The Export Oriented Units(EOUs) were introduced in 1981 to increase exports from India.
The scheme aims to increase foreign exchange earnings and create employment.
There are various export incentives, including MEIS Scheme, SEIS scheme, and EOU scheme, launched by the Government to boost exports.
EOUs scheme complements the following schemes-
- Free Trade Zone (FTZ)
- Export Processing Zone (EPZ)
In Chapter no 6, policies and procedures are given related to EOUs as well as Electronics Hardware Technology Parks (EHTPs),
Software Technology Park (STPs) and Bio-Technology Park (BTPs). Parlance EOU/STP/EHTP/BTP are commonly called the EOU scheme.
Objectives of the EOU scheme:-
- This scheme provides units with a conductive ecosystem in which various waivers and preferences in compliance and taxation are given to conduct business efficiently.
- Exports in these units lead to an inflow of foreign exchange which improve economic condition in nations,
- It also aims to generate additional employment sectors.
- It also improves the supply chain of procurement of raw materials and providing final goods to DTA.
- EOU schemes are also expected to inspire the nations' technological advancements and skill development.
Benefits of Export-Oriented Units (EOUs)
- EOUs can procure raw materials and capital goods through domestic sources.
- Can claim reimbursement on GST amounts they pay.
- These are allowed to claim input tax credits on goods and services.
- Enjoy Priority basis clearance facility.
- EOUs are not required to obtain an industrial license.
The existing Schemes, including EOUs, are not WTO compliant and need to be replaced by other schemes; The Government launched the RoDTEP scheme, which will replace the existing MEIS scheme in a phased manner.
Setting up an EOU
The letter is given of approval for EOU set up by the board of approval.
It gives 2 years construction of plants and installation of machinery, which can be extended by 1 year
After starting the operation, it has to achieve positive foreign exchange within 5 years
Minimum investments
A minimum of Rs 1 crore must be put into plant and machinery. It is not applicable in the case of the following –
- Software technology parks
- Electronics hardware technology parks
- EOU, which deals with agricultural
- Animal husbandry
- In handcrafts
- Information technology
- Brass hardware
- Services and handmade jewelry
Location
It should be 25 km from the urban area unless it deals in nonpolluting products or services.
Special License
A special License is required to set up an EOU for sectors like weapons and Defence equipment, atomic, narcotics, psychotropic substances and certain alcoholic or tobacco-related products.
Bonding Period
EOUs are bounded for 5 years to perform the import-export activity. This period can be extended for the next 5 years by giving a request letter to the Development Commissioner (DC) and another 5 years extension by giving a request letter to the Chief Commissioner of Customs.
Impact of EOU on Exports
EOUs gave a choice to set up their business. It allowed the freedom to set up business at the place of their choice, unlike FTZs and EPZs.
It also gives exporters a wide range of industrial sectors to choose from while setting up their EOUs.
Also Read: Get Important Insights Into Buying And Selling With U.S. Import Data
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