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TERM PAPER

Of

ITPD
On

Export Oriented Units: A wider and viable alternative to SEZ

Submitted to;
Mr. Hitesh Jhanji
Lect. of ITPD

Submitted by;
Ajay,( A04)
Sect.T1901
MBA 3rd Sem
CONTENT

1. Introduction

2. Objective of EOU

3. Major sector in EOU

4. List of organizations

5. Export from EOU

6. EOU activities

7. Benefits from EOU scheme

8. Special Economic Zone (SEZ)

9. Objective of SEZ

10. Types of SEZ

11. Benefit of SEZ

12. Comparison between EOU & SEZ

13. Challenges for organization

14. Future challenges for organizations

15. Initiatives taken by Indian Govt. to promote sector

16. Conclusion

17. References
Introduction
The EOU scheme was introduced in the year 1980 vide Ministry of Commerce resolution
dated 31st December 1980. The purpose of the scheme was basically to boost exports by
creating additional production capacity .It adopts the same production regime but offers a
wide option in locations with reference to factors like source of raw materials, ports of
export, hinterland facilities, availability of technological skills, existence of an industrial
base and the need for a larger area of land for the project. 1764 units are in operation under
the EOU scheme as on March, 2004. As on 31st December 2005, 1924 units are in operation
under the EOU scheme. .

The EOU scheme is, at present, governed by the provisions of Export and Import (EXIM)
Policy, 1997-2002. Under this scheme, the units undertaking to export their entire production
of goods are allowed to be set up. The EOUs can export all products except prohibited items
of exports in ITC (HS).

Under the EOU scheme, the units are allowed to import or procure locally without payment
of duty all types of goods including capital goods, raw materials, components, packing
materials, consumables, spares and various other specified categories of equipments
including material handling equipments, required for export production or in connection
therewith. However, the goods prohibited for import are not permitted. In the case of EOUs
engaged in agriculture, animal husbandry, floriculture, horticulture, pisci culture, viticulture,
poultry, sericulture and granite quarrying, only specified categories of goods mentioned in
the relevant notification have been permitted to be imported duty-free.

Objectives of the Export oriented unit:

The main objectives of the EOU scheme is to increase exports, earn foreign exchange to the
country, transfer of latest technologies stimulate direct foreign investment and to generate
additional employment.

The 100% EOUs fall into 3 categories:

(a) EOUs established anywhere in India and exporting 100% products except certain fixed
percentage of sales in the Domestic Tariff Area (DTA) as may be permissible under the Policy.

(b) Units in Free Trade Zones in Special Economic Zones (SEZs) and exporting 100% of their
products.
(c) EOUs set up in Software Technology Parks (STPs) and Electronic Hardware Technology
Parks (EHTPs) of India for development of Software & Electronic Hardware.

Major Sectors in EOU:-

1. Granite
2. Textiles / Garments
3. Food Processing
4. Chemicals
5. Computer Software
6. Coffee
7. Pharmaceuticals
8. Gem & Jewelry
9. Engineering Goods
10. Electrical & Electronics
11. Aqua & Pearl Culture

To set up an EOU for the following sectors, an EOU owner needs a special license. EOUs can be
set up anywhere in the country and may be engaged in the manufacture and production of
software, floriculture, horticulture, agriculture, aquaculture, animal husbandry, pisciculture,
poultry and sericulture or other similar activities. Apart from local zonal office and state
government, setting up of an EOU is also strictly guided by the environmental rules and
regulations.

LIST OF ORGANIZATIONS :-

ORAGANIZATION NAME PRODUCT NAME


Aditya Birla Nuvo Ltd. All types of Synthetic Yarn
(Formerly Indian Rayon & Industries Ltd.)

A. P. Exports, Garments T.Shirts, Girls Night Suit, Track


suits etc.

