| Scheme | 1. | This may be called Export Oriented Units, Electronics Hardware Technology Parks (EHTPs) and Software Technology Parks (STPs) Scheme. |
| Definitions | 2. | For the purpose of Export Oriented Units, Electronics Hardware Technology Parks (EHTPs) and Software Technology Parks (STPs), unless the context otherwise requires, the words and expressions shall have the following meanings attached to them as given in the Policy. |
| Eligibility | 3.1 | Units undertaking to export their entire production of goods and services, except permissible sales in the DTA, as per this Policy, may be set up under the Export Oriented Unit (EOU) Scheme, Electronic Hardware Technology Park (EHTP) Scheme or Software Technology Park (STP) Scheme for manufacture of goods, including repair, re-making, reconditioning, re-engineering, and rendering of services. No trading units shall, however, be permitted. |
| 3.2 | Software Technology Park (STP)/Electronics Hardware Technology Park (EHTP) complexes can be set up by the Central Government, State Government, Public or Private Sector Undertakings or any combination thereof, duly approved by the Inter-Ministerial Standing Committee (IMSC) in the Ministry of Communication and Information Technology (Department of Information Technology). | |
| Approval/ Application and renewal of Application | 4.1 | For setting up an EOU, three copies of the application in the form given in Appendix- 14-IA may be submitted to the Development Commissioner (DC) of theSEZ concerned. |
| 4.2 | Applications for setting up of units under EOU scheme other than proposals for setting up of unit in the services sector (except software and IT enabled services, or any other service activity as may be delegated by the BOA), shall be approved or rejected by the Units Approval Committee within 15 days as per the criteria indicated in Appendix-14-IB and Sector specific conditions relating to the approval given in Appendix- 14-IC . In other cases, approval may be granted by the Development Commissioner after clearance by the Board of Approval. | |
| 4.3 | Proposals for setting up EOU requiring industrial licence may be granted approval by the Development Commissioner after clearance of the proposal by the Board of Approval (as per Appendix-14-ID) and Department of Industrial Policy and Promotion within 45 days on merits. | |
| 4.4 | Only project having a minimum investment of Rs.1 crore and above in building, plant and machinery shall be considered for establishment under EOU scheme. Minimum investment should take place on coming into production of the unit. (This shall, however, not apply to existing units and units in EHTP/STP/ handicrafts/ agriculture/floriculture/ acqua-culture/ animal husbandry/ information technology, services and such other sectors as may be decided by the BOA). | |
| 4.5 | Application for setting up EHTP/STP unit shall be in the format prescribed by the Ministry of Communication and Information Technology (Department of Information Technology) and shall be submitted to the officer designated by the Department of Information Technology for this purpose. | |
| Letter of Permission/Letter of Intent/Renewal of approval | 4.6 | On approval, a Letter of Permission (LOP)/Letter of Intent (LOI) shall be issued by the Development Commissioner to EOU/EHTP/STP unit. The LOP shall have an initial validity of 3 years for commencement of production. Its validity may be extended by another 3 years, beyond initial validity, by the competent authority. However, proposals approved prior to 01.04.2002 shall be considered on a case to case basis by BOA for extension of validity of LOP beyond six years. [OLD - However, proposals approved prior to 1.4.2002 shall be considered on case to case basis by BOA. ] (Last sentence of para 4.6 has been amended vide PN. No. 17/2003, Dt. 16/07/2003) |
| 4.7 | The LOP/LOI shall specify the item(s) of manufacture/service activity, annual capacity, projected annual export for the first five years in dollar terms, Net Foreign Exchange earnings (NFE), limitations, if any, regarding sale of finished goods, by-products and rejects in the DTA and such other matter as may be necessary and also impose such conditions as may be required. | |
| 4.8 | LOP/LOI issued to EOU/EHTP/STP units by the concerned authority would be construed as a licence for all purposes. Standard format for LOP for EOU units is given in Appendix 14-IE . | |
| 4.9 | LOP/LOI shall be valid for a period of 5 years from the date of commencement of production. This period may be extended further by the Development Commissioner concerned for period of 5 years at a time. | |
| 4.10 | EOUs shall have separate ear-marked premises for separate LOP. Similarly, EOUs may be approved on leased premises provided the lease has been obtained from Government Department/ Undertaking/Agency. However, in case lease is obtained from private parties, it shall have a validity period of five years from the date of LUT and the Development Commissioner shall satisfy himself of genuine nature of the lease. | |
| 4.11 | On completion of the approval period as provided for in paragraph 4.9 [OLD -8.9], it shall be open to the unit to continue under the scheme or opt out of the scheme. If no intimation in this regard is received from the unit within a period of six months of expiry of the approval period, the Development Commissioner will take action, suo moto, to cancel the approval under the EOU scheme and take further action in this regard. Where the unit opts to continue, the Development Commissioner concerned will extend the approval period. (In above para 8.9 has been corrected vide PN. No. 17/2003, Dt. 16/07/2003) | |
| Re-conditioning Repair and Re-engineering | 4.12 | EOU/EHTP/STP units may be set up with the approval of BOA to carry out reconditioning, repair, remaking, testing, calibration, quality improvement, up-gradation of technology and re-engineering activities for export in freely convertible foreign currency. Such units may import goods of any origin for the above activities. The provisions of paragraphs 12.1, 13, 15, 16.1, 18.1 and 24.1 shall not, however, apply to such activities. |
| Legal Undertaking | 5.1 | The approved EOU/EHTP/STP unit shall execute a legal undertaking with the Development Commissioner concerned as per the format given in Appendix- 14-IF. |
| 5.2 | With effect from 1.4.2003, all EOUs should have their own web site and permanent E-Mail address. No LUT for new units after 1.4.2003 shall be executed unless the unit has its own web site and permanent e-mail address. In the event of an EOU not having permanent e-mail address and own website, further, imports and DTA sale shall not be permitted by the Development Commissioner. | |
