2. Export Incentives for Manufacturer
Indigenous inputs w/o payment of excise duty
No excise duty charged on final product
Imported inputs w/o payment of customs duty
No export duty on export of final product
Fast finance at concessional interest rates
Exemption from income tax
Exemption from SALES TAX on final product (refund of
CST paid on inputs in certain cases)
3. Input Duty Relief Scheme
Various schemes – to obtain duty free inputs OR get
refund later
Some schemes – unit has to be isolated from domestic
production units
e.g. EOU, STP, EHTP and SEZ
4. Salient features of SEZ scheme
• Duty free import/domestic procurement of goods for development,
operation and maintenance of SEZ units
• 100% Income Tax exemption on export income for SEZ units under
Section 10AA of the Income Tax Act for first 5 years, 50% for next
5 years thereafter and 50% of the ploughed back export profit for
next 5 years.
• Exemption from minimum alternate tax under section 115JB of the
Income Tax Act.
• External commercial borrowing by SEZ units upto US $ 500 million
in a year without any maturity restriction through recognized
banking channels.
• Exemption from Central Sales Tax.
• Exemption from Service Tax.
• Single window clearance for Central and State level approvals.
• Exemption from State sales tax and other levies as extended by the
respective State Governments
5. Salient features of SEZ scheme
• Exemption from customs/excise duties for development of
SEZs for authorized operations approved by the BOA.
• Income Tax exemption on income derived from the business
of development of the SEZ in a block of 10 years in 15 years
under Section 80-IAB of the Income Tax Act.
• Exemption from minimum alternate tax under Section 115 JB
of the Income Tax Act.
• Exemption from dividend distribution tax under Section 115O
of the Income Tax Act.
• Exemption from Central Sales Tax (CST).
• Exemption from Service Tax (Section 7, 26 and Second
Schedule of the SEZ Act).
6. Salient features of EOU scheme
• 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.
• Facility to retain 100% foreign exchange proceeds in EEFC Account.
• Facility to realize and repatriate export proceeds within twelve months
• 100% Foreign Direct Investment permisisible.
• Exchange earners foreign currency (EEFC) Account
7. Salient features of EOU scheme
• 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
• Access to Domestic Market upto 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
8. Supplies made to EOU by Indian supplier are ‘deemed
exports’ and supplier is entitled to benefits of ‘deemed
export’
Supplies to SEZ are ‘exports’ and all export benefits are
available
Restrictions under Companies Act on managerial
remuneration are not applicable
9. Have to achieve +ve NFE (Net Foreign Exchange
Earnings).
A= FOB value of exports
B = CIF Value of all imported inputs and capital goods
and all payments made in foreign exchange
NFE = A – B
10. EOU SEZ
• EOU unit can be set up at any SEZ unit has to be located
of over 300 places all over within the specified zones
India developed
• Fast Track Clearance Scheme Customs clearance for export
(FTCS) for clearances of and import is obtained within
imported consignments the zone itself
• Minimum investment in plant No such limit
and machinery and building =
Rs 1 crore. This should be
before commencement of Difficult to exit
commercial production
• Easy to exit
11. STP / EHTP unit
Concept of STP/EHTP is similar to EOU/SEZ.
Administered by Ministry of Information Technology.
STP/EHTP unit can be set up as an EOU unit anywhere in
India or as a SEZ unit at specified developed locations in
India.
A software development firm qualifies as STP/EHTP unit.
Can import goods on loan from clients for specific
period.
Can export software electronically or through physical
transport.
12. Other schemes –domestic producers are also entitled to
get inputs/capital goods free of taxes, e.g.
Advance License scheme
Duty Entitlement Pass Book scheme (DEPB)
Duty Free Replenishment Certificate scheme (DFRC)
EPCG scheme
Rebate of duty on inputs if final product is exempt from duty
Under duty drawback scheme, custom/excise duty paid on inputs is
returned as rebate
On cotton yarns and fabrics – basic duty of 10 %, and some other duties. On cotton fiber, there is no duty. On synthetic filament – basic duty 10 %, CVD 10 %, spl CVD 4 % ; fabrics – basic duty 10 %, CVD 10 %, .
First EPZ in Kandla in 1965; SEZ policy was announced in Apr 2000, SEZ Act 2005