A. R. Stanchem Pvt. Ltd. Linear alkyl benzene sulphuric acid, spent


sulphuric acid

A.R. Sulphonates Pvt. Ltd. Mfg. Of Liner Alkyl Denzene Sulphonic


Acid & Spent Acid

Al Qaiser Tobacco Pvt. Ltd. Hooka Tabacco Paste

AMJ Narrow Fabrics Pvt. Ltd. Narrow Wooven Elastic Tape

Ancillary Inds. Corpor Flour Mill


Rice Mill
Etc

Anshin Software Pvt. Ltd. Development of customized Computer


Software

Arena Machineries Ltd. Continous Processing Line & Parts

Arintex Global Ltd Readymade garments, knitted and dyed yarn

Ascon Agro Products Exporters & Builders Pvt. Ltd. Potato Flakes Production

Ascot Digital Pvt. Ltd. I.T. Enable Market Research for overseas
Clinents.

Asian Exports Ornamental Fish & Accessiores for


Aquarium

BGH Exim Ltd.

Bilati (Orissa), Ltd.,

Bonai Industrial Co. Ltd. Iron Ore Fines & Lamps

Bonai Industrial Co. Ltd. Iron Ore Fines & Lamps

Burman Trexim Pvt. Ltd. Readymade Garments, Knitted Garments,


Woven Garments

Chembiotek Research Intl., R&D Work on Bio-Technology,


Pharmacology, Drugs and Pharmaceuticals
etc.

Chemgen Pharma International Pvt. Ltd. Research & Development on Biotechnology,


Durgs and Pharmaceuticals

Cheviot Company Ltd. Jute Products

Choudhury Enterprises Pvt. Ltd. Polyurethane rubber parts,Silicon rubber


(Formerly Tokyo Polymer Industries) parts
Export from EOU

Exports from EOUs during 2004-2005 were of the order of Rs.36806.17 crores as compared to
the export of Rs.28827.58 crores achieved during 2003-2004, registering a growth of 27.68%.

EOU Activities

Initially, EOUs were mainly concentrated in Textiles and Yarn, Food Processing, Electronics,
Chemicals, Plastics, Granites and Minerals/Ores. But now a day, EOU has extended it area of
work which includes functions like manufacturing, servicing, development of software, trading,
repair, remaking, reconditioning, re-engineering including making of gold/silver/platinum
jewellery and articles thereof, agriculture including agro-processing, aquaculture, animal
husbandry, bio-technology, floriculture, horticulture, pisiculture, viticulture, poultry, sericulture
and granites.

Benefits under EOU Scheme

• Units are exempted from payment of Income Tax upto the year 2010.
• All the imports to units are customs duty free.
• Exemption from Central Excise Duty for the procurement of Capital Goods and Raw
Materials from domestic market.
• Units are entitled to sell the product in local market upto 50% of the products exported in
value terms.
• 100% of foreign equity is permissible.
• Reimbursement of Cenral Sales Tax pad on domestic purchases.
• Full Freedom for sub-contracting.
• Exemption from the payment of Electricuty duty.
• EOU unit can be set up at any of over 300 places all over India
• The unit can import capital goods, raw materials, consumables, packing material, spares
etc. without payment of customs duty. Similarly, these can be procured indigenously
without payment of excise duty. Second hand capital goods can also be imported.
• They have to achieve positive NFE (Net Foreign Exchange Earnings).
• Minimum investment in plant and machinery and building is Rs 100 lakhs for EOU. This
should be before commencement of commercial production.
• Fast Track Clearance Scheme (FTCS) for clearances of imported consignments for EOU.
• Generally, all final production should be exported, except rejects upto prescribed limit.
• Sale within India should be on payment of excise duty. The duty which will be equal to
normal customs duty which would be payable on such goods, if imported. However, in
certain cases, excise duty payable will be only 50%/30% of normal customs duty payable
on such goods if imported into India .
• Sub-contracting of production outside on job work basis is permissible after obtaining
necessary permission on annual basis
• Job work for exports is permitted
• Samples can be sold / given free within prescribed limit
• Unutilized raw material can be disposed of on payment of applicable duties
• The unit can exit (de-bond) with permission of Development Commissioner, on payment
of applicable duties.
• Central Sales Tax (CST) paid on purchases is refundable (but not local tax).
• Prescribed percentage of foreign exchange earnings can be retained in EEFC account in
foreign exchange.
• 100% foreign equity is permissible, except in a few cases.
• Supplies made to EOU by Indian supplier are ‘deemed exports’ and supplier is entitled to
benefits of ‘deemed export’.
• Restrictions under Companies Act on managerial remuneration are not applicable.

