Hospitality and tourism in India is a critical segment of the country’s foreign exchange earnings and attracting international tourists. To be competitive, hotels, resorts, and restaurants need to keep upgrading their infrastructure with state-of-the-art equipment, luxury facilities, and latest technology. But the expense of importing such capital goods can prove to be a financial killer.
This is where the Export Promotion Capital Goods (EPCG) Scheme becomes a game-changer. By reducing or eliminating import duties on essential hotel equipment, the EPCG scheme allows hospitality businesses to modernize at lower costs and improve guest experiences, thereby reducing costs and boosting global competitiveness and profitability.
In this blog, we’ll explore the EPCG Scheme for the hotel industry, its benefits, eligibility, and process to help businesses in the hospitality sector maximize its potential.
What is the EPCG Scheme?
The EPCG Scheme, administered by the Directorate General of Foreign Trade (DGFT) under the Foreign Trade Policy of India, allows firms to import capital goods at zero or concessional customs duty. Such capital goods are employed in pre-production, production, and post-production activities.
For a complete overview of the Export Promotion Capital Goods scheme, read our detailed EPCG Scheme Guide
The main aim of the scheme is to encourage exports and earn foreign exchange by making industries upgrade technology and infrastructure without incurring huge financial expenses.
EPCG Scheme for Hotel Sector – Who Can Take Advantage?
The hospitality industry is an offshoot of foreign exchange inflow. Keeping this in view, DGFT has brought hotels and their allied services under the EPCG scheme. Beneficiaries are:
- Hotels, resorts, and restaurants that generate foreign exchange from international tourists.
- Tour operators and travel agencies catering to inward foreign travelers.
- Theme parks, amusement parks, and golf courses catering to international tourists.
DGFT notifications specifically mention the addition of the hospitality and tourism sector to enable businesses to import global-quality equipment without the burden of high import expenses.
Major Advantages of EPCG Scheme for Hotel Sector
Zero Import Duty on Hotel Equipment
Hotels are able to bring in high-quality kitchen appliances, laundry equipment, air conditioning equipment, spa centers, and wellness machines at lower or even zero customs duty. This significantly lowers setup and operational upgrade expenses.
Increases Quality and Guest Satisfaction
With updated machinery and luxury amenities, hotels are able to increase guest comfort and satisfaction levels. Complying with international hospitality standards not only increases foreign tourists but also aids in creating a stronger brand image.
Increases Competitiveness in Tourism
Reduced expenses and increased efficiency enable hotels to provide improved services competitively. This directly benefits India as an attractive global tourism destination.
Promotes Expansion & Upgrades
Hotels are able to invest in environmental-friendly technology, energy-efficient equipment, smart management software, and luxury facilities without being hindered by high import tariff. This opens the way for sustainable expansion and upgrading of the industry.
EPCG Scheme Eligibility for Hotels
To utilize the EPCG scheme, hotels need to satisfy certain eligibility conditions:
- Foreign Exchange Earnings: Hotels need to demonstrate that they earn forex from international visitors or tourism activities.
- Documentary Evidence Needed: Guest bills, billing statements should be produced. CA Certified Foreign Inward Remittance Certificates (FIRCs) or Foreign Currency Realization Certificates
- Export Obligation: Hotels need to earn foreign exchange equal to 6 times the duty exempted in 6 years of getting the EPCG permit.
Learn the details of Export Obligation under EPCG Scheme and how hotels can stay compliant while fulfilling forex requirements.
Procedure to Benefit from EPCG Scheme for Hotel Sector
Hotels wishing to apply under EPCG have to go through a systematic process:
- Application to DGFT – Make an application with attached hotel license, evidence of previous foreign exchange earnings, and list of capital goods to be imported.
- Grant of EPCG Authorization – Post sanction, DGFT releases the EPCG license for duty-free imports.
- Import Capital Goods – Hotels can now import authorized equipment under concessional or zero duty.
- Fulfilment of Obligation – During the next 6 years, the hotel will have to satisfy its forex earning obligation as laid down.
- Submit the complete application to the relevant Regional DGFT office.
- The DGFT will thoroughly examine the submitted documents to verify that the export obligation has been fully discharged
- Upon successful verification, the DGFT will issue an Export Obligation Discharge Certificate (EODC) to the hotel.
- Submit EODC to Customs
- Cancellation of bond or bank guarantee provided during the import of capital goods under the EPCG scheme is now discharged.
The hotel EPCG scheme covers a broad variety of capital goods, including:
- Commercial kitchen equipment – ovens, freezers, dishwashers, food processors.
- Housekeeping & laundry systems – industrial washing machines, dryers, cleaning machines.
- Wellness, spa, and gym equipment – massage tables, sauna systems, treadmills, and fitness machines.
- HVAC and energy-efficient technology – central air-conditioning, heating systems, and green energy solutions.
- IT and smart hotel management systems – property management software, guest service automation, and digital check-in solutions.
Challenges and Compliance for Hotels
Though EPCG is extremely useful, compliance is paramount:
- Severe Documentation – Accurate documentation of forex revenues and imported products is required to be maintained by hotels. (The hotel needs to maintain detailed records of all foreign currency earnings, including the month-wise and bank-wise, Credit-card wise statement of foreign currency received.)
- Regular Monitoring – Annual monitoring of forex commitments is crucial in order to prevent defaults.
- Penalties for Failure to Comply – In case of failure to comply, hotels have to refund the duty saved plus interest and penalty, which can prove costly.
To avoid penalties and ensure smooth documentation, check our complete guide on EPCG Scheme Compliances
Why Hotels Must Use EPCG Scheme
The EPCG scheme presents a singular chance for hotels to:
- Reduce capital expenses substantially.
- Improve infrastructure to global standards of hospitality.
- Improve service quality for global visitors.
- Put Indian hotels in a global tourism and hospitality map.
With the tourism industry of India booming, EPCG can prove to be a game-changer in assisting hotels to grow both efficiently and sustainably.