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EOU Scheme EOU Scheme- -Overview Overview


W W Units Units undertaking undertaking to to export export their their entire entire production production of of goods goods
and and services services may may be be set set up up under under the the Export Export Oriented Oriented Unit Unit
(EOU) (EOU) Scheme Scheme
W W EOUs EOUs can can get get aa location location of of their their choice choice Customs Customs- -bonded bonded
anywhere anywhere in in India India
For For setting setting up up an an EOU EOU in in Karnataka, Karnataka, Kerala, Kerala, Lakshadweep Lakshadweep or or Mahe, Mahe,
apply apply to to Development Development Commissioner, Commissioner, Cochin Cochin SEZ SEZ
W W EOUs EOUs can can import import without without duties, duties, all all capital capital goods goods and and raw raw
materials materials for for running running the the unit unit..
EOUs EOUs can can procure procure these these items items from from Indian Indian sources sources also also without without excise excise
duties duties and and sales sales taxes taxes
W W EOUs EOUs can can sell sell upto upto 50 50 of of FOB FOB value value of of exports exports in in the the
Indian Indian market market at at concessional concessional duties duties
W W New New EOUs EOUs get get Corporate Corporate Income Income Tax Tax concessions concessions till till 2009 2009
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pprovals for EOUs pprovals for EOUs
W W EOUs EOUs are are given given approval approval for for manufacture manufacture of of goods, goods,
including including re re- -furbishing, furbishing, as as well well as as for for rendering rendering of of
services services including including bio bio- -technology, technology, BPO, BPO, Call Call
Centres, Centres, IT IT enabled enabled Services Services.. n n EOU EOU may may also also
engage engage in in mining, mining, agriculture, agriculture, aquaculture, aquaculture,
floriculture, floriculture, or or horticulture horticulture..
W W Trading Trading by by EOUs EOUs is is not not permitted permitted
Minimum Minimum Investment Investment for for approval approval as as an an EOU EOU
should should be be Rs Rs..10 10 million million in in plant plant &machinery &machinery..
W W Software Software /services/ /services/ handicrafts/ handicrafts/ agriculture/ agriculture/
floriculture/ floriculture/ aqua aqua- -culture/ culture/ animal animal husbandry/ husbandry/
information information technology technology are are exempted exempted from from this this size size
restriction restriction..
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pprovals for EOUs pprovals for EOUs
Licences Licences are are required required for for
Manufacturing Manufacturing arms arms and and ammunition, ammunition, atomic atomic substances, substances,
narcotics/psychotropic narcotics/psychotropic substances, substances, and and tobacco tobacco products products
Establishing Establishing EOUs EOUs in in Bangalore Bangalore and and Cochin Cochin city city limits limits
(unless (unless it it is is aa non non- -polluting polluting sector sector EOU, EOU, or or is is located located in in an an industrial industrial
estate estate within within the the city) city)
pprovals pprovals for for licensable licensable activity activity and and services services are are
given given by by the the Board Board of of pprovals pprovals in in the the Commerce Commerce
Ministry Ministry
pplications pplications are are to to be be routed routed through through the the Development Development
Commissioner Commissioner
pproval pproval (called (called Letter Letter of of Permission Permission (LOP)) (LOP)) for for non non- -
licensable licensable manufacturing manufacturing activity activity is is given given locally locally by by
the the Development Development Commissioner Commissioner
Relevant forms are available at Relevant forms are available at
http://www.cepz.com/eouforms http://www.cepz.com/eouforms
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EOU Scheme Features EOU Scheme Features
W W EOUs EOUs may may export export all all products products except except prohibited prohibited items items of of
exports exports
W W EOUs EOUs may may import import without without duty duty all all types types of of goods, goods, including including
capital capital goods goods required required for for its its activities, activities, unless unless they they are are
prohibited prohibited for for import import
Even Even second second hand hand plant plant & & machinery machinery can can be be imported imported..
Capital Capital Goods Goods can can be be purchased, purchased, loaned, loaned, sourced sourced from from
foreign/domestic foreign/domestic leasing leasing companies companies or or brought brought free free of of cost cost..
EOUs EOUs get get upto upto 55 years years for for utilization utilization of of imported imported capital capital
goods, goods, and and upto upto 33 years years for for other other items items..