Special Economic Zones (SEZs)

Special Economic Zones (SEZs) are specific geographical regions that have economic laws
different from and more liberal than a country’s typical economic laws. The goal is usually
an increase in Foreign Direct Investment (FDI) in the country. A policy for setting up
of SEZs in the country with a view to provide an internationally competitive and hassle free
environment for exports was introduced on April 1, 2000 . An SEZ is like a foreign territory
within a country. An SEZ is governed by a special set of rules to facilitate foreign direct
investment for export-oriented production. These zones are typically marked by minimum
bureaucracy, best infrastructure, generous tax holidays, unlimited duty free imports of raw,
intermediate and final goods as well as capital goods and a package of incentives to attract
foreign and domestic investments for promoting export-led growth. Units may be set up in
SEZ for manufacturing of goods and/or rendering of Services.
SEZs are not a new phenomenon in INDIA , In fact, the first such zone in the country was
set up way back in 1965 at Kandla. But it was known then as the Economic Processing Zone.
Thereafter, in 1972, the Santacruz Electronic Export Processing Zone (SEEPZ) was launched
in Mumbai.
The main objectives of the SEZ Act are:
• Generation of additional economic activity
• Promotion of exports of goods and services;
• Promotion of investment from domestic and foreign sources;
• Creation of employment opportunities;
• Development of infrastructure facilities;
It is expected that this will trigger a large flow of foreign and domestic investment in SEZs,
in infrastructure and productive capacity, leading to generation of additional economic
activity and creation of employment opportunities.
Types of SEZs
A developer can set up SEZs of the following types:
1. SECTOR SPECIFIC SEZs (2)
• Defined as a zone meant exclusively for one or more products or services in one sector.
• Minimum area requirement is 100 hectares (reduced to 50 hectares for specified States
and Territories).
• For Electronic hardware and software including IT/ITES, minimum area required is 10
Hectares with a minimum built up processing area of one lakh square rneters.
• For biotechnology, non-conventional energy including solar energy equipments/cells, or
gem and jewellery sectors, the minimum area requirement is 10 Hectares.
2. MULTI-PRODUCT SEZs 11 ‘
• Signifies an SEZ where units may be set up for manufacture/rendering of services of two
or more goods/services in a sector or goods/services falling in two or more sectors.
• Minimum area requirement is 1000 hectares (reduced to 200 hectares for specified States
and Territories like in Assam , Meghalaya, Nagaiand, Mizoram, Manipur, J&K, Tripura ,
Sikkim , Himachal Pradesh and Uttranchai ).
• Minimum area requirement for SEZ exclusively for services is 100 hectares.
3. PORT/AIRPORT BASED SEZs (3)
• Minimum area requirement is 100 hectares.
4. FREE TRADE AN D WAREHOUSING ZONES (FTWZ} (4)
• Minimum area requirement is 40 hectares with a built-up area of 100,000 sq. meters.
Benefits/Incentive/Facilities available for SEZ enterprises
• Exemption from customs / excise duties for development of SEZs for authorized
operations approved by the BOA
• Income Tax exemption on export income for a block of 10 years in 15 years under
Section 80-IAB of the Income Tax Act
• Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act
• Exemption from dividend distribution tax under Section 115O of the Income Tax Act
• Exemption from Central Sales Tax (CST)

Facilities / Incentive to SEZ Developer


100% FDI allowed for:

