Eligibility

9.1

Units undertaking to export their entire production of goods and services may be set up under the Export Oriented Unit (EOU) Scheme, Export Processing Zone (EPZ) Scheme, Electronic Hardware Technology Park (EHTP) Scheme or Software Technology Park (STP) Scheme. Such units may be engaged in manufacture, services, trading, repair, remaking, reconditioning, re-engineering including making of gold/ silver/ platinum jewellery and articles thereof, agriculture, including agro-processing, aquaculture, animal husbandry, bio-technology, floriculture, horticulture, pisciculture, viticulture, poultry, sericulture and granites and may export all products except prohibited items of exports in ITC (HS).

Export and importability of goods

9.2

An EOU/EPZ/EHTP/STP unit may export goods and services including agro-products, partly processed jewellery, sub-assemblies and components. It may also export by-products, rejects, waste scrap arising out of the production process.

An EOU/EPZ/EHTP/STP unit may import without payment of duty all types of goods, including capital goods, as defined in the Policy, required by it for its activities as mentioned in paragraph 9.1 above or in connection therewith, provided they are not prohibited items of imports in the ITC (HS). The units shall also be permitted to import goods required for the approved activity, including capital goods, free of cost or on loan from clients.

EOU/EPZ/EHTP/STP units may procure goods required by it for its activities or in connection therewith, without payment of duty, from bonded warehouses in the DTA set up under the Policy.

STP/EHTP/EPZ may import without payment of duty all types of goods for creating a central facility for use by software development units in STP/EHTP/EPZ. The central facility for software development can also be accessed by units in the DTA for export of software.

An EOU engaged in agriculture, animal husbandry, floriculture, horticulture, pisciculture, viticulture, poultry or sericulture may import without payment of duty only such goods as are permitted to be imported duty free under a Customs Notification issued in this behalf.

EOU/EPZ gem and jewellery units may also source gold/silver/platinum through the nominated agencies.

Second hand Capital Goods

9.3

Second hand capital goods may also be imported without payment of duty.

Leasing of Capital

Goods

9.4

An EOU/EPZ/EHTP/STP unit may, on the basis of a firm contract between the parties, source the capital goods from a domestic/foreign leasing company. In such a case, the EOU/EPZ/EHTP/STP unit and the domestic/foreign leasing company shall jointly file the documents to enable import/ procurement of the capital goods without payment of duty.

Net Foreign Exchange earning as a Percentage of exports (NFEP) and Minimum Export

Performance (EP)

9.5

The minimum Net Foreign Exchange earning as a Percentage of exports (NFEP) and the minimum Export Performance (EP) shall be as specified in Appendix I of the Policy. Items of manufacture for export specified in the Letter of Permission (LOP)/Letter of Intent (LOI) alone shall be taken into account for calculation of NFEP and EP.

Legal Undertaking

9.6

The unit shall execute a legal undertaking with the Development Commissioner concerned and in the event of failure to fulfil the performance, as stipulated in Appendix I, it would be liable to penalty in terms of the legal undertaking or under any other law for the time being in force.

Approvals

9.7

Applications for setting up of EOU/EPZ/EHTP/STP units, satisfying the conditions mentioned in paragraph 9.37 of the Handbook (Vol-I) may be approved by the concerned Development  Commissioner within 15 days.

Other cases

9.8

In other cases, approval may be granted by the Board(s) of Approval (BOA) set up for this purpose within 45 days.

DTA Sale of finished products including rejects.

9.9

The entire production of EOU/EPZ/EHTP/STP units shall be exported subject to the following:

(a)

Unless specifically prohibited in the LOP/LOI, rejects may be sold in the Domestic Tariff Area (DTA) on payment of duties as applicable to sale under paragraph 9.9(b) of the Policy, on prior intimation to the Customs authorities. Such sales shall be counted against DTA sale entitlement under paragraph 9.9(b) of the Policy. Sale of rejects upto 5% of FOB value of exports shall not be subject to achievement of NFEP.

(b)

Units, other than gems and jewellery units, may sell goods/ services upto 50 % of FOB value of exports, subject to fulfilment of minimum NFEP as prescribed in Appendix-I of the Policy and on payment of applicable duties. Sales made to a private bonded warehouse set up under paragraph 11.14 or to trading units set up under paragraph 9.21 of the Policy shall also be taken into account for the purpose of arriving at FOB value of exports by EOU/EPZ units provided payment for such sales are made from EEFC account. No DTA sale shall be permissible in respect of motor cars, alcoholic liquors, tea (except instant tea) and books and such other items as may be notified from time to time.