| Export of goods and services | 6.1 | An EOU/EHTP/STP unit may export all goods and services except items that are prohibited in ITC(HS) (HS). Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be subject to fulfillment of the conditions indicated in the ITC(HS) (HS). |
| 6.2 | Software units may undertake exports using data communication links or in the form of physical exports (which may be through courier service also), including export of professional services | |
| 6.3 | EOU/EHTP/STP unit, other than service units, may also export to Russian Federation in Indian Rupees against repayment of State Credit/Escrow Rupee Account of the buyer subject to RBI clearance, if any. | |
| 6.4 | The EOUs shall be permitted to export jewellery on the basis of a notional rate certificate issued by the nominated agency. This rate will be based on the prevailing Gold/US$ rate and the US$/INR rate in the notional rate certificate. The certificate issued by the nominated agency should not be older than 3 working days of the date of shipment. | |
| 6.5 | The exporter shall have the flexibility to fix the price and repay the gold loan within 180 days from the date of export. The price shall be communicated to the nominated agencies who will issue a certificate showing the final confirmation of the rate to the bank negotiating the document, to ensure export proceeds are realized at this rate | |
| 6.6 | Gem & Jewellery and Jewellery EOUs may re-export imported goods and export domestically procured goods, including goods generated out of partial processing/ manufacture. Besides, supply of unsuitable/ broken cut and polished diamonds, precious and semi-precious stones upto 5% of the value of imported or indigenously procured goods to the DTA against the valid Gem & Jewellery REP as applicable on payment of appropriate duty is also permitted. | |
| Import/domestic procurement of goods | 7.1 | An EOU/EHTP/STP unit may import and /or procure from DTA or bonded warehouses in the DTA/international exhibitions held in India, without payment of duty, all types of goods required by it for its activities or in connection therewith, provided they are not prohibited items of imports in the ITC(HS) (HS). However, any permission required for import under any other law shall be applicable. |
| 7.2 | Goods permitted to be imported /procured from Domestic Tariff Area shall include: | |
| (a) Raw materials, components, consumables, intermediates, spares and packing materials: | ||
| (b) Capital goods, whether new or second-hand, including inter-alia the following and their spares: | ||
| (i) DG sets, captive power plants, transformers and accessories for all above. | ||
| (ii) Pollution control equipment. | ||
| (iii) Quality assurance equipment. | ||
| (iv) Material handling equipment, like fork lifts and overhead cranes, mobile cranes, crawler cranes, hoists and stackers. | ||
| (v) Un-interrupted Power Supply System (UPS), Special racks for storage, storage systems, modular furniture, computer furniture, anti-static carpet, tele-conference equipment, Servo Control System, Air-conditioning system, panel for electricals. | ||
| (vi) Security Systems. | ||
| (vii) Tools, jigs, fixtures, gauges, moulds, dyes, instruments and accessories; | ||
| (c) Raw material for making capital goods for use within the unit | ||
| (d) others including: | ||
| (i) Prototypes and technical samples for existing product(s) and product diversification, development or evaluation. | ||
| (ii) Drawings, blue prints, charts, microfilms and technical data; | ||
| (iii) Office equipment, including PABX, Fax machines, projection system, Computers, Laptop, server. | ||
| (e) Spares and consumables for all the above items | ||
| (f) any other items not mentioned above with the approval of Board of Approval. | ||
| (Please refer TN. NO. 01/2003, Dt. 05/05/2003 - Issue of Advance Licenses for Deemed Exports for supplies to EOUs/ EPZs/ EHTPs/ STPs for para 7.2) | ||
| 7.3 | The units shall also be permitted to import/procure goods and services required for its activities, including capital goods, free of cost or on loan from clients. | |
| 7.4 | STP/EHTP/EOU may import/procure from DTA without payment of duty specified goods for creating a central facility for use by software development units in STP/EHTP/EOU. The central facility for software development can also be accessed by units in the DTA for export of software. | |
| 7.5 | An EOU engaged in agriculture, animal husbandry, aquaculture, floriculture, horticulture, pisciculture, viticulture, poultry or sericulture may import/procure all types of goods, without payment of duty, required by it for its activities or in connection therewith as available to other EOUs. However, such units may be permitted to take only specified goods for use outside the bonded area. | |
| 7.6 | Gem and jewellery units may also source gold/silver/platinum through the nominated agencies on loan basis subject to the condition that the gold/silver/platinum jewellery shall be exported within 120 days from the date of release. This shall not, however, apply to outright purchase of precious metals from nominated agencies or if the same is obtained on loan other than from the nominated agencies. | |
| 7.7 | EOUs may import plain/studded gold/platinum or silver jewellery for export after repairs/remaking. | |
| Conditions of Import | 7.8 | The import of goods by EOU/EHTP/STP units shall be subject to the following conditions: |
| (a) The goods shall be imported into the EOU/EHTP/STP premises. However, agriculture and allied sectors and granite sector units in EOU may supply/ transfer the capital goods and the inputs in the farms/fields/quarries with prior intimation to the jurisdictional Customs/ Central Excise authorities, provided the ownership of the goods rests with EOU units. | ||
| (b) The procedure as prescribed under Customs/Excise rules for EOUs and units in EHTP/STP will be followed and appropriate bond executed with Customs/ Excise authorities | ||
| (c) The goods, except capital goods and spares, shall be utilised by EOU/EHTP/STP units within a period of three years or as may be extended by Customs authorities. | ||
| (d)Goods already imported/shipped/arrived before the issue of LOP/ LOI are also eligible for duty free clearance under the EOU/EHTP/STP scheme provided customs duty has not been paid and the goods have not been cleared from Customs. | ||
| Fax machines/lap- top computers outside approved premises | 7.9 | EOU/EHTP/STP units may install one fax machine at a place of its choice, outside the premises of the unit, subject to intimation of its location to the concerned Customs/Central Excise authorities. |
| 7.10 | EOU/EHTP/STP units may, temporarily take out of the premises of the unit duty free laptop computers and video projection systems for working upon by authorised employees | |
