100% Export Oriented Unit: Hamid Khan Roll No. 04

100% EXPORT ORIENTED UNIT
Hamid Khan
Roll No. 04
100% Export Oriented Unit
• Export Oriented Unit Scheme or EOU scheme is one of the export
promotion schemes of the Government of India and is in existence
since 1980.
• Sector Specific EOU scheme are also known as Software Technology
Park (STP) scheme for export of software; or Electronic Hardware
Technology (EHTP) Park Scheme for export of electronic Hardware;
or Bio-technology Park (BTP) Scheme for export of Bio Technology
Products.
• Under EOU Scheme, manufacturing or service sector units are
allowed to be set up with the objective of exporting entire production
of goods manufactured or services except limited sale in Domestic
Tariff Area (DTA) as provided under the Foreign Trade Policy (FTP).
100% Export Oriented Unit
• The EOU scheme is formulated by Government of India in
the Ministry of Commerce & Industry. The provisions of
EOU scheme are contained in Chapter 6 of the Foreign
Trade Policy (FTP); Chapter 6 of Handbook of Procedures
(HOP), Vol. I and Public Notices /Circulars issued by the
Department of Commerce.
• Establishment of units and their performance is monitored
by the jurisdictional Development Commissioner (DC)in
accordance with the FTP provisions.
Objectives of EOU Scheme
Main objectives of EOU Scheme are as under:
(a) Boosting exports;
(b)Earning foreign exchange;
(c) Attracting foreign investment;
(d) Generating employment;
(e) Backward and forward linkage by way of sourcing of raw
material from and supply of finished goods to DTA;
(f) Attracting latest technology into the country;
(g)Upgrading the skill and creating source of skilled man-power;
(h)Development of backward area.
Incentives/facilities available to EOUs
• No import licences are required by the EOU units and import of all industrial inputs exempt
from customs duty.
• Supplies from the DTA to EOUs are regarded as deemed exports and are hence exempt from
payment of excise duty which means that high quality inputs are available at lower costs.
• On fulfilment of certain conditions, EOUs are exempted from payment of corporate income
tax for a block of 5 years in the first 8 years of operation. Export earnings continue to be
exempt from tax even after the tax holiday is over.
• Industrial plots and standard design factories are available to EOUs at concessional rates.
• Single window clearance for EOU.
• EOUs and EPZs are permitted to sub-contract part of their production processes for job work
to units in the DTA on a case by case basis.
• Supplies to the DTA under international competitive bidding against payment in foreign
exchange to other EOUs and EPZ units and against import licenses are considered towards
fulfilment at the export obligation.
• The FOB value of exports of EOUs and EPZ units can be clubbed with that of parent
companies located in the DTA for the purpose of obtaining a Trading or Export House status.
• EOUs and EPZ units may export goods through Trading and Export Houses or other EOU
and EPZ Units.
Attractive Policy Provisions for EOUs
• EOU can also import second hand capital goods without any age limit.
• 50% of physical exports can be sold in domestic market on payment of concessional duty.
• EOUs can process and export rice (Basmati & Non-Basmati).
• EOUs including Gem & Jewellery units are permitted to sub-contract upto 50% of their
production (or) production process in DTA / other EOUs.
• EOUs are allowed to utilize plant and machinery for job work DTA units provided the goods
are exported directly from the EOU premises.
• EOUs in Agriculture and allied sectors and in granite sector may transfer the capital goods and
the inputs to the Farms/field/quarries for usage relating to the production in the EOU.
• In case of new EOUs, Advance DTA sale will be allowed not exceeding 50% of its estimated
exports for the first year except the pharmaceutical units where this will be based on its
estimated exports for the first two years.
• Simultaneous Advance DTA sale permission is given on quarterly basis for perishable goods
like mushrooms, cut flowers etc.
• Exports through third party is permitted
• Exports from the job workers premises is allowed
• 100% FDI investment permitted through Automatic Route similar to SEZ units
• EOUs can obtain Foreign currency loans from OBUs situated in the SEZs
• EOUs have to achieve only positive Net Foreign Exchange (NFE) within 5 years i.e., A - B > 0
where (A) is the FOB value of Exports and (B) is CIF value of imports
Eligibility Criteria
• For the status of EOU, the project must have a minimum
investment of Rs.1 crore in plant and machinery. This
condition does not apply for software technology parts,
electronics hardware technology parks and biotechnology
parks.
• EOU involved in handicrafts, agriculture, animal husbandry,
information technology, services, brass hardware and
handmade jewellery does not have any minimum investment
criteria.
Obtaining EOU Status
• To obtain EOU status, application for setting up of unit under
EOU scheme must be made to the Board of Approval. In the
case of approving, they provide validity of Letter of
Permission for setting up EOU.
• The Letter of Permission will have an initial validity of 2 years
to enable the unit to construct the plant and install the
machinery. Further, a person can obtain an extension for a
period of upto one year.
• On starting operation, in a period of 5 years, the EOU will
have to achieve positive net foreign exchange earning
cumulatively.
Application and Approval
• Applications for setting up of units under the EOU scheme,
other than proposals for setting up of units in the services
sector (except for R&D, software and IT-enabled services, or
any other service activity delegated by BoA), shall be
approved or rejected by the Units Approval Committee within
15 days as per criteria.
• Applications for conversion into an EOU / EHTP/ STP / BTP
unit from existing DTA units, having an investment of Rs. 50
crores and above in plant and machinery or exporting Rs. 50
crores and above annually, shall be placed before BoA for a
decision.
Exit from EOU Scheme
• With approval of DC, an EOU may opt out of scheme. Such exit shall be
subject to payment of Excise and Customs duties and industrial policy in
force.
• If unit has not achieved obligations, it shall also be liable to penalty 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 materials available for
manufacture of jewellery, shall be handed over to an agency nominated by
DoC, at price to be determined by that agency.
• An EOU / EHTP / STP / BTP unit may also be permitted by DC to exit
from the scheme at any time on payment of duty on capital goods under
the prevailing EPCG Scheme for DTA Units.

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