Gems and jewellery units may sell upto 10% of FOB value of exports of the preceding year in DTA subject to fulfillment of NFEP as prescribed in Appendix 1 of the Policy. In respect of sales of plain jewellery, the recipient shall pay concessional rate of duty to the Customs in Indian rupees as applicable to sale from nominated agencies. In respect of studded jewellery, duty shall be payable in Indian rupees as notified by Customs.

(c)

Deleted

(d)

Deleted

(e)

EOU/EPZ/EHTP/STP units may be permitted to sell finished products which are freely importable under the Policy in the DTA over and above the levels permissible under sub paragraph (b) above, against payment of full duties, provided they have achieved the NFEP and EP as per Appendix-I of the Policy.

(f)

Deleted

(g)

For services, including software units, sale in the DTA in any mode, including on-line data communication, shall be permissible up to 50% of FOB value of exports and/or 50% of foreign exchange earned, where payment for such services is received in free foreign exchange.

(h)

By-products included in the LOP/LOI may also be sold in the DTA subject to achievement of NFEP and on payment of applicable duties within the overall entitlement of paragraph 9.9(b) of the Policy. Sale of by-products beyond the entitlements of paragraph 9.9(b) shall also be permissible on payment of full duties.

Note

In the case of units manufacturing electronics hardware and software, the NFEP and DTA sale entitlement shall be reckoned separately for hardware and software.

Other Supplies in DTA

9.10

The following supplies in DTA shall be counted towards fulfillment of NFEP/EP :

Supplies effected in DTA in terms of paragraph 10.2 of the Policy

Supplies effected in DTA against payment from the Exchange Earners Foreign Currency (EEFC) Account of the buyer in the DTA.

Supplies to other EOU/EPZ/EHTP/STP/SEZ units provided that such goods are permissible for procurement in terms of paragraph 9.2 of the Policy.

Supplies made to private bonded warehouses set up under paragraph 11.14 of the Policy and/or under Section 65 of the Customs Act.

Supply of goods against special entitlement of duty free import of goods. 

Supply of goods to Defence and internal security forces, foreign missions/ diplomats provided they are entitled for duty free imports of such items in terms of general exemption notification issued by Ministry of Finance.

Export through status holder

9.11

An EOU/EPZ/EHTP/STP unit may export goods manufactured by it through a merchant exporter/status holder recognized under this Policy or any other EOU/EPZ/EHTP/STP/SEZ unit.

Samples

9.12

EOU/EPZ/EHTP/STP units may, on the basis of records maintained by them, and on prior intimation to Custom authority:

Supply or sell samples in the DTA for display/market/ promotion upto 1% of value of previous year’s export or maximum of Rs.10 lakhs in case of new unit going into production, on payment of applicable duties;

Remove samples without payment of duty, on furnishing a suitable undertaking to Customs authorities for bringing the samples back within a stipulated period;

Export samples, including through courier agencies.

Samples made in wax models, silver models and rubber moulds may also be exported by Gem & Jewellery units.

Entitlement for supplies from the DTA

9.13

(a)

Supplies from the DTA to EOU/EPZ/EHTP/STP units will be regarded as “deemed exports” and, besides being eligible for the relevant entitlements under paragraph 10.3 of this Policy, will be eligible for the following:

(i)

Reimbursement of Central Sales Tax.

(ii)

Exemption from payment of Central Excise Duty on all goods as per entitlement under Paragraph 9.2 of the Policy

(iii)

 Discharge of EP, if any, on the supplier.

(b)

EOU/EPZ/EHTP/STP units shall, on production of a suitable disclaimer from the DTA suppliers, be eligible for obtaining the entitlements specified in paragraph 10.3 (b) and (c) of the Policy. For the purpose of claiming entitlements at paragraph 10.3 (b), they shall get Brand Rates fixed by the DGFT wherever All Industry Rates of Drawback are not available. Such supplies would, however, be eligible for entitlements specified in paragraph (a) above

(c)

Central Excise Duty paid on bulk tea procured from licenced auction centres by EOU/EPZ units would be re-imbursed by Development Commissioner of concerned Zone so long as levy on bulk tea in this regard is in force

(d)

Duty paid on fuels procured from domestic oil companies, would be reimbursed to EOU/EPZ/EHTP/ STP units by the Development Commissioner of the concerned Zone as per the rate of Drawback notified by the Directorate General of Foreign Trade from time to time.

(e)

Supplier of cut and polished diamonds, precious and semi-precious stones, synthetic stones and processed pearls from DTA to EOU/EPZ units shall be eligible for grant of Replenishment Licenses at the rates and for the items mentioned in Appendix-30A.of the Handbook (Vol.1).

