Export Oriented Units, Policy, Objectives, Criteria and Benefits

Export Oriented Units (EOUs) are industrial units established under the Export-Import (EXIM) Policy of the Government of India. These units are intended to promote exports from the country by providing a hassle-free environment for export production. EOUs are allowed to import raw materials, capital goods, and other items without payment of customs duty, excise duty, and other taxes.

EOUs are governed by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry, and they are eligible for various incentives and benefits under the EXIM Policy.

The Objectives of the EOU scheme are as follows:

• To promote exports from India by creating world-class infrastructure and facilities for export production.
• To attract foreign investments for the production of export goods.
• To generate employment opportunities in the country.
• To increase the foreign exchange earnings of the country.
• To provide a conducive environment for export production and make India an export hub.

To achieve these objectives, the EOU scheme offers various benefits and incentives to the units. These include:

• Duty-free import of raw materials, components, and capital goods for production and packaging of goods for exports.
• Exemption from payment of Central Excise duty on the procurement of raw materials, components, and capital goods.
• Exemption from payment of customs duty on the import and export of goods.
• Exemption from payment of Service Tax on the services rendered to the unit.
• Income tax exemption for the first five years of operations.
• Permission to sell a certain percentage of the goods produced in the domestic market.
• Setting up of 100% Export Oriented Units (EOUs) in the Special Economic Zones (SEZs) is also allowed.

The procedure for setting up an EOU involves the following steps:

• Obtaining the necessary approvals and licenses from the concerned authorities such as the Ministry of Commerce and Industry, State Government, and Pollution Control Board.
• Setting up the infrastructure and facilities required for production and export purposes.
• Applying for registration as an EOU with the Development Commissioner of the concerned SEZ or the Directorate General of Foreign Trade (DGFT).
• Execution of a bond with the Customs authorities for the export obligation.
• Filing of the necessary documents and obtaining the required permissions and clearances for the import and export of goods.

Some of the benefits of EOUs include:

• Duty-free import of capital goods, raw materials, and components for export production.
• Exemption from payment of excise duty and other taxes on raw materials, components, and finished goods meant for export.
• Exemption from payment of central sales tax and service tax on goods and services procured for export.
• Availability of 100% income tax exemption on export earnings for a period of five years.
• Permission to retain 50% of foreign exchange earnings in a foreign currency account.
• Eligibility for the Duty Entitlement Pass Book (DEPB) scheme and other export promotion schemes.

To set up an EOU, an entrepreneur needs to obtain the necessary approvals and licenses from the concerned authorities, such as the DGFT, State Pollution Control Board, and local government bodies. The entrepreneur also needs to submit a detailed project report and obtain environmental clearance.

Once the necessary approvals are obtained, the EOU can start importing raw materials, capital goods, and other items without payment of customs duty and other taxes. The EOUs are required to maintain a bond or a bank guarantee to cover the duty exemption availed by them.

The production process in the EOU needs to be geared towards exports, and the units are required to maintain proper records of their exports and imports. EOUs are also subject to regular inspections and audits by the concerned authorities to ensure compliance with the rules and regulations.

In terms of documentation, EOUs are required to maintain records of their exports and imports, and they need to file regular returns with the DGFT and other concerned authorities. They are also required to maintain proper records of their financial transactions and comply with the accounting standards prescribed by the Institute of Chartered Accountants of India (ICAI).