DIVIDEND BALANCING

Provisions of Dividend Balancing are applicable in case of 22 specified industries in the

consumer goods sector as per list given below.

LIST OF 22 SPECIFIED INDUSTRIES IN THE CONSUMER GOODS SECTOR

IN WHICH DIVIDEND BALANCE IS APPLICABLE*

1. Manufacture of food and food products.

2. Manufacture of dairy products.
3. Grain mill products.
4. Manufacture of bakery products.
5. Manufacture and refining of sugar (vacuum pan sugar factories.)
6. Production of Common Salt.
7. Manufacture of Hydrogenated oil (Vanaspati)
8. Tea processing.
9. Coffee.
10. Manufacture of beverages, tobacco and tobacco products.
11. Distilling, rectifying and blending of spirits, wine industries, malt liquors and malt,
production of country liquors and malt, production of country liquors and toddy.
12. Soft drinks and carbonated water industry.
13. Manufacture of cigars, cigarettes, cheroot and cigarette tobacoo.
14. Manufacture of wood and wood product, furniture and fixtures.
15. Manufacture of leather and fur/leather products.
16. Tanning, curing, finishing, embossing and japanning of leather.
17. Manufacture of footwear (excluding repair) except vulcanized for moulded rubber
or plastic footwear.
18. Manufacture of footwear made primarily of vulcanized or moulded products.
19. Prophylactics (rubber contraceptive).
20. Motor cars.
21. Entertainment Electronics (VCRs, Colour TVS, CD Players, Tape Recorders).
22. White Goods (Domestic Refrigerators, Domestic Dishwashing Machines,
Programmable Domestic Washing Machines, Microwave Ovens, Airconditioners).

Note:
The requirement of dividend balancing in respect of the industries listed above has
been withdrawn with effect from 14th July, 2000 vide Press Note No.7 dated 14 th July,
2000.
List of EPZ with their territorial area in India :

Development Commissioner State/Union Territories

NOIDA Export Processing Zone
FALTA Export Processing Zone
Madras Export Processing Zone
*Santa Cruz Export Processing Zone.
*KANDLA Free Trade Zone
*Cochin Export Processing Zone
*VIZAG Export Processing Zone
Delhi, Uttar Pradesh, Punjab, Haryana, Himachal
Pradesh, Jammu & Kashmir, Chandigarh,
Rajasthan and Madhya Pradesh.
West Bengal, Bihar, Orissa, Assam, Arunachal
Pradesh, Meghalya, Manipur, Nagaland , Tripura
, Mizoram & Sikkim.
TamilNadu, Pondicherry (excluding Mahe and
Yaman) Andaman and Nicobar Islands
Maharashtra, Goa, Daman & Diu, Dadra and
Nagar Haveli
Gujarat
Kerala, Karnataka, Lakshwadweep and Mahe
Andhra Pradesh and Yaman.

* 4 Export Processing Zones, i.e. Santa Cruz, KANDLA, Cochin, VIZAG Export
Processing Zone, have been converted into Special Economic Zone (SEZ) w.e.f. April,
2000.

List of STPI Centres in India.

Both STP and EHTP Schemes are administered by “Software Techonology Park of
India” (STPI). The Directors of the STPI are nominated as designated officers to
implement the EHTP Scheme and to accord necessary approval required under the
scheme.

Any unit, set-up anywhere in India, can avail the benefits of EHTP scheme, subject to
different locational policy of different STPI centres by registering it with the concerned
STPI Centres depending on territorial area covered under STPI Centres. The various
STPI Centres operating in India are :-

(i) NOIDA (ii) Mohali (iii) Jaipur (iv) Indore (v) Gandhi Nagar (vi) Bhubaneswar (vii)
Mumbai (viii) Pune (ix) Aurangabad (x) Hyderabad (xi) VIZAG (xii) Bangalore (xiii)
Manipal (xiv) Chennai (xv) Coimbatore (xvi) Mysore (xvii) Thiruvanathapuram and
(xviii) Gauhati.
S.N BASIS EOU/EHTP/STP/EPZ SEZ
o
1. Export Performance As per Appendix – A enclosed Only Trading SEZ units is
required to achieve turnover
of US$ 1 million in 5 years.
2. Net Foreign As per Appendix – A enclosed. SEZ unit shall achieve
Exchange Earning Positive NFE.
(NFEP or NFE) NFEP = (A-B)/A*100 NFE = A-B > 0
Where, Where,
A = FOB Value of Exports A = FOB Value of Exports
B = Sum total of CIF Value of B = Sum total of CIF Value
imported units. of imported units.
3. Minimum No Minimum Investment is Minimum Investment in
Investment prescribed. Building, Plant & Machinery
shall be Rs. 50,000/-.
4. Conversion of DTA Permitted. No provision.
into EOU / EHTP /
STP units
5. Import of Capital Without payment of duty except - Same -
Goods. items prohibited in ITC (HS).
Goods already imported before issue
of LOP/LOI (Letter of
Permission/Intent) are also eligible
for duty free clearance provided (i)
custom duty has not been paid and
(ii) goods have not been cleared.
6. Import of Second Permitted. No provision.
hand Capital goods
7. Leasing of Capital (i) Capital goods procured from - Same -
Goods. indigenous sources on lease will
be eligible for Excise exemption.
(ii) Value of Imported goods financed
through lease shall be taken for
purpose of calculation of NFEP.
8. Re-import Re-import allowed of goods No provision.
(exported for specific purpose).
9. Custom Bonding The entire operations shall be in a - Same -
custom bonded premises for a period
of 5 years.
10 Legal Undertaking Unit shall execute a legal - Same -
undertaking.
11 Domestic Tarriff As per Appendix – B enclosed SEZ units may sell goods and
Area(DTA) Sale services in DTA in
accordance with import
 policy subject to :
a) Payment of applicable
duties.
b) Acheivement of positive
NFE.
12. Sub-Contracting Units can sub-contract part of their - Same -
production process involving change
of form or nature of goods, through
job works by units in DTA or other
EOU/EHTP/STP with permission of
Custom authorities.

