sits live for years. A clean-up project often releases BGs that have been parked at the bank for eight to ten years.
• Stacking RoDTEP with AA wrongly: AA-export RoDTEP exclusions are real and current. Wrongful claims lead to scrip reversal and recovery.
• Skipping invalidation: Procuring capital goods or inputs domestically without an invalidation letter and ARO is treated as failure to use the licence — duty saved becomes payable.
• Mismatched e-BRC: A shipping bill without a matched e-BRC counts as no export for EO purposes, regardless of physical despatch.

The single biggest source of EPCG losses is not shortfall on exports — it is wrong product codes on shipping bills that disqualify otherwise good exports from counting toward EO.

What You Receive at the End

• Written scheme recommendation with EPCG / AA / DFIA comparison and projected export obligation.
• Filed DGFT application with all ANFs, attachments and portal acknowledgement.
• Issued licence in electronic form with port-of-import registration completed on ICEGATE.
• Bond / bank guarantee documentation executed at customs and on file.
• Per-licence EO tracker showing duty saved, EO required, EO done, e-BRC matched and time elapsed.
• Quarterly EO progress review with milestone alerts at 50% and 80%.
• CA-certified annual reconciliation statement in DGFT's prescribed format.
• EODC application package and DGFT closure letter at the end of the EO period.
• Bond and BG cancellation proof recorded against the licence file.
• Audit-ready dossier covering the full licence life plus three years of post-closure shadow.

How to Get Started

Share the project brief — equipment list or bill of materials, expected export plan, country mix, current IEC and RCMC status, and any open EPCG or AA licences. A clear scheme matrix comes back within three working days with the recommended path, projected EO, and a realistic timeline through licence issue and EODC.

Once the scheme is chosen, the application package is drafted and filed within five working days. From there, the licence flow continues through customs registration, imports, export tracking, e-BRC reconciliation, and finally EODC redemption. The same case team handles the full licence life — including any DRI or SCN defence — so the file context never resets midway.