EOU, FTZ, EPZ

By:
Naveen kumar

EXPORT ORIENTED UNITS

The EOU is, at present, governed by the provision
of EXIM policy. The EOU scheme, introduced in
early 1981, is complementary to the SEZ
scheme. It adopts the same production regime
but offers a wide option in locations with
reference to the factors like
Source of raw material
Ports of export
Availability of technological skills
Existence of an industrial base
Need for a larger area of land for the project

Objectives of EOU
To increase exports
Earn foreign exchange to the country
Transfer of latest technologies
stimulate direct foreign investment
Generate additional employment.

Benefits of EOU
Units were exempted from payment of Income Tax upto the year
31-03-2011.
All the imports to units are customs duty free .
Exemption from Central Excise Duty for the procurement of
Capital Goods and Raw Materials from domestic market.
Units are entitled to sell the product in local market upto 50% of
the products exported in value terms.
100% of foreign equity is permissible.
Reimbursement of Central Sales Tax paid on domestic
purchases.
No restrictions on External Commercial Borrowings.
Exemption from paying electricity duty.
Supplies made to EOU by Indian supplier are deemed exports
and supplier is entitled to benefits of deemed export.

Cont.
Fast Track Clearance Scheme (FTCS) for clearances of
imported consignments for EOU.
Unutilized raw material can be disposed of on payment of
applicable duties.
The unit can exit (de-bond) with permission of
Development Commissioner, on payment of applicable
duties.
Prescribed percentage of foreign exchange earnings can
be retained in EEFC (exchange earners foreign currency)
account in foreign exchange.
EOUs are free to select the location of a project.
EOUs can export through an export house/trading
house/star trading house or other EOUs.

Application
The EOU/promoter has to apply in Appendix 14-I-A , with
Project Report should contain nature of business, annual capacity,
business projections for 5 years, details of import raw materials and
capital goods, floor plan, .
IEC number
PAN and TAN
Resolution
Directors/ Promoters brief profile and resume
Returns of previous 3 years and residential proof of Promoters/ Directors
DD for Rs.5,000
A copy of the Certificate of Incorporation and Memorandum and Articles
of Association in case of companies/ attested copy of registered
Partnership deed.
Copy of lease deed of the premises valid for atleast 5 years.

Letter of permission
After submitting the application form and if every thing is in
order, Letter of Permission (LOP) is issued by the Zone
Administration within 2 weeks after interview of the promoter
by the Approval Committee. LOP shall have an initial validity of
3 years by which time the unit should have commenced
production. Its validity may be further extended to 3 years by
competent authority LOP will contain following details:
Items of manufacture/service activity
Annual capacity
Projected annual export for the first five years in dollar terms
Net Foreign Exchange Earnings
Limitations, if any regarding the sale of finished goods, by
products and rejects in the DTA (directorate of treasuries and
accounts)

Foreign Trade Zones

Free Trade Zones are geographical
areas defined within the national
territory, for the development of
industrial goods and services or
commercial activities under a special
tax, customs and foreign trade
regime

objectives
Be an instrument for job creation and attraction of
new capital investments.
Be a development center that promotes
competitiveness in the regions where they are
created.
Develop highly productive and competitive industrial
processes, within the parameters of security,
transparency, technology, clean production and
sound corporate practices.
Promote economies of scale.
Simplify procedures for the commercialization of
goods and services to facilitate its sale.

Benefits

Single 15% income tax rate for industrial users of goods, industrial users of
services, and operators, except for commercial users, which are taxed at
the general rate.
No custom taxes (VAT and CUSTOMS DUTIES) on merchandise imported
from abroad.
VAT exemption for raw materials, inputs and finished goods sold from a
national customs territory to industrial users of Free Trade Zones.
VAT exemption on merchandise sales to foreign markets.
Exports made from Free Trade Zones to foreign countries benefit from
international trade agreements signed by Colombia.
Goods produced, manufactured, transformed or resulting from any
production process developed in a Free trade Zone are recognized as being
of national origin. (Only Peru does not recognize the Colombian origin of
any goods manufactured in Colombian Free Trade Zones).
Possibility of performing partial processing outside of the Free Trade Zone
for up to nine (9) months.
Possibility of selling inside the national territory 100% of the goods or
services produced in the Free Trade Zone with customs tariff and VAT
payable only on the percentage of inputs imported from third countries.

