Export Oriented Units

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Presented To: Presented By:All Present in the Hall Group No. 02PGP-II,

PGDM GeneralBatch 2008-2010

Contents

Salient features How to set-up an Export Oriented Unit?

Eligibility Criteria Prior to Approval Application Procedure Approval Procedure After Approval Procedure

Development Commissioner Approval from State Government  Agencies Export Performance of EOUs up to 2008-09 and Units in

Operation

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Salient Features (1/3)

No license required for import Exemption from Central Excise Duty in procurement of

capital goods, raw-materials, consumables spares etc. from the domestic market

Exemption from customs duty on import of capital goods, raw materials, consumables spares etc.

Reimbursement of Central Sales Tax (CST) paid on domestic purchases

Supplies from DTA to EOUs treated as deemed exports Reimbursement of duty paid on furnace oil, procured from

domestic oil companies to EOUs as per the rate of drawback notified by the Directorate General of Foreign Trade

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Salient Features (2/3)4

100% Foreign Direct Investment permissible Exchange Earners Foreign Currency (EEFC) account Facility to retain 100% foreign exchange proceeds in EEFC

Account Facility to realize and repatriate export proceeds within twelve

months Further extension in time period can be granted by RBI and their

authorized dealers Re-export of imported goods found defective, goods imported

from foreign suppliers on loan basis etc. Exemption from industrial licensing requirement for items

reserved for SSI sector Profits allowed to be repatriated freely without any dividend

balancing requirement

Salient Features (3/3)5

Access to Domestic Market up to 50% of FOB value of export on concessional rate of duty

Duty free goods to be utilized in two years. Further extension granted on liberal basis

Job work on behalf of domestic exporters for direct export allowed

Conversion of existing Domestic Tariff Area (DTA) unit into an EOU permitted

Can procure duty-free inputs for supply of manufactured goods to advance license holders

Supply of ITA-I items in the domestic market which would be counted for fulfillment of NFE

How to set-up an Export Oriented Unit?

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1. Eligibility Criteria

2. Prior to Approval Procedure

3. Application Procedure

4. Approval Procedure

5. After Approval Procedure

Eligibility Criteria 7

Can be set up by any entrepreneur for: manufacturing of goods rendering of services repair, reconditioning, re-making  and re-engineering

Trading activity is not allowed in the EOU Scheme EOU unit is required to achieve only positive Net Foreign

Exchange (NFE) over a period of  five years EOU can also be set up in the following sectors: -

•Agriculture•Animal Husbandry•Aquaculture•Floriculture•Horticulture

•Pisciculture•Viticulture•Poultry•Seri culture

Prior to Approval Procedure (1/5)8

1. Planning your venture: Is it your own? or Is it with foreign participation? If so, then what is the nature of

participation?2. What process do you intend to do?

Manufacturing, rendering and export of services Agriculture Animal Husbandry Aquaculture Floriculture Horticulture Pisciculture Poultry Sericulture Repair, reconditioning, re-making, re-engineering etc.

Prior to Approval Procedure (2/5)9

3. Technology to be used:• Local/foreign• Related cost and conditions

4. Feasibility report:• On your own or with help of consultant

5. The finances involved:• Land, structure, buildings etc.• Building construction material is not exempted from duty• Capital Goods, machinery etc.• Payment for royalties etc.• Administration and establishment• Others : like interest on loans, related taxes and levies etc.

6. The current competition overseas:• Main competitors• Demand and price levels

Prior to Approval Procedure (3/5)10

7. The import laws and other requirements in target markets:

Any fiscal/non-fiscal barriers, like anti-dumping laws Quota restrictions Preferential treatment to competitor countries

8. Location of the Unit: Closeness to port or rail/road Availability of raw material and Environment clearance needed if unit is located within 25

kilo meters of an urban town Accordingly the application will be submitted to the

concerned Development Commissioner under whose jurisdiction that state comes.