Units may sub-contract upto 50% of - No ceilings prescribed –

production for job-work, with
permission of Custom authorities.

EOU/EPZ may undertake job-work - Same -

for export, on behalf of DTA
exporter, with the permission of
Custom authorities provided
(i) the goods are exported directly
from EOU/EPZ units
(ii) export documents are in name of
DTA exporters.
All units may sub-contract
part of production through
other units in same SEZ,
without permission of
Custom authorities
provided adequate records
are maintained by
supplying and receiving
units.

12. Entitlement of (i) Reimbursement of Central Sales - Same -

supplies from DTA Tax.
(ii) Exemption of payment from
Central Excise duty on all goods.
(iii) Discharge of Export Performance
(iv) Reimbursement of duty paid on
fuels from domestic oil
companies, as per Drawback rate
notified by DGFT.
The entitlements stated above are
available only if goods supplied are
manufactured in India.
13. Legal Undertaking Unit to execute a legal undertaking - Same -
with Development Commisssioner
concerned.
14. Sale of un-utilized Unit may export or dispose them in - Same -
material DTA in accordance with import policy
in force and on payment of applicable
duties and submission of import
licence by DTA unit.
Capital goods that have become
obsolete may either be exported or
dispose off in DTA on payment of
applicable duties.

15. Tax incentives Units enjoys tax holiday of 100% - Same -

exemption from Income-Tax upto
Assessment Year 2009-10.
w.e.f 1-4-2002, domestic sales of
articles or things shall not be
exempt.
Earlier, domestic sales upto 25% of
total sales were deemed to be export
profits
16. Bringing of Foreign Within a period of 180 days. Within period of 365 days
Exchange in India.
17. EEFC – Exchange Units can credit upto 70% of proceeds SEZ units can credit 100% of
Earning Foreign in EEFC accounts. proceeds in EEFC account.
Control A/c
18. Approval If conditions in para 9.37 satisfy, - Same -
approval within 15 days by
Development commissioner

If not, by Board of approval in 45

days
19. Foreign Investment Upto 100% is permissible - Same -
20. Duty Remission No duty payable if goods are - Same -
destroyed with permission of custom
authorities.

STP/EHTP/EPZ/EOU units set up in respective parks can have the advantage of

developed sector specific infrastructure and economies of scale of operations.
APPENDIX- A

Minimum NFEP and Export Performance requirement under EOU/EPZ EHTP/STP

scheme

(PARAGRAPH 9.5 OF THE POLICY)

Name of the sector Minimum Minimum E.P for five years

NFEP
A. MNUFACTURING/PROCES Positive US $ 3.5 Million or3 times the CIF
SING SECTOR value of imported capital goods
I (i) Unites with actual investment whichever is higher
in plant and machinery, both
imported and indigenous of Rs. 5
crores and above.
II.(i) Electronic Hardware Positive US $ 1.00 Million or 3 times the CIF
value of imported capital goods
whichever is higher.
(ii) Agriculture, aquaculture, Positive -do-
animal husbandry, horticulture,
pisciculture, viticulture, poultry
and sericulture.
(iii) Biotechnology -do- US $ 0.50 million or 3 times the CIF
value of imported capital goods
whichever is higher.
(iv) Toys all kinds -do- -do-
(v) Floriculture -do- -do-
(vi) computer software and IT 10% -do-
enabled service

B. TRADING
(i )Trading units including Gems Positive US $ 1.00 Million or 3 times the CIF
and jewelry units. value of imported capital goods
whichever is higher
B. SERVICES 10% US$ 0.50 Million or 3 times the CIF
(Other than IT enable value of imported capital goods,
services) whichever is higher
D. ALL OTHERS 10% US $ 1 Million or 3 times the CIF
value of imported capital goods,
whichever is higher.
APPENDIX – B :

DTA SALE BY EOU/EPZ/EHTP/STP

1. Sale of Rejects
Unless specifically prohibited by Letter of Permission(LOP)/ Letter of Intent(LOI) rejects
may be sold in DTA on payment of duties as applicable to sale on prior intimation to
Custom authorities. Such sale shall be counted against DTA sale entitlement as per
paragraph 9.9(b) of policy. Sale of Rejects upto 5% of FOB value of exports shall not be
subject to achievement of NFEP.
2. Sale of goods/services
Units may sell goods/services upto 50% of FOB value of exports, subject to
(i) Fulfillment of minimum NFEP as prescribed in Appendix – A.
(ii) Payment of applicable duties

EOU/EHTP/STP units may be permitted to sell finished products, which are freely
importable under the policy, in DTA over and above the levels permissible mentioned
above, against payment of full duties provided that units shall achieve NFEP and export
performance as mentioned in Appendix – A.

3. Sale of by-products

By-products referred in LOP/LOI may be sold in DTA subject to achievement of NFEP

and payment of applicable duties within the overall limit of 50% as mentioned above.
However, sale over and above the levels permissible may also be permitted on payment
of full duties.