| 7.11 | EOU/EHTP/STP units may install personal computers not exceeding two in number, imported/procured duty free in their registered/administrative office subject to the guidelines issued by Department of Revenue in this behalf. | |
| 7.12 | For IT and IT enabled services, persons authorized by the software units may access the facility installed in the EOU/EHTP/STP unit through communication links | |
| Leasing of Capital Goods | 8.1 | An EOU/EHTP/STP unit may, on the basis of a firm contract between the parties, source the capital goods from a domestic/foreign leasing company without payment of Customs/Excise duty. In such a case, the EOU/EHTP/STP unit and the domestic/foreign leasing company shall jointly file the documents to enable import/ procurement of the capital goods without payment of duty. |
| 8.2 | The value of imported capital goods financed through leasing companies or obtained free of cost and/or on loan basis shall also be taken into account for the purpose of calculation of NFE as defined in the Policy. | |
| Net Foreign Exchange Earnings (NFE) | 9.1 | EOU/EHTP/STP unit shall be a positive net foreign exchange earner. Net Foreign Exchange Earnings (NFE) shall be calculated cumulatively for a period of five years from the commencement of production according to the formula given below. Items of manufacture for export specified in the Letter of Permission (LOP)/ Letter of Intent (LOI) alone shall be taken into account for calculation of NFE. |
| Positive NFE = A- B > 0 Where | ||
| NFE is Net Foreign Exchange Earning. | ||
| A) is the FOB value of exports by the EOU/EHTP/STP unit; and | ||
| B) is the sum total of the CIF value of all imported inputs and the CIF value of all imported capital goods, and the value of all payments made in foreign exchange by way of commission, royalty, fees, dividends, interest on external borrowings during the first five year period or any other charges. "Inputs" mean raw materials, intermediates, components, consumables, parts and packing materials | ||
| 9.2 | If any goods are obtained from another EOU/EHTP/STP/SEZ unit, or procured from an international exhibition held in India, or bonded warehouses or precious metals procured from nominated agencies the value of such goods shall be included under B. | |
| 9.3 | If any capital goods imported duty free or leased from a leasing company, received free of cost and/or on loan basis or transfer, the CIF value of the capital goods shall be included pro-rata, under B for the period it remains with the units. | |
| 9.4 | For annual calculation of NFE the value of imported capital goods and lumpsum payment of foreign technical know-how fee shall be amortized as under:1st - 10th Year: 10% | |
| Maintenance of accounts | 10.1 | EOU/EHTP/STP unit shall maintain proper account, and shall submit quarterly and annual report as prescribed in annexure to Appendix-14-IF to the Development Commissioner and Customs and Central Excise authorities. |
| 10.2 | The unit shall be able to account for the entire quantity of each category of homogenous goods imported/procured duty free, by way of exports, sales/supplies in DTA or transfer to other SEZ/EOU/EHTP/STP units and balance in stock. However, at no point of time the units shall be required to co-relate every import consignment with its exports, transfer to other SEZ/ EOU/ EHTP/STP units, sales in the DTA and balance in stock. Any matter for clarification as to whether goods are homogenous or not shall be decided by unit approval Committee. | |
| Monitoring of NFE | 11.1 | The performance of EOU/EHTP/STP units shall be monitored by the Units Approval Committee as per the guidelines given in Appendix –14-IG. |
| 11.2 | Failure to ensure positive NFE or to abide by any of the terms and conditions of the LOP/LOI/IL/LUT shall render the unit liable to penal action under the provisions of the Foreign Trade (Development & Regulation) Act, 1992 and the Rules and Orders made there under without prejudice to action under any other law/rules and cancellation or revocation of LOP/LOP/IL. | |
| DTA Sale of finished products/ rejects waste/scrap/ remnants and by-products | 12.1 | The entire production of EOU/EHTP/STP units shall be exported subject to the following: |
| (a) Unless specifically prohibited in the LOP, rejects may be sold in the Domestic Tariff Area (DTA) on payment of duties as applicable to sale under paragraph 12.1(b) on prior intimation to the Customs authorities. Such sales shall be counted against DTA sale entitlement under paragraph 12.1(b). Sale of rejects upto 5% of FOB value of exports shall not be subject to achievement of NFE. | ||
| (b) Units, other than gems and jewellery units, may sell goods/ services upto 50 % of FOB value of exports, subject to fulfillment of positive NFE on payment of applicable duties. Sales made to a private bonded warehouse set up under the policy shall also be taken into account for the purpose of arriving at FOB value of exports by EOUs provided payment for such sales are made from EEFC account. No DTA sale shall be permissible in respect of motor cars, alcoholic liquors, tea (except instant tea) and books or by a packaging/ labeling /segregation/ refrigeration unit and such other items as may be notified from time to time. DTA sale guidelines are given in Appendix-14-IH. Within the entitlement of DTA sale, the unit may sell in DTA its products and services. Entitlement will be determined in totality and not with reference to specific items. (Above Sub para has been added vide PN. No. 17/2003, Dt. 16/07/2003) | ||
| (c) Gems and jewellery units may sell upto 10% of FOB value of exports of the preceding year in DTA subject to fulfillment of positive NFE as prescribed in the Policy. In respect of sales of plain jewellery, the recipient shall pay concessional rate of duty to the Customs in Indian rupees as applicable to sale from nominated agencies. In respect of studded jewellery, duty shall be payable in Indian rupees as notified by Customs. | ||
| (d) Scrap/ waste/ remnants arising out of production process or in connection therewith may be sold in the DTA as per the Standard Input-Output norms notified under the Duty Exemption Scheme on payment of duties as applicable under paragraph 12.1(b) within the overall ceiling of 50% of FOB value of exports. Such sales shall not, however, be subject to achievement of positive NFE. In respect of items not covered by the norms under the Duty Exemption Scheme, the Development Commissioner may fix adhoc norms on the basis of data for a period of six month and within this period he shall get the norms fixed by the Board of Approval. Sale of waste/scrap/remnants by units not entitled to DTA sale or sales beyond the DTA sale entitlement, shall be on payment of full duties. The Scrap/waste/remnants may also be exported. | ||
