The Export Oriented Units (EOU) scheme was introduced to boost exports, increase foreign earnings and created employment in India. The EOU scheme is complementary to the scheme for Free Trade Zone, Export Processing Zone. Units that are undertaking to export their entire production of goods are allowed to set up as an EOU. In this article, we look at the Export Oriented Units scheme in detail.
Export-oriented units are units undertaking to export their entire production of goods. EOUs can engage in manufacturing, services, development of software, repair, remaking, reconditioning, re-engineering including making of gold/silver/platinum jewellery and articles. Further, units involved in agriculture, agro-processing, aquaculture, animal husbandry, biotechnology, floriculture, horticulture, pisciculture, viticulture, poultry, sericulture and granites can also obtain the status of EOU.
The Export Oriented Units enjoys the below following benefits
For the status of EOU, the project must have a minimum investment of Rs.1 crore in plant and machinery. This condition does not apply for software technology parts, electronics hardware technology parks and biotechnology parks. Further, EOU involved in handicrafts, agriculture, animal husbandry, information technology, services, brass hardware and handmade jewellery does not have any minimum investment criteria.
To obtain EOU status, application for setting up of unit under EOU scheme must be made to the Board of Approval. In the case of approving, they provide validity of Letter of Permission for setting up EOU. The Letter of Permission will have an initial validity of 2 years to enable the unit to construct the plant and install the machinery. Further, a person can obtain an extension for a period of up to one year. On starting operation, in a period of 5 years, the EOU will have to achieve positive net foreign exchange earning cumulatively.
The project report has to be proposed to the Development Commissioner Officer together with Application in triplicate as stated by Appendix 14 I-A, wherein the report should have all Commercial & Technical feasibility.
Crossed Demand Draft worth of Rs.5, 000/- has to be drawn in favor of "Pay & A/C Officer, Ministry of Commerce & Industry, Dept. of Commerce, payable at Central Bank of India, Udyog Bhavan, New Delhi.
The investment has to be Rs.1 crore in Plant & Machinery and Building. [This does not apply to already existing units and units present in Handicrafts/ STP/EHTP/Floriculture/ Agriculture/Animal Husbandry/Aquaculture/ Information Technology/ services and other similar sectors as determined by BOA].
The project report submitted for EOU registration has to have the following:
After receiving the application for EOU registration, along with the above mentioned documents, the Customs Authorities will confer registration to EOU unit within 5 days of the registration application receipt.
With the approval of DC, an EOU may opt-out of the scheme. These exits shall subject to a penalty of Excise and Customs duties and industrial policy in force. In case the unit has not achieved obligations, it shall be taxable to a penalty at the time of exit.
In case of gems and jewellery unit ceasing its operation, the gold and other precious metals, gems, alloys and other materials available for the manufacture of jewellery, is given to an agency specified by DoC, at a price to be determined by that agency.