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EOUs & FDI EOUs & FDI
100 100 FDI FDI in in manufacturing manufacturing EOUs EOUs is is permitted permitted under under the the
automatic automatic route route of of the the Reserve Reserve Bank Bank of of India India
ii..ee.. first first bring bring in in the the money, money, and and then then inform inform Reserve Reserve Bank Bank of of
India India s s local local office office in in Form Form FC(RBI) FC(RBI) within within 30 30 days days of of receipt receipt
lso lso under under the the automatic automatic route route for for EOUs EOUs are are
External External Commercial Commercial Borrowing Borrowing upto upto USD USD 50 50 million, million, with with
maturities maturities of of 33 years years or or more, more, for for funding funding and and running running the the unit unit..
Use Use of of brand brand names/trademarks names/trademarks,, if if royalty royalty is is upto upto 22 on on exports exports and and
11 on on domestic domestic sales, sales, without without technology technology transfer transfer
Foreign Foreign technology technology tie tie- -ups ups,, if if lump lump sum sum payment payment does does not not exceed exceed
USD USD 22 million, million, and and if if royalty royalty is is upto upto 55 on on domestic domestic sales sales and and 88 on on
exports, exports, even even for for wholly wholly owned owned subsidiaries subsidiaries
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EOUs and Foreign Exchange EOUs and Foreign Exchange
EOUs EOUs may may freely freely repatriate repatriate investment investment & & returns returns
abroad abroad
EOUs EOUs need need to to bring bring export export proceeds proceeds to to India India only only
within within 360 360 days days of of export export
nd nd even even then, then, upto upto 100 100 may may be be retained retained in in foreign foreign
currency currency in in the the unit unit s s EEFC EEFC ccount ccount
EOUs EOUs may may invoice invoice sales sales to to other other EOUs EOUs etc etc in in foreign foreign
exchange exchange
EOUs EOUs may may invoice invoice sales sales to to Indian Indian entities entities other other than than
EOUs EOUs also also in in foreign foreign exchange exchange sourced sourced from from from from their their
EEFC EEFC account account or or abroad abroad

Tax Concessions for EOUs Tax Concessions for EOUs


New New EOUs EOUs are are entitled entitled under under to to Corporate Corporate Income Income Tax Tax
exemption exemption on on physical physical exports exports out out of of India India till till 2009 2009
Central Central Sales Sales Tax Tax is is reimbursed reimbursed on on purchases purchases from from
local local manufacturers manufacturers
Supplies Supplies from from local local manufacturers manufacturers are are free free of of Central Central
Excise Excise Duty Duty
In In case case duties duties are are paid, paid, Terminal Terminal Excise Excise Duty Duty is is
reimbursed reimbursed
EOUs EOUs in in manufacturing manufacturing sector sector get get exemption exemption from from
State State Sales Sales Tax Tax on on inputs inputs (excepting (excepting fuel) fuel)
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EOU Scheme & DT entities EOU Scheme & DT entities
W W Existing Existing Indian Indian entities entities can can open open aa new new EOU EOU under under
the the same same legal legal entity entity
But But the the EOU EOU division division must must maintain maintain separate separate accounts, accounts,
including including separate separate Bank Bank accounts accounts
W W DT DT units units can can also also convert convert to to EOU EOU scheme scheme
Units Units working working with with EPCG EPCG /dvance /dvance Licencing Licencing can can also also
convert convert to to EOU EOU scheme scheme
Their Their pending pending licence licence obligations obligations will will be be subsumed subsumed into into
the the EOU EOU scheme scheme..
But But to to be be eligible eligible for for Corporate Corporate Income Income Tax Tax concessions concessions
under under section section 10 10B, B, it it has has to to be be ensured ensured that that old old assets assets do do
not not exceed exceed 20 20 of of total total assets assets of of the the EOU EOU
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EOUs & Customs Department EOUs & Customs Department
W W EOUs EOUs have have to to get get their their premises premises bonded bonded by by the the local local Customs/ Customs/
Central Central Excise Excise Department, Department, and and function function under under their their supervision supervision
W W They They can can get get aa location location of of their their choice choice so so bonded bonded..
ll ll duty duty- -free free items items have have to to be be brought brought here here first first..
W W One One single single multi multi- -purpose purpose bond bond with with the the Customs Customs //Central Central Excise Excise
Department Department,, called called the the BB 17 17 Bond, Bond, suffices suffices for for all all operations operations..
W W While While there there is is no no physical physical control, control, there there is is record record- -based based control control
EOU EOU has has to to maintain maintain proper proper account account of of the the import, import, consumption consumption and and
utilisation utilisation of of all all imported/locally imported/locally procured procured materials materials and and exports exports made made and and
submit submit them them periodically periodically to to the the Customs Customs..
