2. Introduction
SEZ was announced in the year April, 2000 and came into
practical existence from 10th of February, 2006.
EOU scheme was introduced in the year 1980 vide ministry
of commerce.
Set up for manufacturing of goods and rendering of
services.
Both are governed by the provisions of FTP (Foreign Trade
Policy).
SEZ and EOU were the schemes introduced to encourage
exports in the country.
Vast encouragement in Foreign direct investment.
Similar but there are certain differences between them.
3. 3
Special economic zones (SEZ)
Designated areas in the country that possess special
economic regulations.
Zones are treated as if it is a foreign country within India.
Set up mainly for export purpose. Total exports for the year
2012-13 is Rs. 4.76 lakh crore.
Promotion of investment from domestic and foreign
sources.
Creation of employment opportunities; and
Development of infrastructure facilities.
SEZ can import raw materials and capital goods without
payment of excise and custom duty.
Conducting business in the SEZ usually means to receive tax
incentives.
4. 4
Transactions with SEZ
Raw materials , capital goods can be imported by the zones duty
free.
Exemption from customs /excise duty on all construction and
office materials for setting up units in the zone.
As per Notification No. 20/2006-Cus dated 1-3-2006 wherein all
goods produced or manufactured in a SEZ unit and cleared in
DTA for home consumption is exempted from this duty provided
such goods are not exempted from sales tax or VAT.
No routine inspection from authority on export & import cargo.
Allowed to export directly from SEZ on behalf of domestic
exporters.
DTA supplier would be entitled to Duty drawback/DEPB benefits.
SEZ units permitted unlimited sale in DTA after achieving Positive
NFE.
- Customs and Excise
5. 5
Transactions with SEZ
Exemption from levy of taxes on purchase or sale of goods
other than newspapers under central sales tax act 1956.
Last sale preceding the sale to SEZ area in exempt under
Sec 5(3) of CST act, 1956.
In view of the above a dealer who had an order from a unit
or developer in SEZ area can make purchases free of tax
against ‘H’ form.
Vide Notification (No. KSA CR 165/09-10 dated 22-2-2010)
should deduct TDS under Sec 18-A of KVAT act.
SEZ units allowed to undertake job work on behalf of
domestic exporters.
- CST and local taxes
6. 6
Transactions with SEZ
No other operation other than SEZ, Payment of ST is
exempted against Form A1.
Operation partially in SEZ then total exemption by way of
refund is entitled to them according to the formula given.
- Service Tax
Export turnover of goods + Services of SEZ
(Unit/Developer)
Total Turnover for the period
Service Tax paid on services
other than wholly
consumed Services (both
for SEZ and DTA Unit)
7. 7
Export Oriented Units(EOU)
• The units undertaking to export entire production of goods
are allowed to be set up as a EOU.
• Initial bonding for EOU’s is 5 years and it can be extended
thereon.
• Minimum investment of Rs. 1 Crore in building, plant and
machinery.
• Only Manufacturing units allowed under EOU scheme.
• Import or procure from DTA (Domestic Tariff Areas) without
payment of Duty.
• Positive net foreign exchange is a must for EOU’s.
• Eligible for fast track clearance procedure.
8. 8
Transactions with EOU
• Manufacture for export purpose is exempt from payment of
customs and central excise duties.
• EOU’s are placed in special category with regard to import
cargo clearance.
• Sale from EOU to DTA at concessional duty upon certain
conditions. (Notification No. 23/2003-CE, dated 31-3-2003)
• On fulfillment of positive NFE, allowed to sell rejects,
scraps, waste, byproducts in DTA.
• DTA supplier has the benefit of Deemed export drawback.
• Exemption from Industrial license requirement.
9. 9
Transactions with EOU
• Supplies from DTA to EOUs are regarded as ‘Deemed
Exports’.
• Manufactured in India and supplied to EOU eligible for
reimbursement of CST.
• EOU’s can obtain goods from DTA without duty against the
strength of CT 3.
• Duty free goods to be utilized in two years. Further
extension granted on liberal basis.
• Conversion of DTA into EOU permitted.
• 100% FDI is allowed.
• State act does not say anything related to transaction with
EOUs so usually local tax in levied on sale.
10. 10
Conclusion
• EOU and SEZ are steps in the right direction aimed at
providing a momentum to growth in exports and
employments.
• It is the responsibility of commerce ministry to fine-tune
the tax incentives on regular basis.
• Proper understanding is required.
