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The Export Oriented Unit (EOU) scheme was introduced in the year 1980. The purpose of the scheme was basically to boost exports. It was introduced as a complementary scheme to the Free Trade Zone/ Export Processing Zone (EPZ) Scheme.
Over the years the Scheme undergone various changes am dots scope also expanded substantially as compared to the initial Scheme, which was basically for manufacturing sector with the minimum value addition in terms of export earnings. The unit can be set up in the manufacture, services, development of software, repair, repair , remaking, reconditioning, re-engineering including making of gold/silver/platinum jewellery and articles thereof, agriculture including agro-processing, aquaculture, bio-technology, floriculture, horticulture etc. with the objective of exporting entire production except limited sales in Domestic Tariff Area ( DTA).
The provisions of EOU Scheme are contained in Chapter -6 of Foreign Trade Policy and Handbook of Procedures. EOU can be set up at any area in India as per the convenience of exporter. The existing DTA unit can also be converted into EOU. The setting up of EOUs and their performance is monitored by the jurisdictional Development Commissioner in accordance with the provisions of Foreign Trade Policy. The EOUs are licensed to manufacture goods within the bonded premises for the purpose of exports. Trading units are not permitted to be set up under the Scheme.
Incentives / facilities available to EOUs:
Duty free imports of Capital goods, raw materials, consumable, spares etc.
Procurement of goods from Domestic Tariff Area without payment of Central Excise duty.
Supplies from DTA are eligible for deemed export benefits viz. Drawbacks, refund of Terminal Excise duty under Chapter- 8 of Foreign Trade Policy.
Reimbursement of Central Sales Tax.
DTA sales upto 50% of FOB value of exports on payment of concessional rate of
Central Excise duty.
Only positive net foreign exchange (NFE) to be achieved over a period of five years.
EOU can supply goods duty free in against Advance Authorisation.
Export obligation under Advance Authorisation is subsumed in EOU.
Duty Credit Scrip under MEIS ranging from 2% to 5% of FOB value of exports extended from 01.04.2015.
EOUs have contributed major portion of our exports and domestic economy. However, after expiry of Income tax exemption to EOUs in 2011, many EOUs opted out of EOU Scheme. In order to arrest declining trend in setting up of EOUs, it is necessary to provide fiscal measures, policy initiatives and procedural simplifications.
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