| 12.2 | Scrap/dust/sweeping of gold/silver/ platinum may be sent to the Government of India Mint/Private Mint from the EOU/EHTP/STP units and returned to them in standard bars in accordance with the procedure prescribed by the Customs authorities or may be permitted to be sold in the DTA on payment of applicable Customs duty, on the basis of gold/silver/platinum content, as may be notified by Customs authorities. | |
| 12.3 | EOU/ EHTP/ STP units may be permitted to sell finished products which are freely importable under the Policy in the DTA against payment of full duties provided they have achieved the positive NFE as per the Policy. | |
| 12.4 | Such sales may also be permitted in exceptional cases without achievement of positive NFE. | |
| 12.5 | For services, including software units, sale in the DTA in any mode, including on-line data communication, shall be permissible up to 50% of FOB value of exports and/or 50% of foreign exchange earned, where payment for such services is received in free foreign exchange. | |
| 12.6 | By-products included in the LOP may also be sold in the DTA subject to achievement of positive NFE on payment of applicable duties within the overall entitlement of paragraph 12.1(b). Sale of by-products by units not entitled to DTA sales or beyond the entitlements of paragraph 12.1(b) shall also be permissible on payment of full duties. | |
| 12.7 | In the case of units manufacturing electronics hardware and software, the NFE and DTA sale entitlement shall be reckoned separately for hardware and software. | |
| DTA Supplies to Count towards NFE | 13.1 | The following supplies effected in DTA by EOU/EHTP/STP units will be counted for the purpose of fulfilment of positive NFE : [OLD -The following supplies effected from DTA to EOU/EHTP/STP units will be counted for the purpose of fulfillment of positive NFE:] (First sentence of para 13.1 has been amended vide PN. No. 17/2003, Dt. 16/07/2003) |
| (a) Supplies effected from DTA in terms of Chapter 8 of the Policy. | ||
| (b) Supplies made to bonded warehouses set up under the Policy and/or under Section 65 of the Customs Act. | ||
| (c) Supplies against special entitlements of duty free import of goods. | ||
| (d) Supplies of goods and services to such organizations which are entitled for duty free import of such items in terms of general exemption notification issued by the Ministry of Finance. | ||
| (e) Supply of services (by services units) relating to exports paid for in free foreign exchange or for such services rendered in Indian Rupees which are otherwise considered as having been paid for in free foreign exchange by RBI. | ||
| (f) Supplies of Information Technology Agreement (ITA-1) items and notified zero duty telecom/electronic items indicated in the Appendix 14-IC. | ||
| (g) Supplies effected in DTA against payment from the Exchange Earners Foreign Currency (EEFC) Account of the buyer in the DTA or against foreign exchange remittance received from overseas subject to Import Policy in force. | ||
| 13.2 | Such DTA sales shall not affect the application to any goods of any other prohibition or regulation affecting import thereof in force at the time when such goods are imported. This also does not confer any immunity, exemption or relaxation at any time from any commitment or compliance with any requirements to which the importer may be subject to under other laws or regulations. | |
| Supplies to other EOU/EHTP/STP/SEZ units | 13.3 | Supplies to other EOU/SEZ/ EHTP/ STP units shall be counted towards NFE provided that such goods are permissible for procurement by these units. |
| Entitlement for supplies from the DTA | 14.1 | Supplies from the DTA to EOU/EHTP/STP units will be regarded as "deemed exports" and the DTA supplier shall be eligible for the relevant entitlement under Chapter 8 of the Policy besides discharge of EP if any, on the supplier. Notwithstanding the above, EOU/EHTP/STP units shall, on production of a suitable disclaimer from the DTA supplier, be eligible for obtaining the entitlements specified in Chapter 8 of the Policy. For the purpose of claiming deemed export duty drawback, they shall get Brand Rates fixed by the DGFT wherever All Industry Rates of Drawback are not available. |
| 14.2 | In addition the EOU/EHTP/STP units shall be entitled to the following:- | |
| (a) Reimbursement of Central Sales Tax. The procedure to be followed and the form of the application for reimbursement of Central Sales Tax (CST) is given in Appendix -14-I I. | ||
| (b) Exemption from payment of Central Excise Duty on all goods as per entitlements given in the Policy. | ||
| (c) Reimbursement of Central Excise Duty paid on bulk tea procured from licenced auction centres by Development Commissioner of concerned Zone so long as levy on bulk tea in this regard is in force. The unit shall submit documentary evidence showing that the tea was procured from licenced auction centers along with the claim. | ||
| (d) Reimbursement of Duty paid on fuels procured from domestic oil companies, by the Development Commissioner of the concerned Zone as per the rate of Drawback notified by the Directorate General of Foreign Trade from time to time. | ||
| 14.3 | Supplier of precious and semi-precious stones, synthetic stones and processed pearls from DTA to EOUs shall be eligible for grant of Replenishment Licence at the rates and for the items mentioned in the Handbook (Vol.I). The procedure for submission of application for grant of Replenishment Licence as contained in the relevant chapter of the Handbook of Procedures (Vol. 1) shall be applicable. [OLD -The procedure for submission of application for grant of Replenishment License as contained in the relevant Chapter of the Handbook (Vol-I).] However, the application shall be made to the Development Commissioner of the SEZ concerned. Such supplies to EOUs are not treated as deemed exports for the purpose of any of the deemed export benefits. (Second sentence of above para has been amended vide PN. No. 17/2003, Dt. 16/07/2003) | |
| 14.4 | Application for grant of all the entitlements listed above may be made to the Development Commissioner of SEZ concerned. | |
| Export through status holder | 15 | An EOU/EHTP/STP unit may export goods manufactured/software developed by it through a merchant exporter/status holder recognized under this Policy or any other EOU/ EHTP/STP/SEZ unit subject to the condition that |
| (a) Goods shall be produced in the EOU/EHTP/STP unit concerned. | ||
| (b) The level of NFE or any other conditions relating to the imports and exports as prescribed shall continue to be discharged by the EOU/EHTP/STP unit concerned. | ||
