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 must continue to improve their infrastructure with state-of-the-art equipment, luxury facilities and the latest technology. But the expense of importing these capital goods can be deadly for finances.
This is where the Export Promotion Scheme for Capital Goods (EPCG) is a game-changer. By reducing or eliminating import duties on essential hotel equipment, the EPCG scheme enables hospitality businesses to modernize at lower costs and improve guest experience, thereby reducing costs and boosting global competitiveness and profitability.
In this blog, we will explore the EPCG program for the hospitality industry, its benefits, eligibility and process to help hospitality businesses maximize their potential.
What is the EPCG scheme?
The EPCG Scheme, administered by the Directorate General of Foreign Trade (DGFT) under India’s Foreign Trade Policy, allows companies to import capital goods at zero customs duty or on concessional terms. These capital goods are used 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 objective of the plan is to encourage exports and earn foreign exchange by making industries improve technology and infrastructure without incurring huge financial expenses.
EPCG Scheme for Hospitality Sector – Who can avail it?
The hotel industry is a branch of foreign exchange earnings. Keeping this in mind, the DGFT has included hotels and their associated services under the EPCG scheme. The beneficiaries are:
- Hotels, resorts and restaurants that generate foreign currency from international tourists.
- Tour operators and travel agencies that serve foreign travelers.
- Theme parks, amusement parks and golf courses that cater to international tourists.
The DGFT notifications specifically mention bringing in the hospitality and tourism sector to enable businesses to import global quality equipment without the burden of high import charges.
Main advantages of the EPCG plan for the hotel sector
Zero import tax on hotel equipment
Hotels can import high-quality kitchen appliances, laundry equipment, air conditioning equipment, spa centers and wellness machines with lower or even zero customs duties. This significantly reduces installation and operational upgrade costs.
Increase quality and guest satisfaction
With updated machinery and luxury amenities, hotels can increase guest comfort and satisfaction levels. Complying with international hospitality standards not only increases foreign tourists but also helps create a stronger brand image.
Increases competitiveness in tourism
Reducing expenses and increasing efficiency allows hotels to offer better services competitively. This directly benefits India as an attractive global tourist destination.
Promotes expansion and updates
Hotels can invest in environmentally friendly technology, energy efficient equipment, smart management software and luxury facilities without being hampered by high import tariffs. This paves the way for sustainable expansion and modernization of the industry.
EPCG Program Eligibility for Hotels
To use the EPCG scheme, hotels must meet certain eligibility conditions:
- Foreign currency earnings: Hotels must demonstrate that they earn foreign currency from international visitors or tourism activities.
- Documentary evidence required: Guest invoices and billing statements must be submitted. CA Certified Foreign Inward Remittance Certificates (FIRC) or Foreign Currency Realization Certificates
- Export Obligation: Hotels must earn foreign exchange equivalent to 6 times the exempt tax within 6 years of obtaining EPCG permission.
Learn the details of the export obligation under the EPCG scheme and how hotels can meet foreign exchange requirements.
Procedure to benefit from the EPCG scheme for the hotel sector
Hotels wishing to apply under EPCG must go through a systematic process:
- Application to the DGFT – Submit an application attaching a hotel license, evidence of previous foreign currency earnings and a list of capital goods to be imported.
- EPCG Authorization Grant – After sanction, DGFT releases EPCG license for duty-free imports.
- Import Capital Goods – Hotels can now import authorized equipment on favorable or duty-free terms.
- Compliance with Obligation – For the next 6 years, the hotel must comply with its obligation to obtain foreign currency as established.
- Submit the complete application to the corresponding DGFT Regional office.
- The DGFT will carefully examine the submitted documents to verify that the export obligation has been fully met.
- Upon successful verification, DGFT will issue an Export Obligation Discharge Certificate (EODC) to the hotel.
- Submit EODC to Customs
- Cancellation of bond or bank guarantee provided during import of capital goods under EPCG scheme is now released.
The Hotel EPCG plan covers a wide range of capital assets, including:
- Commercial kitchen equipment – ovens, freezers, dishwashers, food processors.
- Cleaning and 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 intelligent hotel management systems – property management software, guest services automation and digital check-in solutions.
Challenges and compliance for hotels
Although EPCG is extremely useful, compliance is paramount:
- Severe documentation – Hotels must maintain accurate documentation of foreign currency earnings and imported products. (The hotel must maintain detailed records of all foreign currency earnings, including monthly, bank and credit card statements of foreign currency received.)
- Regular monitoring – Annual monitoring of foreign currency commitments is crucial to avoid defaults.
- Penalties for non-compliance – In case of non-compliance, hotels must refund the fees saved plus interest and penalties, which can be costly.
To avoid penalties and ensure smooth documentation, check out our comprehensive guide to EPCG scheme compliance.
Why hotels should use the EPCG system
The EPCG scheme presents a unique opportunity for hotels to:
- Substantially reduce capital expenditures.
- Improve infrastructure to global hospitality standards.
- Improve service quality for global visitors.
- Place Indian hotels on a global tourism and hospitality map.
With India’s booming tourism industry, EPCG can prove to be a game-changer in helping hotels grow efficiently and sustainably.
Frequently Asked Questions on EPCG Scheme for Hospitality Sector
Yes, even small and boutique hotels can benefit from EPCG if they earn foreign exchange from international clients.
Hotels can import kitchen appliances, laundry equipment, spa and wellness centers, HVAC and IT infrastructure under EPCG.
Hotels must earn 6 times the amount of taxes saved in foreign currency terms within 6 years.
Yes, restaurants that receive foreign currency income from international clientele are covered by the plan.
It is a DGFT-endorsed license that allows hotels to import capital goods duty-free instead of meeting foreign exchange earnings commitments.
The scheme is not a subsidy per se, but rather a duty-free benefit that reduces the cost of importing capital goods for the importer.
The EPCG scheme for the hospitality sector is a strong driver for the Indian hospitality industry. By reducing customs duties on critical capital goods, EPCG enables hotels to upskill, improve guest experience and compete internationally.
For hotels, whether large hotel chains or boutique hotels, EPCG offers a cost-effective route to upgrade and expand to international standards.
If you are a hotelier looking to apply for EPCG, Afleo Logistics can guide you through the entire process, from DGFT application to compliance management, ensuring you maximize benefits seamlessly.
Contact Afleo today and modernize your hotel with the advantage of the EPCG scheme.
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