Export oriented units
What is Export Oriented Unit [EOU]?
Units undertaking to export their entire production of goods andservices(except permissible sales in DTA), may be set up under theExport Oriented Unit (EOU) Scheme, Electronics HardwareTechnology Park (EHTP) Scheme, Software Technology Park(STP) Scheme or Bio-Technology Park (BTP) Scheme for manufacture ofgoods, including repair, re-making, reconditioning, re-engineering,rendering of services, development of software, agriculture includingagro-processing, aquaculture, animal husbandry, bio-technology,floriculture, horticulture, pisciculture, viticulture, poultry andsericulture. Trading units are not covered under these schemes. Only projects having a minimum investment of Rs.1 Crore in plant & machinery shall be considered for establishment as EOUs. However, this shall not apply to existing units, units in EHTP / STP/ BTP, and EOUs in Handicrafts /Agriculture / Floriculture / Aquaculture / Animal Husbandry /Information Technology, Services, Brass Hardware and Handmade jewellery sectors. BOA may allow establishment of EOUs with a lower investment criteria.
To promote exports, enhance foreignexchange earnings, attract investment for export production andemployment generation.
Export and Import of Goods:
An EOU / EHTP / STP / BTP unit may export all kinds of goods andservices except items that are prohibited in ITC (HS). Howeverexport of gold jewellery, including partly processed jewellery,whether plain or studded, and articles, containing gold of 8 caratsand above upto a maximum limit of 22 carats only shall be permitted. Export of Special Chemicals, Organisms, Materials, Equipment andTechnologies (SCOMET) shall be subject to fulfilment of theconditions indicated in ITC (HS). In respect of an EOU, permission toexport a prohibited item may be considered, by BOA, on a case tocase basis, provided such raw materials are imported and there is noprocurement of such raw material from DTA. Procurement and supply of export promotion material like brochure/ literature, pamphlets, hoardings, catalogues, posters etc up to amaximum value limit of 1.5% of FOB value of previous years exportsshall also be allowed.
An EOU / EHTP/ STP/ BTP unit may import and / or procure,from DTA or bonded warehouses in DTA / internationalexhibition held in India, all types of goods, including capitalgoods, required for its activities, provided they are notprohibited items of import in the ITC (HS). Units shall also be permitted to import goods including capital goods requiredfor approved activity, free of cost or on loan / lease from clients. Import ofcapital goods will be on a self-certification basis.Goods imported by a unit shall be with actual user conditionand shall be utilized for exportproduction.
EOU/EHTP/STP/BTP units may import/procure from DTA, with orwithout payment of duties/taxes as provided. Software EOU/ DTA units may use such facility for export ofsoftware.
An EOU engaged in agriculture, animal husbandry, aquaculture,floriculture, horticulture, pisciculture, viticulture, poultry orsericulture may be permitted to remove specified goods inconnection with its activities for use outside the premises of the unit. Gems and jewellery EOUs may source gold / silver / platinumthrough nominated agencies on loan / outright purchase basis. Unitsobtaining gold / silver / platinum from nominated agencies, eitheron loan basis or outright purchase basis shall export gold / silver /platinum within 90 days from date of release.
Procurement and export of spares / components, upto 5% of FOBvalue of exports, may be allowed to same consignee / buyer of theexport article, subject to the condition that it shall not count for NFEand direct tax benefits.
As the case may be to the extent of 5% FOB value of suchmanufactured articles exported by the unit in preceding financialyear. Details of procured / imported goods and articlesmanufactured by the EOU will be listed separately in theexportdocuments. In such cases, value of procured / imported goods willnot be taken into account for calculation of NFE and DTA saleentitlement.
Second hand Capital goods:
Second hand capital goods, without any age limit, may also be importedwith or without payment of duty/ taxes as provided.
Net Foreign Exchange Earnings:
EOU / EHTP / STP / BTP unit shall be a positive net foreign exchangeearner. In addition, sector specific provision of Appendix 6 B of Appendices& ANFs, where a higher value addition and other conditions are given, shallbe required to be followed. NFE Earnings shall be calculated cumulativelyin blocks of five years, starting from commencement of production.
Whenever a unit is unable to achieve NFE due to prohibition / restrictionimposed on export of any product mentioned in LoP, the five year blockperiod for calculation of NFE earnings may be suitably extended by BoA.
- Reimbursement of Central Sales Tax (CST) on goods manufactured in India. Simple interest @ 6% per annum will be payable on delay in refund of CST, if the case is not settled within 30 days of receipt of complete application (as in Para 9.10 (b) of HBP).