| (c) The export orders so procured shall be executed within the parameters of EOU/EHTP/STP schemes and the goods shall be directly transferred from the unit to the port of shipment. | ||
| (d) Fulfillment of NFE by EOU/ EHTP/STP units in regard to such exports shall be reckoned on the basis of the price at which the goods are supplied by EOUs to Status Holder/ Merchant Exporter or other EOU/ EHTP/ STP/SEZ unit. | ||
| (e) All export entitlements, including recognition as Status Holder would accrue to the exporter in whose name foreign exchange earnings are realized. However, such export shall be counted towards fulfillment of obligation under EOU/EHTP/STP scheme only. | ||
| Inter Unit Transfer | 16.1 | Transfer of manufactured goods from one EOU/EHTP/STP unit to another EOU/ EHTP/ STP/SEZ unit will be allowed. |
| 16.2 | Capital goods may be transferred or given on loan to other EOU/SEZ/EHTP/STP units with prior permission of the concerned Development Commissioner and Customs authorities. | |
| Other Entitlements | 17.1 | Exemption from payment of income tax as per the provisions of Income Tax Act. |
| 17.2 | Clubbing of FOB value of export of an EOU/ EHTP/STP units with FOB value of export of its parent company in the DTA or vice versa for the purpose of according Export House, Trading House, Star Trading House or Super Star Trading House status. | |
| 17.3 | Foreign Direct Investment (FDI) upto 100% in the manufacturing sector is permissible, as per the guidelines of Department of Industrial Policy and Promotion on the subject. | |
| 17.4 | Sectoral norms as notified by the Government shall apply to FDI in services activities. | |
| 17.5 | Software units are also be allowed to use the computer system for training purpose (including commercial training) subject to the condition that no computer terminal shall be installed outside the bonded premises for the purpose. | |
| 17.6 | Exemption from industrial licensing for manufacture of items reserved for SSI sector. | |
| 17.7 | State Trading regime shall not apply to EOU manufacturing units. Export of iron ore shall however be subject to the decision of the Government from time to time. Requirements of other conditions of exports like minimum export price/export in consumer pack etc. as per ITC(HS) shall apply in case the raw materials are sourced from DTA and exported without further processing/manufacturing by the EOU. Export of textile items shall be covered by bilateral agreements. Wood based units shall comply with the direction of Hon"ble Supreme Court contained in its order dated 12.12.1996 in Writ (civil) No, 202 of 1995- T.N.Godavarman Thirrumulppad v/s Union of India and others with WP(Civil) no 171 of 1996 in regards to use of timber/other wood. | |
| Sub-Contracting | 18.1 | EOU/EHTP/STP unit, including gem and jewellery units, may on the basis of annual permission from the Custom authorities, subcontract production process in DTA, which may also involve change of form or nature of goods, through job work by units in the DTA. These units may also subcontract upto 50% of the overall production of previous year in value terms for job work in DTA with the permission of the Customs authorities. Subcontracting of both production and production process may also be undertaken without any limit through other EOU/EHTP/STP/SEZ units on the basis of records maintained in the unit. Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner. |
| 18.2 | Sub-contracting by EOU gems and jewellery units through other EOUs or SEZ Units or units in DTA shall be subject to following conditions:- | |
| (a) Goods, finished or semi finished, including studded jewellery, taken out for sub- contracting shall be brought back to the unit within 30 days. | ||
| (b) No cut and polished diamonds, precious and semi-precious stones (except precious and semi-precious stones having zero duty) shall be allowed to be taken out for sub-contracting. | ||
| (c) Receive plain gold/silver/platinum jewellery from DTA/EOU/SEZ units in exchange of equivalent quantity of gold/silver/ platinum, as the case may be, contained in the said jewellery | ||
| (d) EOUs shall be eligible for wastage as applicable for sub-contracting and against exchange. | ||
| (e) The DTA unit undertaking job work or supplying jewellery against exchange of gold/silver/platinum shall not be entitled to deemed export benefits. | ||
| 18.3 | Scrap/waste/remnants generated through job work may either be cleared from the job worker’s premises on payment of applicable duty or destroyed in the presence of Customs/ Excise authorities or returned to the unit. Destruction shall not apply to gold, silver, platinum, diamond, precious and semi precious stones. | |
| 18.4 | Export of finished goods from the job worker"s premises may be permitted provided such premises are registered with the Central Excise authorities. Where the job worker is SEZ/EOU/ EHTP/STP unit, no such excise registration is required and export may be effected either from the job workers’ premises or from the premises of the unit. Export of such products from the job worker"s premises shall not be allowed through third parties as provided in the Policy. | |
| 18.5 | EOU may, on the basis of annual permission from the Customs authorities, undertake job work for export, on behalf of DTA exporter, provided the goods are exported directly from EOU and export document shall jointly in the name of DTA/EOU. For such exports, the DTA units will be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback. | |
| 18.6 | EOUs may be permitted to remove moulds, jigs, tools, fixtures, tackles, instruments, hangers and patterns and drawings to the premises of sub-contractors subject to the conditions that these shall be brought back to the premises of the units on completion of the job work within a stipulated period. The raw materials may or may not be sent along with these goods. | |
| 18.7 | In case of sub-contracting of production process abroad, the goods may be exported from the sub-contractor premises subject to the conditions that job work charges shall be declared in the export declaration forms, invoices etc. and full repatriation of foreign exchange. | |
| Contract farming | 18.8 | EOUs engaged in production/processing of agriculture/horticulture products, may on the basis of annual permission from the Customs authorities take out inputs and equipments (specified at Appendix-14-IJ) to the DTA farm subject to the following conditions: |
| (a) Supply of inputs by the EOUs to the contract farm(s) shall be subject to the input-output norms approved by the DGFT/BOA. | ||
| (b) There shall be contract farming agreement between the EOU and the DTA farmer(s); | ||