Prior to Approval Procedure (4/5)11

9. Capital goods, machinery and equipment to be used:

Indigenous or foreign (allowed duty free) Related cost

10.Raw materials and other inputs, like consumables etc. that would be required

11.The production process: Whether production process requires air-conditioning plant,

special furnaces or kilns etc. Details and cost. (Air-conditioning equipment is permitted duty

free only if it is essential for production process)

Prior to Approval Procedure (5/5)

12. The production capacity and spare capacity13. Any by-products turned out in the production

process14. Treatment of effluents or waste-materials15. Packaging16. Power17. Other information18. Mandatory clearances from State Government: -

Pollution clearance certificate Approvals of building plan in cases where building is proposed to be

constructed Registration as a small scale industrial unit, if applicable Registration under Factories Act

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Application Procedure (1/2)

All applications are to be filed with the concerned Development Commissioner of Special Economic Zone (For jurisdiction of Development Commissioner)

The unit/promoter has to apply in the application form, to be given in triplicate given in Handbook of Procedures

Project Report including a write up on the background of the promoters establishing their credentials and standing has to be submitted along with the application

One may visit http://www.eouindia.gov.in for documents required by the Development Commissioner for approval

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Application Procedure (2/2)

DD for Rs. 5,000/- drawn in favor of The Pay & Accounts Officer, Ministry of Commerce and Industry, Department of Commerce, payable at the Central Bank of India, Udyog Bhavan, New Delhi

Registration-cum-Membership Certificate (RCMC) should be obtained from the office of the concerned Development Commissioner

Import Export Code: If the  unit does not have an Import Export code (IEC), it will apply in the prescribed form to the Zone Administration for the same

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Approval Procedure

Letter of Permission (LOP): Issued by the Zone Administration within 2 weeks

after interview of the promoter by the Approval Committee

Legal undertaking (LUT): A legal undertaking in the prescribed form

undertaking to abide by the terms and conditions of the LOP has to be executed  by the unit

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After Approval Procedure

Issuance of a Private Custom Bonded Warehouse License: The application shall be accompanied by the following

documents/information: Copy of notification where under the place has been declared as

warehousing station under section 9 of the Customs Act Copy of LOI/LOP issued by Development Commissioner concerned and

LUT accepted by the Development Commissioner Details of the premises including ground plan, purchase/rent/lease

deed, allotment letter from Industrial Development Corporation/Authority (if any)

Details about the constitution of the firm/company including its Proprietor/Partners/Directors etc.

Project Report indicating stage wise manufacturing process List of raw material, consumables and capital goods etc. required Undertaking that cost recovery and other charges shall be paid

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Development Commissioner

The Development Commissioner is empowered to grant approvals on the following matters: Import of additional capital goods Enhancement of production capacity Broad-banding/diversification Change in name of the unit Change of location/expansion Extension of validity of LOP/LOI Import of office equipment Merger of two or more EOU/SEZ Units   

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Approval from State Government  Agencies

The unit has to secure approval for its wiring and electrical plan from the Electrical authorities

It has  also to secure power allocation and wiring approval from the State Electricity Board

The unit has to take a registration under the State Government Sales Tax Act and Central Sales Tax Act

In case the unit already has a registration with the State Sale Tax Department, the address of the additional premises should also be endorsed in the registration certificate

The unit has also to take Small Scale Industry (SSI) Registration from the District Industries Center to apply for State Government’s Investment Subsidy

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Export Performance of EOUs up to 2008-09 and Units in Operation

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JurisdictionalSEZs

Export (Value in Rupees Crore) Percentage Growth

Units in Operation

as on 31.3.20092005-06 2006-07 2007-08 2008-09

2006-07 to

2005-06

2007-08 to

2006-07

2008-09 to

2007-08

NSEZ 8615.5 10546.8 10764.6 10608.8 22.42 2.07 -1.45 416

SEEPZ-SEZ 8293.7 11900.1 19912.4 18539.1 43.48 67.33 -6.9 519

MSEZ 7557.9 13591 15651.4 14044.7 79.82 15.16 -10.27 496

CSEZ 15943 18834.6 21404.2 17697.2 18.14 13.64 -17.32 520

VSEZ 2676.8 4366.62 7167.69 7908.36 63.13 64.15 10.33 226

FSEZ 1658.8 2509.95 2647.57 3086.39 51.31 5.48 16.57 103

KASEZ  4716.4 7420.88 90405.8 98582.4 57.34 1118.26 9.04 301

ISEZ   794.77 885.08 1031.29   11.36 16.52 19

Total 49462 69965 168839 171498 41.45 141.32 1.58 2600

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Source: http://www.eouindia.gov.in