The Export Oriented Units(EOUs) is introduced in 1981 which aims to increase exports from India.
Objective of the scheme is to increase foreign exchange earnings and create employment.
There are various export incentives including MEIS Scheme , SEIS scheme, EOU scheme launched by the Government to boost exports.
EOUs scheme complements 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 Park (EHTPs),
Software Technology Park (STPs), and Bio-Technology Park (BTPs). In common Parlance EOU/STP/EHTP/BTP are together called the EOU scheme.
Objectives of the EOU scheme:-
- This scheme provides units a conductive ecosystem in which various waivers and preferences in compliance and taxations are given to conduct business easily.
- Exports in these units leads to inflow of foreign exchange which improve economic condition in nations,
- It also aim to generate additional employment sectors.
- It also improve the supply chain of procurement of raw materials and providing final goods to DTA
- EOU schemes are also expected to inspire technological advancements and skill development in the nations.
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 credit on goods and services.
- Enjoy Priority basis clearance facility.
- EOUs are not required to obtain the industrial license.
The existing Schemes including EOUs are not WTO compliant and needs to be replaced by other schemes, The Government launched RoDTEP Scheme scheme which will replace existing MEIS scheme in phased manner.
Setting up an EOU
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 have to achieve positive foreign exchange within 5 years
Minimum of Rs 1 crore must be put into plant nd machinery. It is not applicable in case of followings –
- Software technology parks
- Electronics hardware technology parks
- EOU which deals with agricultural
- Animal husbandry
- In handcrafts
- Information technology
- Brass hardware
- Services and handmade jewellary
It should be 25 km away from the urban area unless it deals in non polluting products or services.
Special License is required for setting up an EOU for sectors like weapons and Defence equipments, atomic, narcotics, psychotropic substances and certain alcoholic or tobacco related products.
EOUs are bounded for 5 years to perform import export activity. This period can be extended for next 5 years by giving request letter to Development commissioner(DC) and onther 5 years extension by giving request letter to Chief Commissioner of customs.
Impact of EOU on exports
EOUs gave choice to set up their business it gave freedom of setting 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.