| (c) The unit has been in existence for at least two years and engaged in export of agriculture/horticulture products; otherwise it shall furnish bank guarantee equivalent to the duty foregone on the capital goods/inputs proposed to be taken out to the Deputy/Assistant Commissioner of Customs/Central Excise till the unit completes two years. | ||
| Export through Exhibitions/Export Promotion tours | 19.1 | EOUs/EHTP/STP may export goods for holding/ participating in exhibitions abroad with the permission of Development Commissioner subject to the following conditions:- |
| (a) The unit shall produce to the Customs authorities the letter in original or its certified copy containing approval of the Development Commissioner. For gems and jewellery items, a self certified photograph of the products shall also be submitted. | ||
| (b) In case of re-import, such items, on arrival shall be verified along with the export documents before clearance. | ||
| (c) Items not sold abroad shall be re-imported within 60 days of the close of the exhibition. However, in case the exporter is participating in more than one exhibition within 45 days of close of the first exhibition, then the 60 days shall be counted from the date of close of the last exhibition. | ||
| (d) In case of personal carriage of goods and for holding/participating in overseas exhibitions, the value of such gems and shall not exceed US $ 2 million. | ||
| Personal Carriage of gems and jewellery for Export promotion tours | 19.2 | Personal carriage of gold/silver/platinum jewellery, cut and polished diamonds, precious, semi-precious stones, beads and articles as samples upto US $ 100,000 for export promotion tours and temporary display/sale abroad by EOUs is also permitted with the approval of the Development Commissioner subject to the following conditions: |
| (a) EOU shall bring back the goods or repatriate the sale proceeds within 45 days from the date of departure through normal banking channel. | ||
| (b) The unit shall declare personal carriage of such samples to the Customs while leaving the country and obtain necessary endorsement. | ||
| Export through show-rooms abroad/duty free shops | 20.1 | Export of goods is also permitted for display/sale in the permitted shops set up abroad or in the show rooms of their distributors/agents. The items not sold abroad within 180 days shall be re-imported within 45 days. |
| Sale through showrooms/retail outlets as International Airports | 20.2 | EOUs may set up show rooms/retail outlets at the International Airports for sale of goods in accordance with the procedure laid down by the Customs authorities. The items remaining unsold after a period of 60 days shall be exported or returned to the respective EOUs. (Heading for para 20.2 has been added vide PN. No. 17/2003, Dt. 16/07/2003) |
| Personal carriage of import/export parcels including through foreign bound passengers | 21.1 | Import/ export through personal carriage of gem and jewellery items may be under-taken as per the procedure prescribed by Customs. The export proceeds shall, however, be realized through normal banking channel. Import/export through personal carriage [Deleted - units], other than gem and jewellery [Deleted - units], shall be allowed provided the goods are not in commercial quantity. (In para 21.1 words and expression "units" has been deleted vide PN. No. 17/2003, Dt. 16/07/2003) |
| 21.2 | For Personal carriage of jewellery by foreign bound passenger, the following documents shall be submitted by EOU units as proof of exports. | |
| (a) Copy of the shipping bill filed by the EOUs ; | ||
| (b) A copy of the Currency Declaration Form filed by the Foreign buyer with the Customs at the time of his arrival; and | ||
| (c) Foreign Exchange Realisation/ Encashment Certificate from the Bank. | ||
| 21.3 | In addition to this, Personal Carriage by foreign bound passenger on Document Against Acceptance (DA)/Cash On Delivery (COD) basis is also allowed. The EOUs will have to furnish the following documents as proof of exports:- | |
| (a) Copy of Shipping Bill; | ||
| (b) Bank Certificate of Export and Realisation. | ||
| 21.4 | The procedure for personal carriage of import parcels will be the same as for import of goods by airfreight except that the parcels shall be brought to the Customs by the EOUs/ foreign national for examination and release. Instructions issued by the Customs authorities in this regard should be followed mutatis mutandis. | |
| Export /Import by Post /Courier | 22 | Goods including free samples, may be exported/imported by airfreight or through Foreign Post Office or through courier, subject to the procedure prescribed by Customs. |
| Replacement/ Repair of imported/ indigenous goods | 23.1 | The general provisions of the Policy relating to export of replacement/repair of goods would also apply equally to EOU/EHTP/STP units, save that, cases not covered by these provisions shall be considered on merits by the Development Commissioner. |
| 23.2 | The units may send capital goods abroad, for repair and return. Any foreign exchange payment for this purpose will also be allowed. | |
| 23.3 | The goods sold in the DTA and found to be defective may be brought back for repair/ replacement, under intimation to the concerned jurisdictional Customs/Excise authorities. | |
| 23.4 | Goods or parts thereof on being imported/ indigenously procured and found defective or otherwise unfit for use or which have been damaged or become defective after import/ procurement may be returned and replacement obtained or destroyed. In the event of replacement, the goods may be brought back from the foreign suppliers or their authorized agents in India or indigenous suppliers. However, destruction shall not apply to precious and semi-precious stones and precious metals. | |
| 23.5 | EOU/EHTP/STP units may, on the basis of records maintained by them and prior intimation to Customs authorities. | |
| (a) Transfer goods to DTA/abroad for repair/replacement, testing or calibration and return. | ||
| (b) Transfer goods for quality testing/R&D purpose to any recognised laboratory/ institution upto Rs.5 lakhs per annum without payment of duty, on giving suitable undertaking to the customs for return of the goods. However, if the goods have been consumed/destroyed in the process of testing etc. a certificate from the laboratory/ institution to this effect be furnished to the Customs. | ||
| Samples | 24.1 | EOU/EHTP/STP units may on the basis of records maintained by them, and on prior intimation to Custom authority supply or sell samples in the DTA for display/market promotion on payment of applicable duties. |
| 24.2 | Remove samples without payment of duty, on furnishing a suitable undertaking to Customs authorities for bringing back the samples within a stipulated period. | |