9.14

The entitlements stated under paragraph 9.13 (a) and (b) shall be available provided the goods supplied are manufactured in the country.

Other Entitlements

9.15

Other entitlements of EOU/EPZ/EHTP/STP units are indicated in the Handbook (Vol-I)

Inter Unit Transfer

9.16

(a)

Transfer of manufactured goods from one EOU/EPZ/ EHTP/STP unit to another EOU/EPZ/ EHTP/ STP/SEZ unit will be allowed.

(b)

Goods imported/procured by an EOU/EPZ/EHTP/STP unit may be transferred or given on loan or lease to another EOU/EPZ/EHTP/STP/SEZ unit which shall be duly accounted for, but not counted towards discharge of export performance

Any capital goods transferred or given on loan shall require prior permission of concerned Development Commissioner

Sub-Contracting

9.17

(a)

The EOU/EPZ/EHTP/STP units other than gem and jewellery units, may on the basis of annual permission from the Customs authorities, sub-contract part of their production process in DTA, which may also involve change of form or nature of the goods, through job work by units in the DTA. These units may also sub-contract up to 50% of production for job work in DTA with the permission of Customs authorities. Sub-contracting of both production and production process may also be undertaken through other EOU/EPZ/EHTP/STP/SEZ units on the basis of records maintained in the unit. Subcontracting of part of production process may also be permitted abroad with the approval of the Board of Approval.

(b)

EOU/EPZ units may undertake job-work for export, on behalf of DTA exporter, with the permission of Customs authorities, provided the goods are exported directly from the EOU/EPZ units and export documents are in the name of the DTA exporter. For such exports, the DTA units will be entitled to refund of duty paid on the inputs by way of Brand Rate of duty drawback.

(c)

The scrap/waste/remnants generated at the job worker's premises may be either cleared from the job worker's premises on payment of duty or returned to the supplying unit.

(d)

Gems and jewellery EOU/EPZ units are allowed to receive plain gold/silver/platinum jewellery, including findings, components and semi-finished jewellery from DTA against exchange of gold/silver/platinum of the same purity and quantity in weight as that of the said jewellery. The DTA units supplying such jewellery, against exchange of gold/ silver/ platinum shall not be entitled for deemed export benefits. The EOU/EPZ units shall not be eligible for wastage or manufacturing loss against such jewellery

Sale of Un-utilised Material

9.18

In case an EOU/EPZ/EHTP/STP unit is unable, for valid reasons, to utilize the goods, imported or procured from DTA, it may dispose them in the DTA, on payment of applicable duties and submission of import license by DTA unit, wherever applicable or export. Supply from one EOU/EPZ/EHTP/STP unit to another such unit would be treated as import under this paragraph.

9.19

Capital goods and spares that have become obsolete/surplus, may either be exported or disposed of in the DTA on payment of applicable duties. The benefit of depreciation, as applicable, will be available in case of disposal in DTA. No duty shall be payable if the goods are destroyed with the permission of Customs authorities.

Disposal of Scrap/ Waste/ Remnants

9.20

Scrap/waste/remnants arising out of production process or in connection therewith may be exported or may be sold in the DTA on payment of duties as applicable under paragraph 9.9(b) of the Policy within the overall ceiling of 50% of FOB value of exports but shall not be subject to achievement of minimum NFEP. Sales beyond this limit shall be on payment of full duties.

There shall be no duties/taxes on such scrap/waste/ remnants in case the same are destroyed with the permission of Customs authorities.

Trading

Units

9.21

Trading units may be set up subject to achievement of NFEP and EP as prescribed in Appendix-I. Such units shall be permitted to sell waste/ scrap in the DTA in accordance with the import Policy in force with the prior permission of the Development Commissioner, on payment of full duties.

The provisions of paragraphs 9.9, 9.10, 9.11, 9.12, 9.16 and 9.17 of this Chapter shall not apply to trading units.

The trading units may also undertake packing and labeling and shall be eligible for duty free procurement of packing, labelling materials and the capital goods required in connection therewith.

Trading units may also procure goods without payment of duty from other EOU/EPZ/EHTP/STP/SEZ units for exports.

Reconditioning Repair and

Re-engineering

9.22

EOU/EPZ/EHTP/STP units may be set up to carry out reconditioning, repair, remaking, testing, calibration, quality improvement, up-gradation of technology and re-engineering activities for export in freely convertible foreign currency. Such units may import goods of any origin for export in freely convertible foreign exchange for the above activities. The provisions of paragraphs 9.9, 9.10, 9.11, 9.12, 9.13 , 9.16 and 9.17 of this chapter shall not, however, apply to such activities.

