Government is giving focus on EOU Scheme and therefore EOU Scheme has been liberalized. There is no requirement of warehousing and also procedural matter has been simplified. Domestic procurement for EOU is kept at par with domestic unit and EOU units are allowed to import duty free by following the procedure under Import of Concessional Rate of Duty (IGCRD).
Earlier DTA Sale used to attract more duty which includes 50% of Basic Custom Duty and additional duties in terms of Section 3 and Section 5 of Custom Tariff Act 1975. Whereas after implementation of GST, if EOU is making DTA Sale, EOU unit is required to pay custom duty saved on imports contents in export products.
Whereas, EOU Unit is required to clear the surplus capital goods or raw material or any other inputs in terms of para 6.15 of Foreign Trade Policy then such unit will have to pay back custom duty saved. Similar provisions have been incorporated in the Notification No. 52/2003 Cus dtd. 31.03.2003 as amended vide Notification No. 79/2018 dtd. 05.12.2018, when the goods are cleared / de-bonded form EOU Scheme and these amendments will have far reaching effect.
Let us closely look into the changes made and impact thereof.
| Sr | Original Wording | Amended Wording | Impact Analysis |
| Para 4 – Second proviso(a) | a. Such clearance of capital goods may be allowed on payment of duty on depreciated value thereof and at the rate in force on the date of clearance. | Such clearance of capital goods may be allowed on payment of duty but for the exemption on the depreciated value thereof. | It means custom duty saved on depreciated value will have to be paid. Custom duty includes Basic Custom Duty + CVD (Section 3(3) of Customs Tarff Act 1975) + SAD (Section 3(5) of Customs Tariff Act 1975) and Section 3(7) of Customs Tariff Act 1975. If such goods are imported prior to 30th June 2017 then duty will have to be paid equivalent to Basic Custom Duty + CVD + SAD and ITC will not be available for the same. However, if goods are imported after 30th June 2017, then Basic Custom Duty + IGST will be payable and ITC of IGST paid will be available based on Bill of Entry which is the document for availment of ITC. Till the time, GSTN system is not integrated with Ice Gate and NSDL for SEZ and also with Private / Public Bonded Warehouse, there will be no issues of availing ITC based on the bill of entry filed at the time of assessment. |
| Para 4 – Second proviso(b) | b. Such clearance of goods (including empty cones, bobbins, containers, suitable for repeated used) other than those specified in clause (a) may be allowed on payment of duty on the value at the time of import and at the rates in force on the date of payment of such duty | Such clearance of goods (including empty cones, bobbins, containers, suitable for repeated used) other than those specified in clause (a) may be allowed on payment of duty but for the exemption on the value at the time of import |
Undoubtedly, EOU, STPI & EHTP Scheme has been made trade friendly focusing for exports and achieving positive NFE. Till the time, NFE is positive, EOU, STPI & EHTP Unit should continue to maintain the status and not required to exit. However, once exit is decided then there will be some additional cost if goods are imported pre-GST regime.
Other changes have been made in the amending Notification 52/2003 Cus dtd. 31.03.2003 Vide Notification No. 79/2018 dtd. 05.12.2018 is mainly aligning with the changes in terms of notification numbers and aligned to provisions of Foreign Trade Policy, substance remains the same, except above two amendments.
Object of this amendment seems to encourage EOU, STPI & EHTP Scheme focusing on export and positive NFE rather than converting into Domestic Unit.
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