| 24.3 | An EOU may export free samples, without any limit, including samples made in wax moulds, silver mould and rubber moulds through all permissible mode of export including through couriers agencies/post. | |
| Sale of un-utilised material /destru-ction | 25.1 | In case of EOU/EHTP/STP unit is unable, for valid reasons, to utilize the goods and services, imported or procured from DTA, it may be transferred to other EOU/SEZ/EHTP/STP units or disposed off in the DTA with the approval of the Development Commissioner on payment of applicable duties and submission of import licence by DTA units, wherever applicable or exported. Such transfer of imported goods and services from EOU/EHTP/STP unit to another such unit would be treated as import for the receiving unit. (Para 25.1 has been amended vide PN. No. 17/2003, Dt. 16/07/2003) [OLD -In case an EOU/EHTP/STP unit is unable, for valid reasons, to utilize the goods and services, imported or procured from DTA, it may be transferred to other EOU/SEZ/EHTP/STP units or disposed off in the DTA on payment of applicable duties and submission of import licence by DTA unit, wherever applicable or exported. Such transfer from EOU/EHTP/STP unit to another such unit would be treated as import for the receiving unit.] |
| 25.2 | Capital goods and spares that have become obsolete/surplus, may either be exported, transferred to another EOU/EHTP/STP/SEZ or disposed of in the DTA on payment of applicable duties. The benefit of depreciation, as applicable, will be available in case of disposal in DTA. | |
| 25.3 | EOU/EHTT/STP unit may be allowed by customs authorities concerned to donate imported/ indigenously procured (bought or taken on loan) computer and computer peripherals, including printer, plotter, scanner, monitor, key-board and storage units without payment of duty, two years after their import/ procurement and use by the units, to recognized non-commercial educational institutions, registered charitable hospitals, public libraries, public funded research and development establishments, organizations of the Government of India or Government of a State or Union Territory as per Custom/ Central Excise notification issued in this regard. | |
| 25.4 | No duty shall be payable in case capital goods, raw material, consumables, spares, goods manufactured, processed or packaged, and scrap/waste/ remnants/rejects are destroyed within the Unit after intimation to the Custom authorities or destroyed outside the Unit with the permission of Custom authorities. Destruction as stated above shall not apply to gold, silver, platinum, diamond, precious and semi precious stones. | |
| Distinct Identity | 26 | If an industrial enterprise is operating both as a domestic unit as well as an EOU/EHTP/STP unit, it shall have two distinct identities with separate accounts, including separate bank accounts. It is, however, not necessary for it to be a separate legal entity, but it should be possible to distinguish the imports and exports or supplies affected by the EOU/EHTP/STP units from those made by the other units of the enterprise. |
| Unit Approval Committee | 27 | The powers and functions of the Unit Approval Committee shall be as under:- |
| (a) To consider applications for setting up EOUs other than proposals for setting up of unit in the services sector (except R&D, software and IT enabled services, or any other service activity as may be delegated by the BOA), Item of manufacturer requiring industrial licence under the Industrial (Development & Regulation), Act, 1951 shall be considered by the BOA. (Above 27(a) has been amended vide PN. No. 43/2003, DT. 28/01/2004) [OLD - (a) To consider applications for setting up EOUs other than proposals for setting up of unit in the services sector (except software and IT enabled services, or any other service activity as may be delegated by the BOA), Item of manufacture requiring industrial licence under the Industrial (Development & Regulation) Act, 1951 shall be considered by the BOA. ] | ||
| (b) to consider and permit conversion of units in SEZ to EOU; | ||
| (c) to monitor the performance of the Units; | ||
| (d) to supervise and monitor permission, clearances, licences granted to the units and take appropriate action in accordance with law; | ||
| (e) to call for information required to monitor the performance of the unit under the permission, clearances, licenses granted to it; | ||
| (g) to perform any other function delegated by the Central Government or its agencies; | ||
| (h) to perform any other function as may be delegated by the State Governments or its agencies; and | ||
| (i) to grant all approvals and clearances for the establishment and operation of EOUs. | ||
| Administration of EOUs/Power of DC | 28 | The Development Commissioner shall have the following powers in respect to the units. Jurisdiction of Development Commissioners is given in Appendix- 14-IK. |
| (1) Attest the list of Capital goods including second hand capital goods, without any age limit permitting import of such goods; | ||
| (2) Conversion of sick/closed DTA unit into EOU; | ||
| (3) Conversion of EOU to STP/EHTP and vice versa as per the prescribed procedure; | ||
| (4) To allow increase in the value of capital goods in terms of Indian Rupees, on account of foreign exchange rate fluctuations; | ||
| (5) To permit capacity enhancement without any limit in case of de-licensed industries only; | ||
| (6) Permit broad-banding for similar goods and activities mentioned in the LOP or to provide for backward or forwarded linkages to the existing line of manufacture; | ||
| (7) Authorize change in name of the company or the implementing agency and change from a company to another provided the new implementing agency/company undertakes to take over the assets and liabilities of the existing unit; | ||
| (8) Permit change of location from the place mentioned in the LOP to another and/or include additional location provided that no change in other terms and conditions of the approval is envisaged and that the new location is within the territorial jurisdiction of the DC; | ||
| (9) Extend validity period of LOP by three years beyond the initial validity period of the LOP (except in case where there is a restriction on initial period of approval, like setting up of oil refinery projects) ; | ||
| (10) Cancel LOP wherever warranted;. | ||
| (11) Permit merger of two or more units into one unit provided the units fall with in the jurisdiction of the same DC subject to the conditions that the activities are covered under the provision of broad banding; | ||
| (12) Exercise powers of adjudication under Section 13 read with Section 11 of Foreign Trade (Development & Regulation) Act, 1992 in respect of EOUs as mentioned in Gazette Notification No. SO. 194(E) dated 6.3.2000 | ||
