EOU, EHTP, STP & SCHEME

1. EOU, EHTP, STP & SCHEME units are setup for their export of entire production of goods and services (except permissible sale in DTA)

2. They can import input & capital goods without payment of customs duty.

3. STP, EHTP, BTP scheme are similar to EOU schemes and provisions are more or less similar.

Units Description Administered Object
EOQ Export Oriented Unit Ministry of Commerce & Industry Exportation of goods
EHTP Electronics Hardware Technology Park Ministry of Information Technology Export of Electronic Hardware Software
STP Software Technology Park Ministry of Information Technology Development of software export
BTP Bio-Technology Park Department of Bio-technology

1. ELIGIBILITY

  • Such units may be set up for manufacture of goods including repair, re-making, reconditioning, re-engineering, rendering of services, development of software, agriculture.
  • Trading units are not covered under these schemes.
  • Only projects having minimum investment of Rs. 1 crore in plant & machinery shall be considered for establishment of EOUs.
  • However, this shall no apply to units in EHTP/STP/BTP etc. Board of approvals may also allow establishment of EOUs with a lower investment criteria.

2. PROCEDURE FOR SETTING UP NEW EOU, EHTP, STP & BTP

  • Approval for setting up of units under EOU scheme shall be granted by the units Approval committee within 15days as per prescribed criteria. In other cases approval may be granted by Board of approval setup for this purpose.
  • On approval, concerned authority will issue Letter of Permission (LoP)/Letter of Intent (LOI) which will have initial validity of 2 years (extendable if necessary, by BOA), by which time unit should have commenced production.

3. NET FOREIGN EXCHANGE EARNING

  • EOU/ EHTP/STP/BTP units must be positive net foreign exchange earner. However, a higher value addition is specified in some sectors.

4. How to compute net foreign exchange earning?

Net Foreign Exchange Earnings shall be calculated cumulatively in blocks of 5 year, starting from commencement of production.

In case unit is not able to achieve NFE due to:

  • Prohibition/restriction imposed on any product; 5 years block period may be extended suitably by Board of Approval (BOA).
  • Adverse market condition or any grounds of genuine hardship having adverse impact to functioning of the unit, 5 years block is extendable upto 1 year.

Who monitors NFE?

Performance of EOU/EHTP/STP/BTP shall be monitored by Board of approval committee.

Which supplies to DTA can be counted for positive NFE?

Following supplies affected from EOU/ EHTP/STP/BTP units to DTA (Domestic Tariff Area) will be counted for fulfillment of NFE>

  • Supplies to DTA holders of Advance Authorization/Advance Authorization for annual requirement/ DFIA under duty exemption/ EPCG Scheme subject to certain exceptions.
  • Supplies affected in DTA foreign exchange remittance received from overseas.
  • Supplies to other EOU/ EHTP/STP/BTP/SEZ units provided that such goods are permissible for procurement in terms of relevant provisions in FTP.
  • Supplies made to bonded warehouse set up under FTP and / or under section 65 of the Customs Act and free trade and warehousing zone, where payment is received in foreign exchange.
  • Supplies of goods and services to such organization which are entitled for duty free import of such items in terms of general exemption notification issued by Ministry of Finance.
  • Supplies of Information Technology Agreement (ITA-1) items and notified zero duty on telecom and electronic items.
  • Supplies of item like tag, labels, printed bags, stickers, belts, button or hangers to DTA unit for export.

ENTITLEMENT TO UNITS UNDER EOU/ EHTP/STP/BTP SCHEMES

  • Entitlement for supplies from DTA
  • Supplies from DTA to EOU/ EHTP/STP/BTP will be regarded as deemed export and DTA supplier shall be eligible for relevant entitlement for deemed exports, beside discharge of export obligation, if any on the supplier.
  • The refund of GST paid on such supply would be available to such supplier subject to specified conditions and documentations under GST law.
  • Imported goods are exempt from basic custom duty. Further IGST and GST compensation cess is exempt upto 31.03.2020.
  • Input Tax Credit of GST on input and capital goods.
  • Other Entitlement
  • Exemption from Industrial licensing for manufactured of items reserved for SSI.
  • Export proceeds will be realized within 9 months.
  • Units will be allowed to retain 100% of its export earnings in the Exchange Earner Foreign currency (EEFC) account.
  • Unit will not be required to furnish bank guarantee at the time of import or going for job work in DTA, subject to the fulfillment of required condition.
  • 100% FDI Investment is permitted through automatic route similar to SEZ units.
  • Units shall pay duty on the goods produced or manufactured and cleared into DTA on monthly basis in the manner prescribed in the Central Excise Rules.

EXPORT AND IMPORT OF GOODS

Export: Following Exports are permitted:

  • All kinds of goods and services except items prohibited in ITC(HS).
  • Special chemical, organisms, Material, Equipment and Technologies (SCOMET) subject to the fulfillment of the conditions indicated in ITC (HS).

Import: Following Exports are permitted:

1. Export promotion material upto a maximum value limit of 1.5% of FOB value of previous years export.

2. All types of good including capital goods, required for its activities from (i) DTA (ii) bonded warehouses in DTA/International exhibition held in India, subject to actual user condition provided such goods are not prohibited items of import in the ITC (HS) subject to the following conditions

  • The import and/ or procurement from bonded warehouse in DTA/international exhibition held in India shall be without payment of basic custom duty. Such imports and/or procurement shall be made without payment of integrated tax and GST compensation cess upto 31.03.2020.
  • The procurement of goods covered under GST from DTA would be on payment of applicable GST and compensation cess. The refund of GST paid on such supply from DTA to EOU would be available to the supplier subject to the such conditions and documentations as specified under GST Laws.

