Background, Objectives and Incentives/facilities available to EOUs - Central Excise Practice Manual (OLD) - Central Excise

Background, Objectives and Incentives/facilities available to EOUs Background 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). 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. Since Customs bonding is mandatory for EOUs, the Scheme envisages important role for Customs Central Excise Department. Corresponding notifications enabling duty exemption have been issued by the CBEC under Customs Act, 1962 and Central Excise Act, 1944. Similarly other agencies like Reserve Bank of India (RBI), Central Board of Direct Taxes (CBDT), Directorate General of Foreign Trade (DGFT) etc. have issued notifications /Circulars for proper implementation of the scheme including laying down procedures thereof. Main notifications issued by the CBEC in the Department of Revenue providing duty exemption to EOUs are as under:- Sr. No. Notification No. and Date Subject 1. 22/2003-Central Excise, dated 31.3.2003 Fully exempts goods procured by EOUs from DTA units from payment of Central Excise Duty, 2. 52/2003-Customs, dated 31.03.2003 Fully exempts goods imported by EOUs from payment of Customs Duty. 3. 23/2003-CE, dated 31.3.2003 Provide partial exemption to goods manufactured by EOUs and sold in DTA from payment of Central Excise duty. 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:- Various incentives/facilities available to EOUs, in brief, are as under:- (i) Duty free imports or procurement from Bonded Warehouse /International Exhibitions of inputs, consumables, office or other capital goods (including second-hand Capital goods) etc. [vide notification No. 52/2003-Customs, dated 31.03.2003 ]. (ii) Procurement of goods from Domestic Tariff Area without payment of Central Excise duty [vide notification No. 22/2003-Central Excise, dated 31.03.2003 ]. (iii) Supplies by DTA manufacturer are eligible for deemed export benefits under Chapter 8 of FTP, which include drawback, refund of Terminal Excise Duty and Issuance of Advance Authorisation enabling duty free import to the DTA supplier. (iv) Full reimbursement of Central Sales Tax on goods purchased from DTA against C-Form for manufacture of goods for export. (v) Export Income exempted from payment of Income Tax (upto 31.3.11). (vi) DTA Sale (including advance DTA sale) upto 50% of F.O.B value of exports (i.e. Physical Exports) permitted on payment of Concessional rate of Central Excise duty[vide notification No. 23/2003-Central Excise, dated 31.03.2003 ]. (vii) Only positive net foreign exchange earnings (NFE) to be achieved over a period of five years. (viii) Duty free goods (except Capital Goods) to be utilized over a period of 3 years. (ix) Export proceeds to be realized within a period of 12 months. Retention allowed upto 100% of export earnings in EEFC Account. (x) Supplies made in DTA under Paragraph 6.9 of FTP Supplies to other exporting units/Bonded Warehouse are counted for the purpose of fulfillment of positive NFE. (xi) Goods allowed to be supplied duty free in DTA against Advance Authorization/ DFIA issued by DGFT. (xii) Job-work/sub-contracting for or from DTA permitted subject to fulfillment of certain conditions. (xiii) Import/export of goods including precious goods permitted through personal carriage Foreign Post Office. (xiii) FDI upto 100% permitted as per the guidelines of Department of Industrial Policy and Promotion. (xiv) Exemption from Industrial Licensing for manufacture of items reserved for SSI sector. (xv) Software Units allowed touse computer systems for training purposes (including commercial training). (xvi) EOUs allowed to install one fax machine and two computers outside the bonded area of the unit. (xvii) Depreciation upto 100% permissible on capital goods. On debonding, the duty to be paid on the depreciated value of the capital goods.