DGFT trade approvals: IEC and EPCG
Who this applies to
- You plan to export from or import into India, in any capacity: the Importer-Exporter Code (IEC) is the prerequisite that makes both possible.
- You are importing capital goods for pre-production, production or post-production and want to do it at zero customs duty against an export obligation: the EPCG scheme is DGFT's route for that.
- You are planning a new facility or expansion where imported plant and machinery is part of the project: the IEC and any EPCG authorisation are typically needed before the capital goods can be imported, not after.
What DGFT approves
The Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce and Industry, administers India's foreign trade regime: who may export or import, and the schemes that make specific kinds of trade cheaper or easier. For an industrial facility, these are the approvals that usually matter:
- Importer-Exporter Code (IEC). A business identification number, mandatory for any export from India or import into India, and the same number as the business's PAN. It is generated online once the application process is complete, subject to verification, carries no expiry, and needs an annual update by 30 June. An IEC is also the prerequisite for every other DGFT scheme, EPCG included.
- Export Promotion Capital Goods (EPCG) Authorisation. Allows import of capital goods for pre-production, production or post-production at zero customs duty, in exchange for an export obligation: broadly, exporting goods worth several times the duty saved, within a fixed number of years, while also maintaining the business's average export performance for similar goods. A valid IEC is a precondition for applying.
What it costs to get wrong
Importing or exporting without a valid IEC, or importing capital goods under EPCG without meeting the resulting export obligation, is enforceable under the Foreign Trade (Development and Regulation) Act 1992 and the Foreign Trade Policy the scheme sits under. Failing an EPCG export obligation converts the zero-duty benefit back into a duty liability on the goods actually imported, on top of whatever else follows from the shortfall.
The process
Apply for an IEC
You apply online through DGFT, and the code is linked to the business's PAN. It is generated once the online process is complete, subject to verification, and it does not expire: the ongoing requirement is the annual update by 30 June.
Apply for an EPCG authorisation, if importing capital goods
You need a valid IEC in hand first. The authorisation specifies the capital goods, the duty saved, and the export obligation and timeline against which your performance is tracked.
Meet the export obligation
You then export against the authorisation over the obligation period, while keeping up your average export performance for the same or similar goods. DGFT tracks fulfilment against the authorisation, and falling short turns the saved duty into a liability.
How this sits against your other approvals
DGFT approvals are central and trade-specific. They do not affect, and are not affected by, Tamil Nadu planning permission, the factory licence, fire approvals or PESO licensing. What they do sit upstream of is the physical project itself, wherever imported capital goods are part of it: an EPCG authorisation is what makes a duty-free import of plant and machinery possible, before that machinery is ever the subject of a DISH plan approval or a PESO design approval. Get the IEC and any EPCG authorisation in hand early, not as an afterthought once the site-level approvals are already in motion.
Restricted items, SCOMET and other regulators
An IEC identifies the importer or exporter. It is not an authorisation to import or export an item that the current ITC(HS) policy marks restricted, prohibited, or reserved to a State Trading Enterprise, and it is not a SCOMET licence. Check the policy at the 8-digit level on the transaction date, for import and for export separately. The Handbook of Procedures 2023 states that the online IEC application is ANF-2A on dgft.gov.in, and that the code is generated after the online process, subject to verification and to the exemptions in the Handbook. Later amendments of the Handbook have to be read on the day you apply. Keep the IEC particulars, and the linked PAN, entity and bank data, current.
The same Handbook provides online applications for restricted import or export authorisations. An authorisation can limit the port, the item, the quantity, the value, the end use and the validity. SCOMET covers listed special chemicals, organisms, materials, equipment and technologies, including certain intangible transfers. A catch-all control can apply where the exporter knows, or is told, of a weapons concern even if the item is not on the list. Some general authorisations exist. Their conditions have to be met exactly.
A DGFT authorisation does not replace a PESO import approval, an MSIHC import notification, a hazardous-waste import permission, a BIS requirement, or a State alcohol permit. Used machinery can have a different policy from new goods.
Common failure points
- Treating the IEC as a licence for a restricted, prohibited or SCOMET item.
- Checking a six-digit code, or checking import policy and not export policy.
- Treating the IEC as optional for a business that occasionally exports or imports. Unless an exemption in the Handbook of Procedures applies, it is needed for every such transaction, however infrequent.
- Letting the annual IEC update lapse. The code itself does not expire, but an unfiled annual update can still stall a transaction that depends on it being current.
- Applying for EPCG without factoring in the export obligation's full term. The zero-duty benefit is conditional, not permanent, and the obligation period runs for years, not months.
- Sequencing capital-goods import after site-level approvals are already committed, when the EPCG authorisation (and the IEC behind it) is usually the thing that needs to be in hand first.
Importing capital goods, or planning to export?
Send us what you are importing or exporting and the project timeline. We will tell you whether an IEC or EPCG authorisation applies and where it sits against your other approvals.