Export Oriented Units

Presented To: All Present in the Hall

Presented By: Group No. 02PGP-II, PGDM General Batch 2008-2010

Contents
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Salient features

How to set-up an Export Oriented Unit?

Eligibility Criteria Prior to Approval Application Procedure Approval Procedure After Approval Procedure Development Commissioner Approval from State Government Agencies Export Performance of EOUs up to 2008-09 and Units in Operation

Salient Features (1/3)

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No license required for import

Exemption from Central Excise Duty in procurement of

capital goods, raw-materials, consumables spares etc. from the domestic market Exemption from customs duty on import of capital goods, raw materials, consumables spares etc. Reimbursement of Central Sales Tax (CST) paid on domestic purchases Supplies from DTA to EOUs treated as deemed exports Reimbursement of duty paid on furnace oil, procured from domestic oil companies to EOUs as per the rate of drawback notified by the Directorate General of Foreign Trade

Salient Features (2/3)

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100% Foreign Direct Investment permissible Exchange Earners Foreign Currency (EEFC) account Facility to retain 100% foreign exchange proceeds in EEFC

Account Facility to realize and repatriate export proceeds within twelve months Further extension in time period can be granted by RBI and their authorized dealers Re-export of imported goods found defective, goods imported from foreign suppliers on loan basis etc. Exemption from industrial licensing requirement for items reserved for SSI sector Profits allowed to be repatriated freely without any dividend balancing requirement

Salient Features (3/3)

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Access to Domestic Market up to 50% of FOB value of export

on concessional rate of duty Duty free goods to be utilized in two years. Further extension granted on liberal basis Job work on behalf of domestic exporters for direct export allowed Conversion of existing Domestic Tariff Area (DTA) unit into an EOU permitted Can procure duty-free inputs for supply of manufactured goods to advance license holders Supply of ITA-I items in the domestic market which would be counted for fulfillment of NFE

How to set-up an Export Oriented Unit?

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1.

Eligibility Criteria

2. Prior to Approval Procedure 3. Application Procedure 4. Approval Procedure 5. After Approval Procedure

Eligibility Criteria
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Can be set up by any entrepreneur for:

manufacturing of goods rendering of services repair, reconditioning, re-making and re-engineering Trading activity is not allowed in the EOU Scheme EOU unit is required to achieve only positive Net Foreign Exchange (NFE) over a period of five years EOU can also be set up in the following sectors:

Agriculture Animal Husbandry Aquaculture Floriculture Horticulture

Pisciculture Viticulture Poultry Seri culture

Prior to Approval Procedure (1/5)

8 Planning your venture: Is it your own? or Is it with foreign participation? If so, then what is the nature of participation? 2. What process do you intend to do? Manufacturing, rendering and export of services Agriculture Animal Husbandry Aquaculture Floriculture Horticulture Pisciculture Poultry Sericulture Repair, reconditioning, re-making, re-engineering etc.
1.

Prior to Approval Procedure (2/5)

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3.

Technology to be used:
Local/foreign Related cost and conditions

4.

Feasibility report:
On your own or with help of consultant

5.

The finances involved:

Land, structure, buildings etc. Building construction material is not exempted from duty Capital Goods, machinery etc. Payment for royalties etc. Administration and establishment Others : like interest on loans, related taxes and levies etc.

6.

The current competition overseas:

Main competitors Demand and price levels

Prior to Approval Procedure (3/5)

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7.

The import laws and other requirements in target markets:

Any fiscal/non-fiscal barriers, like anti-dumping laws Quota restrictions Preferential treatment to competitor countries

8.

Location of the Unit:

Closeness to port or rail/road Availability of raw material and Environment clearance needed if unit is located within 25 kilo meters of an urban town Accordingly the application will be submitted to the concerned Development Commissioner under whose jurisdiction that state comes.

