M.S. Chhajed & Co Ahmedabad based Chartered Accountants firm established in 1988. At M.S. Chhajed we provide unmatched professional services with breath of global experience.

1. 6, “MAHARSHI” COMPLEX,
SADAR PATEL COLONY,
NR. UNDER BRIDGE,
AHMEDABAD-380014.
INDIA.
(M) +91- 98245 19940
(O) +91- 79 2768 1330/1793
E-Mail: mahesh@mschhajedandco.com
Skype: mahesh.chhajed M. S. Chhajed & Co. 1

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3. The EOU scheme is, at present, governed by the provisions of Export and
Import (EXIM) Policy. 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
• Need for a larger area of land for the project.
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4. 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
• Generate additional employment.
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5. • Units are exempted from payment of Income Tax upto the year 31-03-2011.
• All the imports to units are customs duty free .
• Exemption from Central Excise Duty for the procurement of Capital Goods and Raw
Materials from domestic market.
• Units are entitled to sell the product in local market upto 50% of the products
exported in value terms.
• 100% of foreign equity is permissible.
• Reimbursement of Central Sales Tax paid on domestic purchases.
• No restrictions on External Commercial Borrowings.
• Exemption from paying electricity duty.
• Supplies made to EOU by Indian supplier are ‘deemed exports' and supplier is
entitled to benefits of ‘deemed export'.
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6. • Fast Track Clearance Scheme (FTCS) for clearances of imported consignments for
EOU.
• Sub-contracting to DTA units permissible after obtaining permission on annually.
• Unutilized raw material can be disposed of on payment of applicable duties.
• The unit can exit (de-bond) with permission of Development Commissioner, on
payment of applicable duties.
• Prescribed percentage of foreign exchange earnings can be retained in EEFC
account in foreign exchange.
• EOUs are free to select the location of a project.
• EOUs can export through an export house/trading house/star trading house or
other EOUs.
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7. • Minimum investment before production of Rs.10 mn in building, plant and
machinery (not applicable for STP/EHTP/BTP units etc.).
• The entire production and operation of 100 % EOUs must be in a customs bonded
factory.
• An approved EOU will execute a bond/legal undertaking. Failure to fulfill the
obligations stipulated liable to penalty.
• Separate account for DTA and EOU units.
• Maintain proper account of the imports, consumption and utilization of all
imported materials and exports.
• Rejects upto 5% of F.O.B. value can be sold in DTA.
• No export benefits like cash assistance, license.
• Proposed EOU on lease land having agreement of atleast 5 years.
• Positive NFE is mandatory.
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8. The EOU/promoter has to apply in Appendix 14-I-A , with
• Project Report should contain nature of business, annual capacity, business
projections for 5 years, details of import raw materials and capital goods, floor
plan, .
• IEC number
• PAN and TAN
• Resolution
• Directors/ Promoters brief profile and resume
• Returns of previous 3 years and residential proof of Promoters/ Directors
• DD for Rs.5,000
• A copy of the Certificate of Incorporation and Memorandum and Articles of
Association in case of companies/ attested copy of registered Partnership
deed.
• Copy of lease deed of the premises valid for atleast 5 years.
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9. After submitting the application form and if every thing is in order, Letter of
Permission (LOP) is issued by the Zone Administration within 2 weeks after
interview of the promoter by the Approval Committee. LOP shall have an initial
validity of 3 years by which time the unit should have commenced production.
Its validity may be further extended to 3 years by competent authority LOP will
contain following details:
• Items of manufacture/service activity
• Annual capacity
• Projected annual export for the first five years in dollar terms
• Net Foreign Exchange Earnings
• Limitations, if any regarding the sale of finished goods, by products and rejects
in the DTA
• Such other matter as may be necessary
• Conditions as may be required
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10. • Approval from custom for duty free import and excise free procurement of
indigenous goods and raw material and capital goods required for manufacturing
finished goods in Bonded warehouse u/s 58 & 65 of Customs Act, 1962.
• Application form - 4 copies Approval from STPI to set up 100% EOU
• Copy of TAX ID Copy of Importer Exporter Code Copy of Application filed with STPI for
set up of EOU
• Banker's Certificate about the satisfactory account maintenance Lease Deed of the
premises to be Customs bonded
• Floor plan - 4 copies duly attested by the CEO / authorised signatory
• B-17 bond to be executed by the Company to set up a Private bonded warehouse for
an amount of 12.5% of the Capital goods to be imported
• Bank Guarantee to be provided by the Company for a value of 5% of the value as
indicated in B-17 bond Copy of the Memorandum & Articles of association of the
Company
• The warehousing license issued to the EOUs and STP/EHTP units would be valid for a
period of five years.
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11. Existing DTA units or EPCG units are permitted for conversion into
EOU Scheme. If the unit is having outstanding export commitment
under the Advance Licensing Scheme, it will discharge the same as
well, as per its conditions before conversion into EOU Scheme.
However, duties of Customs and Central Excise already suffered shall
not be refunded on conversion into EOU.
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13. Thanking You…
For further information contact us at:
mahesh@mschhajedandco.com
www.mschhajedandco.com
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