- Exemption from payment of Central Excise Duty on goods, falling in Fourth Schedule of Central Excise Act, procured from DTA on such goods manufactured in India.
- Supplies from DTA to EOU/EHTP/STP/ BTP units for use in their manufacture for exports will b e e l i g i b l e for “benefits under Chapter 7 of FTP”. DTA supplier shall be eligible for relevant entitlements under Chapter 7 of FTP. Besidesdischarge of export obligation, if any, on the supplier.The refund of GST paid on such supply from DTA to EOU would beavailable to the supplier subject to such conditions anddocumentations as specified under GST rules and notificationsissued there under.
- Suppliers of precious and semi-precious stones, synthetic stones andprocessed pearls from DTA to EOU shall be eligible for grant ofReplenishment Authorisations at rates and for items mentioned.
Exemption from industrial licensing for manufacture of itemsreserved for SSI sector.
- Export proceeds will be realized within nine months.
- Units will be allowed to retain 100% of its export earnings in theEEFC account.
- Unit will not be required to furnish bank guarantee at the time ofimport or going for job work in DTA, where
- The unit has turnover of Rs. 5 crore or above.
- The unit is in existence for at least three years.
- The Unit
- has achieved positive NFE / export obligation whereverApplicable.
- has not been issued a show cause notice or a confirmeddemand, during the preceding 3 years, on groundsother than procedural violations, under the penalprovision of the Customs Act, the Central Excise Act, theForeign Trade (Development & Regulation) Act, theForeign Exchange Management Act, the Finance Act,1994 covering Service Tax or any allied Acts or the rulesmade thereunder, on account of fraud / collusion / wilfulmis-statement / suppression of facts or contravention ofany of the provisions thereof.
- Exit from EOU Scheme With approval of DC, an EOU may opt out of scheme. Such exit shallbe subject to payment of applicable Excise and Customs duties andon payment of applicable IGST/ CGST/ SGST/ UTGST andcompensation cess, if any, and industrial policy in force.
- If unit has not achieved obligations, it shall also be liable topenalty at the time of exit
- In the event of a gems and jewellery unit ceasing its operation,gold and other precious metals, alloys, gems and other materialsavailable for manufacture of jewellery, shall be handed over to anagency nominated by DoC, at price to be determined by thatagency.
- An EOU / EHTP / STP / BTP unit may also be permitted byDC to exit from the scheme at any time on payment of applicableduties and taxes and compensation cess on capital goods under theprevailing EPCG Scheme for DTA Units. This will be subject tofulfillment of positive NFE criteria under EOU scheme, eligibilitycriteria under EPCG scheme and standard conditions indicated inHBP.
- Unit proposing to exit out of EOU scheme shall intimate DC andCustoms authorities in writing. Unit shall assess duty liabilityarising out of exit and submit details of such assessment toCustoms authorities. Customs authorities shall confirm dutyliabilities on priority basis, subject to the condition that the unithas achieved positive NFE, taking into consideration thedepreciation allowed. After payment of duty and clearance of all dues, unit shall obtain “No Dues Certificate” from Customsauthorities. On the basis of “No Dues Certificate” so issued by theCustoms authorities, unit shall apply to DC for final exit. In casethere is no proceeding pending under FT (D&R) Act, as amended, DC shall issue final exit order within a period of 7 working days.Between “No Dues Certificate” issued by Customs authorities andfinal exit order by DC, unit shall not be entitled to claim anyexemption for procurement of capital goods or inputs. However, unit can claim Advance Authorisation / DFIA / Duty Drawback.
- Since the duty calculations and dues are disputed and take a longtime, a BG / Bond / Installment processes backed by BG shall beprovided for expediting the exit process.
- In cases where a unit is initially established as DTA unit withmachines procured from abroad after payment of applicableimport duty, or from domestic market after payment of exciseduty/GST, and unit is subsequently converted to EOU, in such cases removal of such capital goods to DTA after exit would bewithout payment of duty. Similarly, in cases where a DTA unitimported capital goods under EPCG Scheme and after completelyfulfilling export obligation gets converted into EOU, unit would not be charged customs duty on capital goods at the time ofremoval of such capital goods in DTA when exit.
- An EOU / EHTP / STP / BTP unit may also be permitted byDC to exit under Advance Authorisation as one time option. Thiswill be subject to fulfillment of positive NFE criteria.
- A simplified procedure may be provided to fast track the Debonding/Exit of the STP / EHTP Unit which has not availed anyduty benefit on procurement of raw material, capital goods etc.