| (13) Do valuation of exports declared on SOFTEX form by EOUs as per RBI A.D. (M.A Series) Circular A P (DIR series Circular No.9 dated 25.10.2001); | ||
| (14) Issue eligibility certificates for grant of employment visa to low level foreign technicians to be engaged by EOUs as per Ministry of Home Affairs" letter No. 25022/7/99-F.1 dated 20.9.1999; | ||
| Registration-cum-Membership Certificate | (15) Function as a Registering authority for EOU. A separate Registration-cum-Membership Certificate shall not be required in their cases as provided for in paragraph 2.44 of the Policy. | |
| Importer Exporter Code No. | (16) Allot Importer-Exporter Code number for EOUs, if the same has already not been allotted to the entity; | |
| Green Card | (17) Issue of Green Card automatically after execution of Legal Undertaking; | |
| (18) Grant/renewal of Status Certificate in respect of EOUs provided it does not involve clubbing of FOB value of exports of its parent company in the DTA; | ||
| (19) Publicity of EOU Scheme under their jurisdiction. | ||
| Exit from EOU scheme | 29.1 | Subject to the approval of the Development Commissioner, EOU/EHTP/STP units may opt out of the scheme. Such exit from the scheme shall be subject to payment of duties of Customs and Excise and the industrial policy in force at the time of exit. Broad conditions governing the exit from EOU/EHTP/STP schemes are indicated at Appendix -14-IL. |
| 29.2 | If the unit has not achieved the obligations under the scheme, exit from the scheme, shall also be subject to penalty as may be imposed by the competent authority. | |
| 29.3 | In the event of a gem and jewellery unit ceasing its operation, gold and other precious metals, alloys, gem and other materials available for manufacture of jewellery, shall be handed over to an agency nominated by the Ministry of Commerce and Industry (Department of Commerce) at the price to be determined by that agency. | |
| 29.4 | An EOU//EHTP/STP unit may also be permitted by the Development Commissioner, as a one time option, to exit from the scheme on payment of duty on capital goods under the prevailing EPCG Scheme, subject to the unit satisfying the eligibility criteria under that Scheme and standard conditions, as per Appendix 14-IL. | |
| 29.5 | Clearance of capital goods imported as second hand shall be allowed as per the Policy under EPCG scheme. In case of second hand capital goods which are less than 10 years old on the date of import, clearance may be allowed on payment of duty after 2 years from date of import. In addition where the second hand capital goods are more than 10 years old, clearance in DTA may be allowed only against an import licence and payment of applicable duties. | |
| epreciation norms for capital goods | 29.6 | The depreciation upto 100% is permissible for capital goods in 5 years in case of IT items and 10 years in case of other items or duty is to be worked out on transaction value, whichever is higher as per the norms notified by the Department of Revenue. |
| 29.7 | Depreciation for computers and computer peripherals for all types of electronic units would be as follows:10% for every quarter in the first year;8% for every quarter in the second year;7% for every quarter in the third year; | |
| 29.8 | For capital goods, other than the above, the depreciation rate would be as follows:4% for every quarter in the first year;3% for every quarter in the second and third year; and 2.5% for every quarter in the fourth year and thereafter. | |
| Conversion | 30.1 | Existing DTA units, may also apply for conversion into an EOU/EHTP/STP unit, but no concession in duties and taxes would be available under the scheme for plant, machinery and equipment already installed. For this purpose, the DTA unit may apply to the Development Commissioner of concerned SEZ in the same manner as applicable to new units. In case there is an outstanding export commitment under the EPCG scheme, it will be subsumed in the export performance (EP) of the unit. If the unit is having outstanding export commitment under the Advance Licensing Scheme, it will apply to the Advance Licensing Committee for reducing its export commitment in proportion to the quantum of duty free material actually utilised for production and permitted to carry forward the unutilized material imported against the Advance Licence, if any, under the EOU/EHTP/ STP scheme. |
| 30.2 | The existing EHTP/STP units may also apply for conversion/merger to EOU unit and vice-versa. In such cases the units will continue avail the permissible exemption in duties and taxes as applicable under the relevant scheme. EHTP/STP units desiring conversion as an EOU may apply to the DC of the SEZ concerned through the Officer designated by the Department of Information Technology in the same manner as applicable to new units. Likewise EOU desiring conversion into EHTP/STP may apply to the officer designated by the Department of Information Technology through the DC of the SEZ concerned. | |
| 30.3 | An EOU may be shifted to SEZ with the approval of Development Commissioner provided the EOU unit has achieved pro-rata obligation under the EOU scheme. | |
| Revival of Sick units | 31 | Subject to a unit being declared sick by the appropriate authority, proposals for revival of the unit or its take over may be considered by the Board of Approval. Guidelines on revival of sick units are given in Appendix -14-IM. |
| Fast Track Clearance | 32 | A fast track clearance procedure for EOUs having status holder certificate under the Policy shall be notified separately. |
| 33 | In the case of units under EHTP/STP Schemes, necessary approval/permission under relevant paragraphs of this Chapter shall be granted by the officer designated by the Ministry of Communication and Information Technology, Department of Information Technology for the purpose instead of the Development Commissioner of SEZ and by the Inter-Ministerial Standing Committee (IMSC) instead of BOA. | |
| S.No. | APPENDICES | |
|---|---|---|
| 1. | APPLICATION FOR SETTING UP UNIT | App. 14-IA. |
| 2. | CRITERIA TO BE ADOPTED FOR AUTOMATIC APPROVAL | App. 14-IB. |
| 3. | SECTOR SPECIFIC CONDITIONS FOR APPROVAL | App. 14-IC. |
| 4. | BOARD OF APPROVAL NOTIFICATION | App. 14-ID. |
| 5. | FORMAT OF LETTER OF PERMISSION(LOP) FOR UNIT | App. 14-IE. |
| 6. | FORM OF LEGAL UNDERTAKING (LUT) FOR UNIT | App. 14-IF. |
| 7. | MONITORING GUIDELINES | App. 14-IG. |
| 8. | DTA SALES GUIDELINES | App. 14-IH. |
| 9. | CST REIMBURSEMENT | App. 14-II. |
| 10. | LIST OF ITEMS PERMITTED FOR CONTRACT FARMING IN THE DTA | App. 14-IJ. |
| 11. | JURISDICTION OF DEVELOPMENT COMMISSIONER | App. 14-IK. |
| 12. | GUIDELINES FOR EXIT OF UNITS | App. 14-IL. |
| 13. | GUIDELINES ON THE REVIVAL SICK UNITS | App. 14-IM. |