EOU Scheme

Export oriented unit (EOU) scheme is basically meant to export their entire production of goods and services. However, such units have been also allowed clearances in Domestic Tariff Area. The EOU scheme is governed by chapter 6 of Foreign Trade Policy (FTP) by Director General of Foreign Trade (DGFT) and Development Commissioner of SEZs oversee the performance of individual EOUs. The DoR implement the EOU scheme through notifications, circulars and instructions. The year wise export, import and total duty foregone are as below:-

  • Imports:- However, after the notification of Goods and Service Tax exemption from Integrated Tax (IGST) was initially not extended to EOUs. On the recommendation of the GST Council in its meeting held on 6th October 2017 , Notification No. 78/2017-Customs dated 13.10.2017 was issued by DOR extending exemption of integrated tax and compensation cess on import made by EOUs. The EOUs are allowed duty free imports of goods as well as domestic procurement of good. The notification 52/2003-Customs dated 31-3-2003 (as amended) governs the duty import by EOUs.
  • Domestic procurements:- Prior to GST domestic procurements by EOUs were exempted from Central Excise duty. However, post- GST such supplies are not exempted from CGST/SGST/UTGST/IGST. With the approval of the GST Council these supplies of goods under GST from registered person to EOU have been considered “Deemed Exports” under section 147 of the CGST Act’2017 vide notification No.48/2017-Central Tax dated 18-10-2017 and refund of tax paid on such supplies can be claimed either by the recipient or supplier of such supplies. For the indigenous procurement of goods covered under Fourth Schedule of the Central Excise Act, 1944, the EOU will continue to get ab-initio exemptions from central excise duty under notification No. 22/2003-CE dated 31-3-2003 by following CT-3 procedure.
  • DTA clearances:- DTA clearances of finished goods covered under GST, EOUs are required to pay CGST/SGST/UTGST/ IGST, as the case may be, besides payment of whole of the duty of customs specified under the First Schedule to the Customs Tariff Act, 1975 (BCD) availed as exemptions on inputs used in manufacture of such finished goods. Further DTA clearances of finished goods covered under Fourth Schedule of the Central Excise Act, 1944, EOUs would be required to pay central excise duty equal to the aggregate of duties of customs in view of proviso to Section 3(1) of the Central Excise Act, the effective rate of such duties being covered by Notification no. 23/2003 – CE, which has also been amended by Notification no. 16/2017 –CE dated 30-6-2017. In other words the excisable goods are liable to effective excise duty as it existed before GST.
  • NFE:- The EOUs are required to achieve positive Net Foreign Exchange(NFE) within block period of Five years.