Prior to Approval Procedure (4/5)

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9. Capital goods, machinery and equipment to be

used:

Indigenous or foreign (allowed duty free) Related cost

10. Raw materials and other inputs, like consumables

etc. that would be required 11. The production process:

Whether production process requires air-conditioning plant, special furnaces or kilns etc. Details and cost. (Air-conditioning equipment is permitted duty free only if it is essential for production process)

Prior to Approval Procedure (5/5)

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12. The production capacity and spare capacity 13. Any by-products turned out in the production process 14. Treatment of effluents or waste-materials

15. Packaging
16. Power 17. Other information 18. Mandatory clearances from State Government:

Pollution clearance certificate Approvals of building plan in cases where building is proposed to be constructed Registration as a small scale industrial unit, if applicable Registration under Factories Act

Application Procedure (1/2)

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All applications are to be filed with the concerned

Development Commissioner of Special Economic Zone (For jurisdiction of Development Commissioner) The unit/promoter has to apply in the application form, to be given in triplicate given in Handbook of Procedures Project Report including a write up on the background of the promoters establishing their credentials and standing has to be submitted along with the application One may visit http://www.eouindia.gov.in for documents required by the Development Commissioner for approval

Application Procedure (2/2)

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DD for Rs. 5,000/- drawn in favor of The Pay & Accounts

Officer, Ministry of Commerce and Industry, Department of Commerce, payable at the Central Bank of India, Udyog Bhavan, New Delhi Registration-cum-Membership Certificate (RCMC) should be obtained from the office of the concerned Development Commissioner Import Export Code: If the unit does not have an Import Export code (IEC), it will apply in the prescribed form to the Zone Administration for the same

Approval Procedure
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Letter of Permission (LOP): Issued by the Zone Administration within 2 weeks after interview of the promoter by the Approval Committee Legal undertaking (LUT): A legal undertaking in the prescribed form undertaking to abide by the terms and conditions of the LOP has to be executed by the unit

After Approval Procedure

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Issuance of a Private Custom Bonded Warehouse License: The application shall be accompanied by the following documents/information:

Copy of notification where under the place has been declared as warehousing station under section 9 of the Customs Act Copy of LOI/LOP issued by Development Commissioner concerned and LUT accepted by the Development Commissioner Details of the premises including ground plan, purchase/rent/lease deed, allotment letter from Industrial Development Corporation/Authority (if any) Details about the constitution of the firm/company including its Proprietor/Partners/Directors etc. Project Report indicating stage wise manufacturing process List of raw material, consumables and capital goods etc. required Undertaking that cost recovery and other charges shall be paid

Development Commissioner
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The Development Commissioner is empowered to

grant approvals on the following matters:

Import of additional capital goods Enhancement of production capacity Broad-banding/diversification Change in name of the unit Change of location/expansion Extension of validity of LOP/LOI Import of office equipment Merger of two or more EOU/SEZ Units

Approval from State Government Agencies

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The unit has to secure approval for its wiring and electrical plan from

the Electrical authorities It has also to secure power allocation and wiring approval from the State Electricity Board The unit has to take a registration under the State Government Sales Tax Act and Central Sales Tax Act In case the unit already has a registration with the State Sale Tax Department, the address of the additional premises should also be endorsed in the registration certificate The unit has also to take Small Scale Industry (SSI) Registration from the District Industries Center to apply for State Governments Investment Subsidy

Export Performance of EOUs up to 2008-09 and Units in Operation

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Export (Value in Rupees Crore) Jurisdictional SEZs 200506 NSEZ Percentage Growth 200607 to 200506 22.42 200708 to 200607 2.07 2008Units in 09 to Operation 2007as on 08 31.3.2009 -1.45 416

200607

200708

200809

8615.5 10546.8 10764.6 10608.8

SEEPZ-SEZ
MSEZ CSEZ VSEZ FSEZ KASEZ ISEZ Total

8293.7 11900.1 19912.4 18539.1

7557.9 13591 15651.4 14044.7 15943 18834.6 21404.2 17697.2 2676.8 4366.62 7167.69 7908.36 1658.8 2509.95 2647.57 3086.39 4716.4 7420.88 90405.8 98582.4 794.77 49462 885.08 1031.29 69965 168839 171498

43.48
79.82 18.14 63.13 51.31

67.33
15.16 13.64 64.15 5.48 11.36

-6.9
-10.27 -17.32 10.33 16.57 9.04 16.52 1.58

519
496 520 226 103 301 19 2600

57.34 1118.26 41.45 141.32

Source: http://www.eouindia.gov.in

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