W W Duty Duty foregone foregone under under the the EOU EOU scheme scheme with with interest interest is is recoverable recoverable
in in case case of of fraudulent fraudulent activity activity (along (along with with prosecution prosecution & & penalties) penalties)
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Export Obligations oI EOUs Export Obligations oI EOUs
EOUs have only to be foreign exchange positive EOUs have only to be foreign exchange positive
FE Inflows> FE Outflows FE Inflows> FE Outflows
where where
W W FE Inflows FE Inflows Export earnings (Direct Exports+ Exports through Export earnings (Direct Exports+ Exports through
Third Parties + Inter Third Parties + Inter- -unit Sales + Exports to unit Sales + Exports to
EOU/SEZ/STP/EHTPs) EOU/SEZ/STP/EHTPs)
W W FE FE Outflows Outflows Foreign Foreign Exchange Exchange outgo outgo on on imports imports of of Raw Raw
materials/consumables materials/consumables ++ FE FE payments payments of of commission/ commission/ royalty/ royalty/
fees/ fees/ dividends/ dividends/ interest interest on on ECB ECB ++ share share of of amortised amortised value value of of
capital capital goods goods imported imported
Imported Imported capital capital goods goods are are amortized amortized over over 10 10 years years; ; only only amortized amortized
amount amount is is included included in in NFE NFE calculation calculation
Values Values are are included included in in the the calculation calculation even even if if the the imports imports are are not not actually actually
paid paid for for..
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EOU Scheme EOU Scheme- - Duty Duty- -free Supplies from Indian free Supplies from Indian
Market Market
Supplies Supplies from from Indian Indian manufacturers manufacturers to to EOUs EOUs are are
classified classified as as deemed deemed exports, exports, and and the the suppliers suppliers are are
eligible eligible for for
dvance dvance Licence Licence for for import import of of intermediate intermediate inputs inputs
Deemed Deemed Export Export Duty Duty Drawback Drawback
Discharge Discharge of of export export performance performance obligation obligation on on the the supplier supplier
EOUs EOUs may may obtain, obtain, on on production production of of aa suitable suitable
disclaimer disclaimer from from the the suppliers, suppliers, the the duty duty drawback drawback and and
refund refund of of Terminal Terminal Excise Excise Duty Duty
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EOUs EOUs ccess to Indian Market ccess to Indian Market
Sales Sales to to the the Indian Indian Market Market
EOUs EOUs can can sell sell duty duty- -free free to to other other EOU EOU /SEZ /SEZ /STP /STP /EHTPs /EHTPs
etc etc
EOUs EOUs can can sell sell on on full full duties duties in in the the DT DT against against foreign foreign
currency currency (from (from EEFC EEFC account account or or from from abroad) abroad)
This This also also counts counts for for NFE NFE..
part part from from the the above above,,
EOUs EOUs can can sell sell upto upto 50 50 of of FOB FOB value value of of physical physical exports exports
to to the the DT DT at at concessional concessional duties duties
EOUs EOUs can can sell sell over over and and above above that that at at full full duties, duties, subject subject to to
NFE NFE being being positive positive
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EOU Sales to other EOUs EOU Sales to other EOUs
EOU EOU s s Sales Sales are are duty duty- -free free to to Indian Indian entities entities like like
SEZ SEZ /EOU /EOU /EPZ /EPZ /STP /STP /EHTP /EHTP units, units,
dvance dvance Licence Licence Holders, Holders,
Bonded Bonded Warehouses Warehouses & &
Educational Educational institutions, institutions, defence defence establishments, establishments, other other
agencies agencies notified notified by by Government Government of of India India as as eligible eligible for for
duty duty- -free free imports imports..
These These sales sales count count for for computation computation of of NFE NFE..
But But they they do do not not count count as as physical physical exports exports..
They They can can be be invoiced invoiced in in foreign foreign currency currency or or in in
Indian Indian currency currency..
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EOUs & Subcontracting EOUs & Subcontracting
EOUs EOUs can can subcontract subcontract up up to to 50 50 of of production production or or part part
of of production production process process to to units units in in the the EOU EOU or or Indian Indian
manufacturers manufacturers..
EOUs EOUs may may temporarily temporarily take take to to the the job job worker worker s s premises premises
jigs, jigs, moulds, moulds, tools, tools, fixtures, fixtures, tackles, tackles, instruments, instruments, hangers, hangers,
patterns patterns & & drawings drawings for for job job work work
EOUs EOUs can can even even subcontract subcontract to to units units abroad abroad
EOUs EOUs can can import import raw raw materials materials & & components components free free of of cost cost
for for job job- -working working and and return return..