EPZ
EPZ stands for Export Processing Zone.
Export Processing zones proliferated in the late
20th century.
Most EPZs located in developing countries.
EPZs employing increased from 22.5 to 43 million
people in 2003.
The basic objectives of EPZs to enhance foreign
exchange earnings and to generate employment
opportunities.
EPZs also known as Special Economic Zones in
some countries.

objectives
Provide special areas where potential investors
would find a congenial investment climate &
free from cumbersome procedures.
Promotion of foreign (FDI) & local investment
Diversifiaction of export
Generation of employment
Transfer of technology
Upgradation of skill
Development of management

Incentives offered in EPZ

Fiscal incentives:
Tax holiday for 10 years;
Exemption of income tax on interest on borrowed capital;
Relief from double taxation subject to bilateral agreements;
Complete exemption from dividend tax
Exemption of income tax on salaries
Duty-free import of machinery;
Non-fiscal incentives:
Project expansion and product diversification without permission;
Off-shore, local and international banking facilities;
Freedom from national import policy restrictions;
Expeditious import of raw materials on a documentary acceptance basis;
Back-to-back letter of credit for the import of raw materials

 In India, the first zone was set up in Kandla as early as 1965. It

was followed by the Santacruz export processing zone which came
into operation in 1973. The government set up five more zones
during the late 1980s. These were at Noida (Uttar Pradesh), Falta
(West Bengal) Cochin (Kerala), Chennai (Tamil Nadu) and
Visakhapatnam (Andhra Pradesh). Surat EPZ became operational
in 1998. The EXIM Policy, 2000 launched a new scheme of Special
Economic Zones (SEZs). Under this scheme, EPZs at Kandla, Santa
Cruz, Cochin and Surat were converted into SEZs. In 2003, other
existing EPZs namely, Noida, Falta, Chennai, Vishakhapatnam
were also converted into SEZs. In addition, approval has been
given for the setting up of 26 SEZs in various parts of the country .
Apparently, India is now promoting the EPZ programme much
more vigorously than in the initial phases of their evolution. Huge
amounts of public resources are being invested in the zones.

 EPZs are licensed by the Ministry of Trade in the different Partner States
The importer should:
Make a declaration of the imported goods in the prescribedForm C17
Execute a security bond usingForm CB4. The bond secures the duty
amount that would have otherwise been payable at the time of
importation. The bond also takes care of the taxes due in the event the
goods are consumed elsewhere other than the EPZ or disposed off in the
domestic market without authority
Present the imported goods together withForm C17to the proper
officer in charge of the EPZ for receipt and deliveries recording
Provide examination facilities within the EPZ where imported goods are
examined or verified. The Commissioner may on reasonable grounds
direct a Customs officer to carry out examination of the goods at the port
of entry.

 Goods intended for exportation from EPZ should be entered

usingForm C17
A bond for the removal of goods from an EPZ to the port of
exportation shall be executed usingForm CB4
The goods together with a copy of the export entry shall be
taken to the port of exportation. If the seals placed by the
EPZ officer have been tampered with, re-examination of
goods shall be done by the Customs officer at the border.
A certified copy ofForm C17confirming that exportation
of the goods has taken place shall be given to the owner for
the purposes of security bond cancellation.

Procedure followed when goods

moving to one EPZ to other
Enter the goods to be moved from one EPZ to another EPZ
usingForm C17
Execute a bond for the movement of goods from one EPZ to
another EPZ usingForm CB4
Obtain a certified/endorsed copy ofForm C17from the
officer at the receiving EPZ for the purposes of bond
cancellation
If the movement of goods is within the EPZ, the person in
charge of an enterprise shall inform the proper officer of such
movements of goods.
Execute a Security bond usingForm CB4

THANK YOU