(a) Townships with residential, educational and recreational facilities on a case to case basis,
(b) Franchise for basic telephone service in SEZ.
• Income Tax benefit under ( 80 IA ) to developers for any block of 10 years in 15 years
• Duty free import/domestic procurement of goods for development, operation and
maintenance of SEZs.
• Exemption from Service Tax /CST.
• Income of infrastructure capital fund/co. from investment in SEZ exempt from Income
Tax
• Investment made by individuals etc in a SEZ co also eligible for exemption u/s 88 of IT
Act
• Developer permitted to transfer infrastructure facility for operation and maintenance.
• Generation, transmission and distribution of power in SEZs allowed
• Full freedom in allocation of space and built up area to approved SEZ units on
commercial basis.
• Authorized to provide and maintain service like water, electricity, security, restaurants
and recreation centers on commercial lines.

Obligation of the Unit under the SEZs Scheme

• SEZ units have to achieve Positive Net foreign Exchange earning; a Legal Undertaking is
required to be executed by the unit with the Development Commissioner.
• The units have to provide periodic reports to the Development Commissioner and Zone
Customs.
• The units are also to execute a bond with the Zone Customs for their operation in the
SEZ.
• Any company set up with FDI has to be incorporated under the Indian Companies Act
with the Registrar of Companies for undertaking Indian operations
 COMPARISION BETWEEN EOU &SEZ :-

Factors Export Oriented Units (EOU) Special Economic Zone (SEZ)


Establishment
The unit can import capital goods,
raw materials, consumables, packing
material, spares etc. without payment
Import Procedures of customs duty. Similarly, these can
be procured indigenously without
payment of excise duty. Second hand
capital goods can also be imported.
Minimum investment in plant and
machinery and building is Rs 100
lakhs for EOU. This should be There is no such limit for SEZ.
before commencement of
commercial production.
Procedure
There is no physical supervision of There is no physical supervision of
customs / excise authorities over customs /
Green Channel production and clearances, but excise authorities over production and
prescribed records are required to be clearances, but prescribed records are
maintained. required to be maintained.
Custom Clearance Fast Track Clearance Scheme In case of SEZ units, customs
(FTCS) for clearances of imported clearance for export and import is
consignments for EOU. obtained within the zone itself.
Generally, all final production Generally, all final production should
Export of final
should be exported, except rejects up be exported, except rejects up to
production
to prescribed limit. prescribed limit.
Central Sales Tax (CST) paid on
In case of SEZ unit, supplier does not
Central Sales Tax (CST) purchases is refundable (but not
have to pay CST
local tax).
Supplies made to EOU by Indian
Supplies made by Indian supplier are ‘deemed exports’ and Supplies to SEZ are ‘exports’ and all
Suppliers Infrastructure supplier is entitled to benefits of export benefits are available.
‘deemed export’.
General infrastructure available to General infrastructure available to
Infrastructure EOU unit are not as better as SEZ unit are much better as available
available to SEZ units to SEZ units

In all, there are seven Development Commissioners at Mumbai, Gandhidham, Chennai , Cochin ,
Visage, Noida and Calcutta , who supervise the functioning of the EOUs and eight Export
Processing Zones/Special Economic Zones in the country.

Supervision of EOUs under the Customs and Central Excise

As compared to Development Commissioner, supervision of EOUs under the Customs and


Central Excise is quite liberal. The EOUs no longer carry out manufacturing operations under
physical supervision of Customs officers and operational flexibility has been also given to EOUs
by amendment of "Manufacture and Other Operations in Warehouse Regulations, 1966". The
system of for locking of the warehouse and control of imported goods etc by the Customs and
Central Excise has also been abolished.

All the movements from and to the unit like clearance of raw materials/ component to the job
workers premises, return of goods from the job-workers’ premises, clearance to other EOUs,
export and sale in DTA are allowed to be made by the unit subject to maintenance of the records.
Physical control over the EOUs has, thus, been replaced by Record Based Control.

