Export Oriented Units (EOUs) are industrial entities in India that are set up to promote and facilitate the export of goods and services. These units are established with the specific aim of boosting foreign exchange earnings and promoting economic growth through increased export activities.
EOUs can be set up anywhere in India, either in designated export processing zones, special economic zones, industrial estates, or even outside these zones, subject to certain conditions and approvals.
EOUs are engaged in a wide range of manufacturing and service activities, including the production of goods, software development, and other export-oriented services.
EOUs are required to export 100% of their products unless they sell a portion of it to the Domestic Tariff Area (DTA). It is clear that EOUs are expected to export the majority of their production, and they are required to achieve positive foreign exchange within a specified period.
Additionally, they are subject to various conditions and entitlements related to their export activities, such as the realization of export proceeds within a certain timeframe and the maintenance of positive Net Foreign Exchange (NFE).
To set up an EOU, a minimum investment of Rs. 1 crore in plant and machinery is required, except for software technology parks, electronics hardware technology parks, and biotechnology parks. EOUs are allowed to procure raw materials and capital goods duty-free, either through import or through domestic sources.
How does EOU differ from SEZ? EOUs differ from Special Economic Zones (SEZs) as EOUs can be set up anywhere in the country, while SEZs are specially demarcated enclaves that are deemed to be outside the Customs jurisdiction. EOUs are subject to GST, while SEZs are exempt from GST.
EOU offers several benefits to encourage exports, foreign exchange earnings, and employment generation in India. Some of the key benefits include:
Duty-free imports of raw materials, capital goods, and consumables for export production.
Exemption from Central Excise Duty on the purchase of goods for capital use, consumables, and spares.
Reimbursement of GST paid on fuels, duty paid on fuels from domestic oil companies, and input tax credit on goods and services.
Priority-basis and fast-track clearance facilities.
Exemption from industrial licensing for manufacturing items reserved for this purpose.
Eligibility for refund or reimbursement of duty paid on fuels produced by domestic oil companies.
All EOUs are liable to claim input tax credit on goods and services, and therefore, claim a refund as well.
EOUs are not required to obtain an industrial license for the manufacture of items reserved for small-scale industries.
EOUs can import second-hand capital goods without any age limit.
Supplies from Domestic Tariff Area (DTA) to EOUs for use in their manufacture for exports are eligible for benefits of deemed exports under Chapter 7 of the Foreign Trade Policy.
EOUs can be set up anywhere in the country, provided they meet the scheme's criteria.
EOUs are allowed to convert existing DTA units to EOUs.
EOUs involved in agriculture and horticulture that are engaged in contract farming could be permitted to use duty-free imports
The establishment and functioning of EOUs are regulated by the Directorate General of Foreign Trade (DGFT) in India. The government provides a supportive policy framework to encourage the growth of EOUs and enhance their competitiveness in the global market.
EOUs play a significant role in promoting exports, attracting foreign investment, and contributing to the overall economic development of the country.
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