An export obligation (EO) is an arrangement used in the import of capital goods under the EPCG scheme. These imports are made under an EO, which must be six times the duty that would have been paid when importing the means of production. Some conditions to calculate the obligation to export EPCG must be met as follows:

  • Export obligations must be performed by authorization.
  • The export obligation under the EPCG must be greater than the typical export volume of the previous three license years for the roughly identical product(s) for the duration of the EO, including any extensions.
  • When calculating EO volumes, shipments made under the Pre-Clearance Process, Duty-Free Import Authorization (DFIA), Return System, MEIS, and SEIS will also be considered.
  • The payment of royalties for R&D services received in foreign and freely convertible foreign currencies is also taken into account when calculating exports under the EPCG scheme.
  • Licenses obtained under the EPCG program remain valid for 18 months from the date of issue and cannot be re-validated thereafter. Only 25% EO is required for units in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and J&K.
  • If the license holder completes 75% of the EO in less than half of the EO period, the remaining 25% will be forfeited.
  • Only 75% of EO is required to export green technology products.