As most of the physical control has been abolished greater stress is given on proper maintenance
of prescribed records & accounts and non-maintenance of the accounts by the units is viewed
seriously. The cost recovery officers/the officer’s incharge of EOUs are required to scrutinize
/examine the accounts/ records of the units and transaction undertaken by the unit at least once in
a month. The cost recovery officer has to ensure that all movements of goods are recorded in the
proper register. The Chief Commissioner is empowered to order special audit of the unit by Cost
Accountant nominated by him in this regard. Cost audit is employed as a tool to check the
correctness of raw materials, quantity used, finished goods produced or other such situation.
 CHALLENGES FOR ORGANIZATION :-

1.Need for Special License

To set up an EOU for the following sectors, an EOU owner needs a special license.

• Arms and ammunition,


• Explosives and allied items of defense equipment,
• Defense aircraft and warships,
• Atomic substances,
• Narcotics and psychotropic substances and hazardous chemicals,
• Distillation and brewing of alcoholic drinks,
• Cigarettes/cigars and manufactured tobacco substitutes.

In the above mention cases, EOU owner are required to submit the application form to the
Development Commissioner who will then put them up to the Board of Approvals (BOA).

2.Choosing the Location for EOU

EOUs can be set up anywhere in the country and may be engaged in the manufacture and
production of software, floriculture, horticulture, agriculture, aquaculture, animal husbandry,
pisciculture, poultry and sericulture or other similar activities.

However, it should be noted that in case of large cities where the population is more than one
million, such as Bangalore and Cochin, the proposed location should be at least 25 km away
from the Standard Urban Area limits of that city unless, it is to be located in an area designated
as an "industrial area" before the 25th July, 1991. Non-polluting EOUs such as electronics,
computer software and printing are exempt from such restriction while choosing the area.

Apart from local zonal office and state government, setting up of an EOU is also strictly guided
by the environmental rules and regulations. Therefore, an even if the EOU unit has fulfilled all
locational policy but not suitable from environmental point of view then the Ministry of
Environment, Government of India has right to cancel the proposal. In such situation industrialist
would be required to abide by that decision.

3.EOU Unit Obligations

The EOUs are required to achieve the minimum NFEP (Net Foreign Exchange Earning as a
Percentage of Exports) and the minimum EP (Export Performance) as per the provisions of
EXIM Policy which vary from sector to sector. As for instance, the units with investment in plant
and machinery of Rs.5 crore and above are required to achieve positive NFEP and export US$
3.5 million or 3 times the CIF value of imported capital goods, whichever is higher, for 5 years.
For electronics hardware sector, minimum NFEP has to be ‘positive’ and minimum EP for 5
years is US$ 1 million or 3 times the CIF value of imported capital goods, whichever is higher.
NFEP is calculated cumulatively for a period of 5 years from the commencement of commercial
production according to a prescribed formula.

Under these schemes, all the large, small, and medium enterprises (SMEs) are exempted from
the sales taxes and other custom duties imposed on the exportation of their manufactured goods
and services.
For obtaining the total benefits of these schemes today, every enterprise wanted to establish their
Export Oriented Unit (EOU) within the ambit of the SEZs. Those enterprises, who have well-
established themselves in the market for a quite long time, can still get a place in the SEZ to
establish their EOU, but the major problem comes to those enterprises, especially SMEs, who
have recently pioneered their business and who have not yet evolved completely.
Several SMEs are developing with a quite high pace and on the other some are lacking behind in
the competition of the corporate world. Do you know the reason why is it happening? Because
many small and medium enterprises are aware about the EUO consultancy and advisory services
and many, do not. Yes! There are a few wise enterprises, which preferred to contact the
consultancy and advisory services instead watching other enterprises leaping .

4.Bonding Period of EOU

The EOUs are licensed to manufacture goods within the bonded time period for the purpose of
export. As per the Exim Policy, the period of bonding is initially for five years, which is
extendable to another five years by the Development Commissioner. However on a request of
EOU Unit, time period can also be extended for another five year by the Commissioner / Chief
Commissioner of Customs.