Goods included capital goods (on a self-certification basis) required for approved activities free of cost or on loan/lease from clients subject to actual user condition.

3. Certain specified goods from DTA, without payment of duty, for creating a central facility with or without payment of duty/taxes provided in point 2(a) and 2(b).

4. Second hand capital goods, without any age limit, duty free, with/without payment of Duty/taxes as provided in point 2(a) of above.

5. Procurement and export of spares/components, upto 5% of FOB value of export, may be allowed to the same consignee/buyer of export article, subject to the condition that it shall not count for Net Foreign Exchange and direct tax benefit.

6. Inter Unit Transfer: Transfer of Manufactured goods and capital goods both can be transferred from one EOU/ EHTP/STP/BTP/SEZ units to another is allowed on payment of applicable GST & Compensation Cess and prior intimation of Development Commissioner

7. Sale of unutilized material: The unutilized material can be transferred to the another unit or disposed of in DTA with intimation to custom authorities on conditions prescribed (payment of applicable duties.

DEEMED EXPORT FOR THE PURPOSE OF FTP

It refers to those transaction in which goods supplied do not leave country, and payment for such supplies is received either in Indian rupees or free Foreign exchange. Supply of goods as specified in FTP shall be regarded as `Deemed Exports` provided goods are manufactured in India.

Objectives

The objective of deemed exports is to ensure that the domestic supplier are not in disadvantageous position vis-à-vis foreign suppliers in terms of the fiscal concessions. The underlying theory is that foreign exchange saved must be treated at par with foreign exchange earned by placing Indian manufacturer at par with foreign suppliers.

Deemed Export broadly covers three areas:

1. Supplies to domestic entities who can import their requirements duty free or at reduced rates of duty.

2. Supplies to projects/purpose that involves international competitive bidding.

3. Supplies to infrastructure projects of national importance. 

(I) CATEGORIES OF SUPPLIES CONSIDERED AS DEEMED EXPORT
Supply of goods against Advance Authorizations/Advance Authorization for annual requirement/DFIA Supply of goods to projects or turnkey contracts financed by multilateral or bilateral agencies/Fund notified by Department of Economic Affairs (DEA), under International Competitive Bidding.
Supply of goods to units located in EOU/STP/BTP/EHTP Supply of goods to any project where import is permits at zero customs duty as prescribed.
Supply of capital goods against EPCG authorization Supply of goods to mega power projects against International competitive bidding (even if customs duty on imports made by such projects is not zero)

Supply of goods to nuclear projects through competitive bidding (need not be international competitive bidding)

Supply of Marine freight container by 100% EOU provided said container are exported within 6 months. Supply to goods to UN or international organization for their official use or supplied to projects financed by them.
  • BENEFITS OF DEEMED EXPORT

Deemed Export shall be eligible for any/all of the following benefits in respect of manufacture and supply of goods, qualifying as deemed export, subject to specified terms and conditions.

1. Advance Authorisation/ Advance Authorisation for annual requirement/DFIA

2. Deemed Export Drawback

3. The refund of drawback in the form of BCD of the input used in manufacture and supply under the said category shall be given on brand rate basis upon submission of documents evidencing actual payments of BCDs.

  • COMMON CONDITIONS FOR DEEMED EXPORT BENEFITS

1. Supplies shall be made directly to entities listed in the point (I) above. Third party support shall not be eligible for benefits/

2. In all cases, supplies shall be made directly to the designated projects/Agencies/Advance authorisation/ Authorisation holder, Sub-contractors may, however, make supplies to main contractor instead of supplying directly to the designated Projects/agencies. Payment in such cases shall be made to sub-contractor by main contractor and not by project authority.

3. Supply of domestically manufactured goods by an Indian subcontract to any Indian and foreign main contractor, directly at the designated projects/agencies site, shall also be eligible for deemed export benefit provided name of sub-contractor is indicated either originally or subsequently (but before the date of supply of such goods) in the main contract. In such case payment shall be made directly to the sub-contractor by project authority.

MISCELLENEOUS PROVISIONS

RELATING TO THE IMPORT OF GOODS

1. Actual User Condition: Goods which are importable without any restriction, may be imported by any person. However, if such import requires any authorisation, actual user alone may import such goods unless actual user condition is specifically dispensed by the DGFT.

2. Second Hand Goods: Import of Second-hand capital goods shall be freely allowed. Apart from capital good, any other capital goods shall be restricted and may be imported only against authorisation.

3. Removal of Scrap/waste from SEZ: Any waste or scrap or remnant including any form of metallic waste & scrap generated during manufacturing or processing activities of an SEZ unit/developers/co-developers shall be allowed to be disposed in DTA freely, subject to the payment of applicable custom duty.

4. Import of gifts and samples: Import of gifts shall be permitted where such goods are freely importable under (ITC) (HS). In other cases custom clearance permit shall be required from DGFT. Further import of sample shall be governed by the prescribed procedure.

5. Re-import goods repaired abroad: Capital goods, equipment, components, parts, accessories, whether imported or indigenous, except those restricted under ITC (HS) may be sent abroad for repair, testing, quality improvement, or upgradation or standardization of technology and reimported without an authorisation.

6. Import of goods used in projects abroad: After completion of projects abroad, projects contractors may import, without an authorisation, goods including capital goods used in the project provided they have been used for at least one year.

Also Read-

A Brief Understanding on Foreign Trade Policy (2015-20)- Part II

Brief understanding on Foreign Trade Policy (2015-20)- Part I

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