Replacement/Repair of Goods

9.23

The provisions of paragraph 11.9 and 11.11 of the Policy relating to export of replacement/repaired goods would also apply equally to EOU/EPZ/EHTP/STP units, save that, cases not covered by the provisions of paragraph 11.9 and 11.11 will be considered on merits by the Development Commissioner.

The goods sold in the DTA and found to be defective may be brought back for repair/replacement under intimation to the Development Commissioner

Replacement/

Repair of imported/ indigenous goods

9.24

Goods or parts thereof on being imported/ indigenously procured and found defective or otherwise unfit for use or which have been damaged or become defective after import/ procurement may be returned and replacement obtained or destroyed. In the event of replacement, the goods may be brought back from the foreign suppliers or their authorized agents in India or indigenous suppliers.

Period of Bonding

9.25

The initial bonding period for units under the EOU/EHTP/STP Schemes shall be 5 years. This period may be extended further by the Development Commissioner concerned for period of 5 years at a time.

Debonding

9.26

Subject to the approval of the Development Commissioner, EOU/EPZ/EHTP/STP units may be debonded. Such debonding shall be subject to payment of duties of Customs and Excise and the industrial policy in force at the time of debonding.

If the unit has not achieved the obligations under the scheme, the debonding shall also be subject to penalty as may be imposed by the competent authority.

In the event of a gem and jewellery unit ceasing its operation, gold and other precious metals, alloys, gem and other materials available for manufacture of jewellery, shall be handed over to an agency nominated by the Ministry of Commerce and Industry (Department of Commerce) at the price to be determined by that agency

9.27

An EOU/EPZ/EHTP/STP unit may also be permitted by the Development Commissioner, as a one time option, to debond on payment of duty on capital goods under the prevailing EPCG Schemes, subject to the unit satisfying the eligibility criteria under that Scheme and standard conditions, as per Appendix 16-C of the Handbook  (Vol-I).

Conversion

9.28

Existing DTA units, may also apply for conversion into an EOU/EHTP/STP unit, but no concession in duties and taxes would be available under the scheme for plant, machinery and equipment already installed.

The existing EHTP/STP units may also apply for conversion/merger to EOU unit and vice-versa. In such cases the units will continue to remain in bond and avail the permissible exemption in duties and taxes as applicable under the relevant scheme.

Monitoring of NFEP/EP

9.29

Net Foreign exchange Earning as a Percentage of exports (NFEP) shall be calculated cumulatively for a period of five years from the commencement of commercial production according to the formula given in the Handbook (Vol.1)

The performance of EOU/EPZ units will be monitored as per the Guidelines given in Appendix 16(E) of Handbook (Vol.1).

Export Through Exhibitions/

Export Promotion Tours/Export of Branded jewellery

9.30

EOU/EPZ gem and jewellery units shall be entitled for the following:

Export gold/silver/platinum jewellery and articles thereof for holding/participating in exhibitions abroad with the permission of Development Commissioner.

Personal carriage of gold/silver/platinum jewellery, precious, semi-precious stones, beads and article.

Export of jewellery, including branded jewellery is also permitted for display/sale in the permitted shops set up abroad.

Display/sell in the permitted shops set up abroad or in the show rooms of their distributors/agents.

Set up show rooms/retail outlets at the International Airports for sale of plain and studded jewellery to foreign tourists.

Re-export of gem and jewellery

9.31

Gem and jewellery EOU/EPZ units may re-export of imported goods and export of domestically procured goods, including goods generated out of partial processing / manufacture. Besides, supply of unsuitable/ broken cut and polished diamonds, rough diamonds precious and semi-precious stones, upto 5% of the value of imported or indigenously procured goods to the DTA against the valid REP/GEM REP/Diamond Imprest Licences as applicable on payment of appropriate duty is also permitted.

Jewellery samples imported may be re-exported after proper identification.

Personal Carriage of Export/ Import Parcels

9.32

Personal carriage of gems and jewellery export parcels by foreign bound passengers and personal carriage of gems and jewellery import parcels by an Indian/foreign national may be permitted as per the conditions given in Handbook (Vol.1).

Setting up of EPZ in Private/Joint/

State Sector

9.33

An EPZ may be set up in the private/ joint sector or by State Government as notified by the Ministry of Commerce and Industry

NOTE: In the case of units under EHTP/STP Schemes, necessary approval / permission under relevant paragraphs of this Chapter shall be granted by the officer designated by the Ministry of Information Technology for the purpose instead of the Development Commissioner of EPZ and by the Inter-Ministerial Standing Committee (IMSC) instead of BOA.