5.EOU in Exim Policy

Currently EOU scheme is mentioned in the Chapter 9 of the Foreign Trade Policy (1997-2002)
and Chapter 9 of the Handbook of Procedures, Volume-I (HOP). The EOUs can export all
products except prohibited items of exports in ITC (HS).

 Recent Policy Changes in the EOUs Scheme (w.e.f. 7th April, 2006)

• The export of goods up to one and half percent of the FOB value.
• In order to facilitate the smooth functioning of the EOU units, the Development
Commissioners will fix time limits for finalizing the disposal of matters relating to EOUs.
• New units engaged in export of Agriculture/Horticulture/Aqua-Culture products have
been now allowed to remove capital goods inputs to the DTA on producing bank
guarantee equivalent to the duty foregone on the capital goods/input proposed to be taken
out.
• The EOU units in Textile Sector are allowed to dispose off the left over material/fabrics
up to 2 per cent of Cost Insurance Freight (CIF) value of imports, on consignment basis.
Recognizing that settling the accounts for every consignment is complex and time
consuming it has been decided to allow disposal of left over material on the basis of
previous year's imports.

 Challenges faced by SEZ


• The biggest challenges faced by SEZ’s in today’s scenario are the taking away of
agricultural land from the farmers. The farmers are being paid disproportionate money
which is not in lieu of the current land prices. The best example could be seen in the case
of farmers from Kalinganagar in Orissa where the money given was disproportionate to
as high as 1:10 with respect to the market rates. Moreover SEZ’s are leading to decrease
in crop production (arable Land Grabbing!) thus slowing down of agricultural activity in
the country. (Though it may help boost it in other ways by increased export of local
goods, both processed and non-processed). More and more farmers are moving towards
the lucrative manufacturing side in search of greater economic security. Moreover the
greatest problem that seems to be emerging out is that arable land is being used for non
agricultural purpose which could lead to food crisis and loss of self sustenance in future.
For example: Nadigram district of West Bengal. But FDI could also help in providing our
farmers to gain access to technological better farming methods.

• SEZ’s in China were initially exempted from national Labor Laws (despite being a
communist country!). This model sustained initially because the foreign investors were
given the leverage to train the workers and even fire them if incompetent. This Hire or
Fire policy initially helped in sustaining foreign investors’ confidence in the Chinese
domestic labor competence, but in the long run such laws must be made more stringent
once the confidence is reposed so as to hedge the workers from hostile company’
policies.

• The SEZ’s if not properly located could lead to Supply Chain Management problems as
well. Moreover improper planning could lead to unbalanced growth in the region giving
an impression of pseudo-development. For example most of the SEZ’s in China are in
proximity to the ports and also close to each other, while these have been at the helm of
economic development most of the interior hinterland is vastly underdeveloped. SEZ’s
could also lead to income disparities with divide between the rich and poor increasing if
not properly planned.

• SEZ’s mostly if setup for the manufacturing sector should be carefully planned to carry
out proper pollution monitoring and control mechanism. Stringent measures may prove to
be expensive but are also extremely important. Shenzhen in china has been the worst
affected among SEZ’s in China where the sky is grey for most part of the day courtesy
the polluting industries. The measures should be taken to make surroundings livable for
multitude of people living in the SEZ’s. Moreover care should be taken to properly treat
effluents from industries not to affect surrounding rivers. Also the SEZ’s should be
carefully planned not to affect the natural habitat around (Gurgaon SEZ affecting the
Bharatpur bird sanctuary)

FUTURE CHALLENGES :

: Administrative Control over Export Oriented Units by the Central Excise formations -
reg.
1.Vide Circular No. 31/2003-Customs dated 7.04.03, the administrative control over EOUs,
(including EHTP and STP) in the port cities, falling within the territorial jurisdiction of
Commissioner of Customs, is with the concerned Commissioners of Customs. At other places,
administrative control is with the jurisdictional Commissioner of Central Excise. The only
exception is Bangalore Customs.
2. In view of implementation of Automation of Central Excise and Service Tax (ACES) the issue
of administrative control over EOUs/EHTP/STP, presently under Customs formations, was
discussed by the Board on 16.4.10.

