05 February 2013
Respected fellow professionals, can any body please guide me about whether one should go for 100% EOU formation or should go for EPCG? as the benefit of 100% EOU under income tax is no more, should one go for imports under EPCG scheme.
also please let me know relevent procedure for either of two. Is there any separate registration required for importing capital goods under EPCG scheme?
05 February 2013
The Export Oriented Units (EOUs) scheme, introduced in early 1981, is complementary to the SEZ scheme. 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. As on 31st December 2005, 1924 units are in operation under the EOU scheme.
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.
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).
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.
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.
Duty free imports or procurement from bonded warehouse/international exhibitions of inputs, consumables, and capital goods including second hand capital goods. Procurement of goods from Domestic Tariff Area without payment of Central Excise Duty. Supplies by DTA manufacturer are eligible for Deemed Export Benefits under the provisions of Foreign Trade Policy which include Duty Drawback, Refund of Terminal Excise Duty and Advance Authorization. Full Reimbursement of CST from MDA (Market Development Assistance) by Department of Commerce on goods purchased from DTA against C Form for manufactures of goods for export. Income Exempted from payment of Income Tax (Sunset clause extended upto 31.03.2011. DTA Sale (Including Advance DTA Sale) upto 50% of FOB value of exports (i.e. Physical Exports) permitted on payment of concessional rate of Central Excise Duty. Concessional DTA Sale of a specific product upto 90% as against the present limit of 75% within overall entitlement of 50% of FOB value of export, vide Para 6.8 (a) of Foreign Trade Policy 2009-14, without changing the criteria of ‘Similar Goods”. Only Positive Net Foreign Exchange Earnings (NFE) to be achieved over a period of 5 years. Duty free goods (except Capital Goods) to be utilized over a period of 3 years. Export Proceeds to be realized within a period of 12 months. Retention allowed upto 100% of export earnings in EEFC Account. Supplies made in DTA under paragraph 6 of Foreign Trade Policy 2009-14 and supplies to other Exporting Units/Bonded warehouses are counted for fulfillment of Positive NFE. Goods allowed to be supplied Duty free in DTA against Advance Linence/DFRC issued by DGFT. Jobwork/Sub-contract for & from DTA permitted subject to fulfillment of certain conditions. FDI upto 100% permitted as per guidelines of Department of Industrial Policy & Promotion. Import/Export of Goods including precious goods permitted through Personal Carriage and Foreign Post Office. Exemption from Industrial Licensing for manufacture of items reserved for SSI Sector. Software Units allowed to use computer systems for training purposes (including commercial training) EOU is allowed to install one fax machine and 2 computers outside bonded area of the unit. Depreciation upto 100% permissible on Capital Goods. On debonding the duty to be paid only on the depreciated value of Capital Goods. EOU will now be allowed CENVAT credit facility for the component of Special Additional Duty (SAD) and education cess on DTA Sale.
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