100% EOU EOU means Export Oriented Unit.

This scheme was introduced on 31st December 1980 with the objective of generating additional capacity for exports. The 100% EOU are required to undertake manufacture under bond and export for a period of 10 years ordinarily and 5 years in the case of products having high degree of technological change. Such units are allowed import of machinery, components, spares, raw materials and consumables free of duty. EOUs are expected to export their entire production except 1) 25% of the production may be sold in the DTA (Domestic Tariff Area) 2) Rejects up to 5% fixed by the Board of Approval may be sold in the DTA (Domestic Tariff Area), subject to payment of appropriate duties. A 100% EOU is an industrial unit offering for export its entire production excluding permitted levels of DTA sales and rejects. EOUs have been designed to create additional export capacity. Export Processing Zones EPZ has emerged as an effective instrument to boost export of manufactured product especially in developing countries. These zones provide an internationally competitive duty free environment for export production at low cost. This enables the products to be competitive both quality wise and price wise in the international market. I free trade zone – Kandla in Gujarat – 1965 II free trade zone – Santacruz EEPZ in Mumbai – 1973 followed by Falta in West Bengal, Noida in Uttar Pradesh, Chennai in Tamil Nadu, Kochi in Kerala, Visakhapatnam in Andhra Pradesh and Surat. All these zones have been set up by the Government of India with the support of respective state governments and these are administered by the Ministry of Commerce. Each zone has got a senior administrator, Development Commissioner and it is his responsibility to provide single window clearance facility to help the units in these zones for processing applications, issuing license for clearing import of capital goods and raw materials, providing infrastructural facilities, customs clearance and regulations relating to labour, taxation, export incentives, foreign exchange etc., Facilities like banks, post offices and clearing agents are also available in the service centers attached to these zones. In all EPZs multi product units are set up except in Santacruz EPZ which is confined to electronics and gems and jewellery. EPZs are responsible for controlling the 100% EOUs. EPZs are eligible for a tax holiday for 5 years.

100% Foreign Equity Foreign Equity up to 100% is permissible in the case of EOUs and EPZ units. a) For Plots: The concession will be 75% for the 1st year. Concessional Rent The units set up in the EPZ will be eligible for concessional rent for lease of industrial plants and SDF (Standard Design Factory) building / sheds allotted for the first three years at the following rates. Request in this regard will be considered by the concerned customs authorities on the basis of factors such as feasibility of . 50% for the 2nd year and 25% for the 3rd year. Sub Contracting The EPZ units may be permitted to sub contract part of their production for job work to units in the DTA on a case to case basis. one EOU to another EOU and one EOU to another EPZ unit. b) For SDF Buildings / Sheds: The concession will be 50% for the 1st year and 40% for the 2nd year. one EPZ unit to another EOU unit. 4. Inter – Unit transfer Transfer of manufactured goods may be permitted by the Development Commissioner (DC) from one EPZ unit to another EPZ unit. All units in EPZs are eligible for a tax holiday for a period of 5 years. However it is obligatory on the exporting units to export 100% of their production. if production had commenced in the 1st year. Clubbing of NFE (Net Foreign Exchange) NFE earned by an EPZ can be clubbed with the NFE of its parent / associate company in the DTA for the purpose of according export house.These EPZ are responsible for administration of 100% export oriented multiproduct industrial units. if production had commenced in the 1st of the 2nd year. Tax holiday can be availed for any continuous block of 5 years within 8 years of commencement of production. Suppliers can be obtained in these zones for further production without payment of excise duty or import duty. The concession will not be available for the 3 rd year if production has not commenced by the end of the 2nd year. 5. 3. Goods imported by an EPZ may be transferred or given on loan to another EZ with the permission of the Development Commissioner 6. Besides foreign investment is welcome and conditions for investments are more liberal that in the Domestic Tariff Area. The concession will be 25% for the 3rd year if production had commenced in the 1st year. Importation is possible without prior licensing. Benefits for EPZ 1. 2. trading house status for the latter. Tax Holiday EOUs and EPZs units will be exempted from payment of corporate income tax for a block of 5 years in the first 8 years of operation.

to EPZ units subjected to the following conditions: a) Private Bonded Warehouses shall be located within the EPZs. Supplies can be obtained in these zones for further production without payment of excise or import duty and importation is possible without prior licensing. the value of all payment made in foreign exchange and the value of all indigenous inputs purchased by the EPZ units. However it is obligatory on the firms to export their 100% production. In these zones various facilities are provided by the government for export production in the form of developed land. Benefits for FTZ 1) All units in FTZ are eligible for a tax holiday for a period of 5 years from the year in which production is started under Income Tax Act. transport. 8. Such goods may also be transferred to an actual user in the DTA with the permission of the Development Commissioner on payment of applicable duties. 9. b) Imports for such PBW shall be made only against specific licenses. Imported machinery / capital goods that have become obsolete may be disposed ot subject to payment of customs duties on the depreciated value thereof... it may re export them with the permission of the Development Commissioner subject to clearance from customs with reference to valuation etc. permit sale in DTA of scrap arising out of production process on payment of applicable duties and taxes. Free trade zones Establishment of FTZ is an important aspect of government policy for encouraging exports. No license shall be given to import items which are not required by the consuming units. water.. c) The items imported by the PBW shall not be permitted to be sold in the DTA. power. 10. 7. Sale of Imported materials In case an EPZ unit is unable for valid reasons to utilize the imported goods. . fixation of input and output norms and furnishing of undertakings / bonds by the concerned units. Private Bonded Warehouses It may be permitted to be set up in EPZs for stock and sale of duty free raw materials. components etc. Disposal of scrap The Development Commissioner may subject to guideline laid down by the Board of Approval in this behalf. Value addition It shall be expressed as a percentage and shall be calculated according to the following formula: VA= A – B/A*100 A = FOB value realized by EOU / EPZ units B = Sum total of CIF value of all imported inputs.bonding. taxes etc.

3) Export Documentation and procedures for claiming exemption of customs duty on imported raw materials and components are simplified. g) Term loans and packing credits are also available at concessional rates. 4) In Kandla FZ. a) Transport subsidy is paid to the zone units to compensate for the extra expenditure incurred by them on import / export through Mumbai port. getting more employment and modern technology by establishing FTZ. d) The zone administration disburses the central sales tax paid on purchases made from other states.2) Foreign Investment in these areas is welcomed and conditions for investment are more liberal than in DTA (Domestic Tariff Area). 5) The government has appointed a task force to go into the working of the FTZ. e) Scrap and rejects can be sold in the domestic market on payment of duty and to the extent prescribed. . 7) Indian government took advantage of that to earn additional foreign exchange. f) Zone units are assured of regular power supply. 6) The rationale of government decision to set up FTZ is to take advantage of producing and marketing those labour intensive products which were being run by the developed countries and were left out because of labour getting costly there. c) Purchase within the state of Gujarat are exempted from Gujarat Sales tax.25 lakhs. machinery and building subject to a maximum of Rs. At present the limit is 25% of its total production. the following facilities are available to units located therein. b) Gujarat government pays cash subsidy at 15% on fixed investment in plant.

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