Duty drawback on Transfer of goods to EOU

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11 August 2021 The Company has 4 Unit in Gujarat. One of the Unit is 100% EOU.
The material has been imported at the unit which is not EOU on payment of custom duty and the same material is transferred (as such) to EOU unit which will be used in Export

Whether the company can avail the benefit of duty drawback or any other incentive for transferring material to EOU ??

Please provide the reference to provisions also

Thanks in advance !!!

Asha Kanta Sharma online

Asha Kanta Sharma

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06 July 2024 Yes, the company can avail benefits such as duty drawback or other incentives for transferring materials to the 100% Export Oriented Unit (EOU) from its non-EOU units. Here’s how it typically works and the relevant provisions:

1. **Duty Drawback**: Duty drawback is a refund of duties paid on imported materials or components used in the manufacture or processing of goods for export. In your case:
- Materials imported into the non-EOU unit on payment of customs duty can be subsequently transferred to the EOU unit.
- Duty drawback can be claimed on these imported materials under the Duty Drawback Scheme, which provides for refund of duties paid on inputs used in export production.
- The provisions for duty drawback are governed by the Customs and Central Excise Duties Drawback Rules, 2017.

2. **Provisions for Transfer to EOU**:
- Section 74 of the Customs Act, 1962, provides for duty drawback on re-export of duty-paid goods.
- The Duty Drawback Scheme under the GST regime allows for claiming drawback on customs duties paid on imported goods used in the manufacture of export goods.

3. **Procedure**:
- Ensure that proper documentation and procedures are followed for the transfer of materials from the non-EOU unit to the EOU unit.
- Maintain records of import duty payment and subsequent transfer to the EOU unit for audit and verification purposes.
- File the necessary claims for duty drawback with the Customs department, supported by documentation showing the import and subsequent export or utilization in the EOU.

4. **Incentives under EOU Scheme**:
- In addition to duty drawback, EOUs are eligible for various other incentives such as exemption from central excise duties, income tax benefits, and exemptions from certain indirect taxes.
- These incentives are provided under the Foreign Trade Policy and related notifications issued by the Directorate General of Foreign Trade (DGFT).

5. **Consultation and Compliance**:
- It’s advisable to consult with a customs consultant or chartered accountant familiar with export procedures and duty drawback schemes to ensure compliance with all regulatory requirements.
- The exact benefits and procedures may vary based on the specific nature of the goods and operations of your company. Therefore, professional advice tailored to your circumstances would be beneficial.

By following the above provisions and procedures, your company can effectively utilize duty drawback benefits or other incentives for transferring materials to the EOU unit, thereby optimizing export operations and reducing costs related to import duties.