GST Course

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Exported Oriented Units:

Units undertaking to export their entire production of good & services may be set up under the EOU scheme

Procedural Aspects:

Application for setting up, to be made to-

ü  ‘Board of approval ‘ (BOA) for approvals of units in service sector

ü  ‘Development Commissioner ‘ (DC) for EOU’s requiring industrial licensing, after getting clearance from Board of Approval (BOA) & Department of Industrial Policy & Promotion (DIPP) within 45 days

ü  Units Approval Committee (UAC) for OTHER units

Development commissioner & EOU:

Development commissioner (DC) issues letter of permission (LOP) or letter of Intent (LOI) to EOU ON approval. Then, WITHIN 3 years , the unit should start commercial production to get a validity period of 5 years from the date of commercial production for its activities. The units shall execute a legal undertaking with the concerned DC. The DC ensures, smooth functioning of EOU and fixing time limits for finalizing the disposal of EOU matters.

Positive net foreign exchange (NFE):

The net foreign exchange earning shall be calculated cumulatively for a block of 5 years.

Start export house status:  

Depending on its export performance for last 3 years, it will also be eligible for Fast Track Clearance procedure.

Incentives/Benefits from central government to 100% EOU:

Ø  Total Customs & Central excise duty exemption.

Ø  Income tax exemptions (Section 10A, 10B, etc……)

Ø  Reimbursement of Central sales tax (CST) on purchases made from Domestic Tariff area (DTA)

Ø  Exports through third party permitted

Ø  No restrictions on foreign shareholding and 100% convertibility of export earnings at market rate

Ø  Unrestricted remittances of profits and dividends

Ø  Supply of goods to EOU = “deemed  exports” and eligible for benefits like advance authorization, deemed export drawback & exemption from terminal excise duty.


How SEZ is different from EOU??

*      Supplies made to SEZ from DTA are  “Exports”,  in respect to EOU they are treated as “Deemed Export”

*      Units to be located within specified Zones in respect to SEZ, where as for EOU units can be set up at any prescribed places as declared.

*      In SEZ there is physical control of over movement of good, no such control in case on EOU

*      No minimum investment limit for SEZ, where as for EOU minimum investment limit in P&M is Rs.100 lakhs as on date of commercial production

*      Customs clearance with in zone itself, for EOU fast track clearance scheme for clearance of imported consignments

*      Supplies from SEZ to DTA is normal, Whereas for EOU sale within India on payment of excise duty /customs duty of similar goods is payable and sometimes as a % of normal customs duty

*      In respect to sales (SEZ) no limit, except to have positive net foreign exchange (NFE), (EOU) sale UPTO 50% (FOB on sales of previous year) in DTA and has to fulfill positive net foreign exchange.

*      In relation to restriction under companies act on managerial remuneration are not applicable for SEZ, applicable for EOU

*      Physical exit is necessary in case of de-bonding as SEZ, for EOU unit can exit (de-bond) with permission of Development Commissioner, on payment of applicable duties.

*      SEZ supplier need not pay CST or service tax, EOU has to pay CST or service tax but eligible for refund.


 Regards ................. Manikantaraju CA,CWA,(CS)

Category Audit, Other Articles by - Manikanta Raju CA,CWA,(CS)