3. It has been decided by the Board in the meeting held on 16.4.10 that the jurisdiction over the
EOU/EHTP/STP even in the port cities should be with the Central Excise formations. This will
facilitate uniform and better administration/control of such EOUs, and, also facilitate the shift to
GST regime in future. It has been decided that the shift in the process of administration,
including handing over of all the records etc. of EOUs from Customs formations to the
respective Central Excise formations can be affected latest by 31st July 2010.

4. The above decision of Board may please be circulated to all the field formations and Trade for
Necessary compliance.

 Initiatives taken by Indian Govt. to promote sector:-


SR. ISSUE DECISION TAKEN ACTION
NO

1 Fast track clearance A Single Window Empowered Director Guidance


of Agency needs to be created as
building plan in Kerala. Director Guidance
approval to send suitable proposals for
inclusion in SEZ Act

2 Declaration of Units If the Act permits, Public Labour and


in SEZ Utility Service may be notified Employment
and 100% EOUs to for more than 6 months at a Department
be public time
utility service

3 Exemption from The possibility of sharing the Secretary, RD/


taxes levied property tax proceeds of local MAWS
by local bodies bodies with SEZ developers
may be examined, so that
developers are able to carry out
maintenance works within the
SEZ. This may be examined
once again
4 Exemption from A decision may be taken at the Secretary CT/SC &
Sales Tax, earliest on granting tax CCT
Surcharge, Resale exemption on capital goods
Tax and and spare parts purchased by
additional Sales Tax 100% EOUs in the State. CT
may arrange to issue necessary
notification
5 Counter signature An amendment to the
by Notification in G.O.Ms No. 75,
Development CT dated 28.6.2005 will be
Commissioner issued dispensing with the
condition that SEZ Authority
countersign each certificate.

6 Exemption from This will be examined and Industries/Secretary


Sales Tax appropriate orders will be CT/SC & CCT
for transaction issued
between and
among EOUs, SEZ
developers, SEZ
units and
STPI
7. Declaration of A draft notification may be DC, MEPZ SEZ /
Development sent by DC, MEPZ SEZ with Industries
Commissioner, proposal letter for issue of
MEPZ SEZ Notification by Industries
as Developer of the Department
Zone
Conclusion
With the government turning a deaf ear towards the cries of the exporters to do away with the
Section 10B of the Income Tax Act, 1961 and give them income tax exemption at par with
Special Economic Zones (SEZs), I believe that it’s time for exporters to look for other
alternatives.

Members of export were also of the opinion that indeed the exporters have to carry on with
their businesses even without help from the government. However they all agreed that the fight
for recognition of the EOUs would continue. And rightly so!

I strongly feel that the government should really rethink its policy and bring Export Oriented
Units (EOUs) under the ambit of the same tax slab.

SEZs get deduction to the extent of cent per cent of the profit and gains for five consecutive
years and 50 percent for five years thereafter, while EOUs get relief from income tax burden for
a period of 10 consecutive assessment year with a sunset clause of allowing deduction up to the
assessment year 2009-10, which is really unfair. This means the EOU Scheme is not guaranteed
and will be eliminated after March 2009.

However I am not against SEZs. Though SEZs are an excellent idea, there are location specific
industries, which cannot be located in these zones. Thus EOUs with a good track record should
be renamed as Virtual SEZs, as was mentioned while drafting the rules for SEZs.
REFERENCES

http://www.eouindia.gov.in/epces_cieculars/epces_cir_07_033

http://www.scribd.com/doc/32960647/100-Eou-Scheme

http://www.scribd.com/search?cat=redesign&q=eou+and+sez&x=19&y=13

http://www.indianjobtalks.com/forum/showthread.php?t=12037

http://neerajmishra.wordpress.com/2008/07/26/sez-special-economic-zone-an-overview-
challenges-and-future/
http://rahulchaitanya.wordpress.com/2008/08/05/sez-stp-ehtp-eou-bio-tech-park-in-india/