EOUs EOUs can can undertake undertake job job- -work work for for export export on on behalf behalf of of
local local manufacturers manufacturers..
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EOU Scheme: Exit Policy EOU Scheme: Exit Policy
Units Units can can de de- -bond bond without without paying paying duties duties capital capital goods goods they they
have have used used for for 10 10 years years
Software Software units units can can de de- -bond bond on on duty duty- -free free basis basis after after 33 years years..
Units Units can can wind wind up up their their operations operations on on meeting meeting their their export export
obligations obligations by by
Exporting Exporting back back any any imported imported capital capital goods goods and and other other
material, material, or or transferring transferring them them to to another another SEZ/EOU SEZ/EOU unit, unit, or or
Destroying Destroying the the items items in in Customs Customs presence, presence, or or
Donation Donation on on gratis gratis basis basis to to educational educational institutions, institutions, or or
De De- -bonding bonding on on payment payment of of duty duty on on capital capital goods goods under under the the
EPCG EPCG Scheme Scheme as as aa one one time time option, option, or or
De De- -bonding bonding all all duty duty- -foregone foregone items items by by paying paying duties duties at at current current
rates rates on on unutilised unutilised raw raw materials materials (imported (imported value) value) and and on on capital capital
goods goods (on (on depreciated depreciated value value only) only) and and selling selling them them in in the the DT DT..
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EOU Scheme: Exit Policy EOU Scheme: Exit Policy
In In case case of of failure failure to to achieve achieve positive positive NFE, NFE,
duty duty foregone foregone under under the the EOU EOU scheme scheme with with
interest interest is is recoverable recoverable in in proportion proportion to to the the
shortfall shortfall in in NFE NFE
If If the the unit unit has has not not met met positive positive NFE, NFE, de de- -
bonding bonding shall shall also also be be subject subject to to payment payment of of
penalties penalties under under the the Foreign Foreign Trade Trade
(Development (Development & & Regulation) Regulation) ct, ct, 1992 1992,, and and
under under the the Customs Customs ct, ct, 1960 1960
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EOU Scheme: Who can operate EOU Scheme: Who can operate
W W To To run run manufacturing manufacturing activities activities foreign foreign companies companies
need need to to set set up up an an Indian Indian Company Company
The The Indian Indian Company Company has has to to have have independent independent legal legal status, status,
distinct distinct from from the the parent parent foreign foreign company company..
The The Company Company may may be be aa wholly wholly- -owned owned subsidiary, subsidiary, or or aa
joint joint venture venture company company in in financial financial collaboration collaboration with with an an
Indian Indian company company in in India India..
W W Company Company registered registered in in India India can can start start an an EOU EOU
unit unit without without starting starting aa new new legal legal entity entity: : separate separate
accounts accounts suffice suffice..
W W To To run run manufacturing manufacturing activities activities foreign foreign companies companies
need need to to set set up up an an Indian Indian Company Company
The The Indian Indian Company Company has has to to have have independent independent legal legal status, status,
distinct distinct from from the the parent parent foreign foreign company company..
The The Company Company may may be be aa wholly wholly- -owned owned subsidiary, subsidiary, or or aa
joint joint venture venture company company in in financial financial collaboration collaboration with with an an
Indian Indian company company in in India India..
W W Company Company registered registered in in India India can can start start an an EOU EOU
unit unit without without starting starting aa new new legal legal entity entity: : separate separate
accounts accounts suffice suffice..
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How to Contact How to Contact
W W For more details of Indian EOUs, see website For more details of Indian EOUs, see website
http://eouindia.com http://eouindia.com
W W For details of EOUs with the Development Commissioner, For details of EOUs with the Development Commissioner,
CSEZ, see CSEZ, see www.cepz.com/sez/heou/index.htm www.cepz.com/sez/heou/index.htm
especially the ~How To pply section at especially the ~How To pply section at
http://www.cepz.com/eouhowtoapply http://www.cepz.com/eouhowtoapply
W W Contact CSEZ office Contact CSEZ office
at Cochin at Cochin mailcsez.com mailcsez.com
Phone in at ++91 Phone in at ++91- -484 484- -2413222 2413222
at Bangalore at Bangalore adcblrcsez.com adcblrcsez.com
Phone in at 080 Phone in at 080- -25714874 25714874

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