Comparison of EOU and SEZ Schemes - Central Excise Practice Manual (OLD) - Central Excise

The comparative charts of EOU and SEZ Schemes are as explained below: Comparison of EOU and SEZ Schemes Sr. No. Benefits Special Economic Zone (SEZ) Unit Export Oriented Unit (EOU) 1. Income Tax 100% income-tax exemption for five years and 50% exemption for five years and thereafter 50% exemption for five years in case of re-investment of profits in terms of section 10AA of Income Tax Act, 1961 inserted after section 10A as per the Second Schedule of the SEZ Act (read with section 27 of the SEZ Act, 2005 ). The units commencing operations before 1st April, 2005 shall be covered as per provision contained under section 10A of Income Tax Act . Note : In terms of SEZ Act, 2005 (with effect from 10.2.2006) for SEZ developer, the exemption from Income Tax shall be available for a period of 10 years in a block of 15 years as per section 80-IAB inserted after section 80-IA in terms of Second Schedule of the SEZ Act, 2005 . 100% Income-tax exemption upto 31.3.2011 (i.e. Assessment Year 2011-12) or first 10 years, whichever is earlier. At present, no income tax exemption available to EOU/STP/EHTP/BTP units 2. Construction Material Goods for infrastructure development/maintenance i.e. construction material allowed to be imported/procured indigenously duty free. Goods for infrastructure development i.e. construction material not allowed to be imported/procured indigenously duty free. 3. Service Tax SEZ units/developer exempted from payment of service tax in respect of services consumed within the SEZ. Services used partially in the SEZ or used outside the SEZ as per notification issued by CBEC are allowed to be refunded EOUs not exempted from payment of service tax, however CENVAT credit is allowed for service tax paid. Post manufacture services which are not input services are allowed to be refunded as per notification issued by CBEC. 4. Central Sales Tax Central Sales Tax exempted on the goods procured indigenously. No CST exemption, however CST reimbursement to be claimed from jurisdictional Development Commissioner. 5. DTA Sale DTA sale allowed on payment of full Customs duty as applicable on imported goods. Limited DTA sale (upto 50% of FOB value of exports) permitted on payment of concessional rate of duty. Subject to achievement of +NFE, EOUs are allowed to sell goods in DTA on payment of full excise duty which is equivalent to import duty. 6. Trading Unit Trading units are allowed to be set up in SEZ. Trading units are not permitted to be set up under EOU Scheme. 7. Domestic Procurement Supply from DTA to SEZ is physical exports. Supply from DTA to EOU considered as deemed exports. 8. Benefit to DTA supplier For supplies from DTA, benefit of DEPB/Advance authorisation available. The drawback/claim of rebate applicable as in case of physical export. For supplies from DTA, benefit of deemed export drawback/ Advance authorisation/ Refund of terminal excise duty available. 9. Cost recovery charges No cost recovery charges recoverable for the customs staff deputed during office hours. Exclusive customs staff deployed in the SEZ for handling customs work. Cost recovery charges for staff posted in the SEZ are required to be paid by the Developer. Cost recovery charges or Merchant Overtime recoverable for the customs staff deputed even during office hours. No exclusive customs/central excise staff for handling customs/Central Excise work relating to the unit. 10. Period of utilization Duty free goods (except capital goods) to be utilized within the validity period of LOP. Duty free goods (except capital goods) to be utilized within the validity period of three years. 11. Foreign Investment 100% FDI investment permitted through automatic route for SEZ manufacturing unit and formal FIPB approval not required. Sector Specific guidelines are applicable. 100% FDI investment permitted through automatic route for EOUs and formal FIPB approval not required. Formal FIPB approval required. Sector Specific guidelines are applicable. 12. Customs Documentation All import/export documentation and assessment formalities to be completed in the zone itself. All import/export documentation and assessment formalities to be completed at the respective port of import/ export. 13. Examination of Goods No routine examination of export /import goods by Customs. Examination of exports/imports goods by customs except in cases where self certification is allowed. 14. Warehousing License Private bonded Warehouse License not required. Private bonded warehouse license is required. 15. Locational Requirements SEZ unit can only be set up in the SEZ notified under Section 4 of the SEZ Act. No such requirement for EOU. EOU can be set up anywhere in the country on standalone basis provided the area has been declared as warehousing stations 16. Investment Requirements No minimum statutory investment limit prescribed. Minimum investment limit of one crore in plant and machinery required except certain specified sectors such as software, handicraft etc.