Foreign Trade Policy, Chapter-6, Export Oriented Units(EOUs), Electronic Hardware Technology Parks (EHTPs), Software Technology Parks(STPs) and Bio-Technology Parks(BTPs).

1. An EOU / EHTP / STP / BTP unit may export all kinds of goods and services except items that are prohibited in ITC (HS). Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be subject to fulfillment of the conditions indicated in ITC(HS).
   
   Procurement and supply of export promotion material like brochure / literature, pamphlets, hoardings, catalogues, posters etc. upto a maximum value limit of 1.5% of FOB value of previous years exports shall also be allowed.
2. An EOU / EHTP / STP / BTP unit may import and/or procure from DTA or bonded warehouses in DTA / international exhibition held in India without payment of duty all types of goods, including capital goods, required for its activities, provided they are not prohibited items of import in the ITC (HS). Any permission required for import under any other law shall be applicable. Units shall also be permitted to import goods including capital goods required for approved activity, free of cost or on loan / lease from clients. Import of capital goods will be on a self certification basis. Goods imported by a unit shall be with actual user condition and shall be utilized for export production.
3. State Trading regime shall not apply to EOU manufacturing units.
4. EOU / EHTP / STP / BTP units may import / procure from DTA without payment of duty certain specified goods for creating a central facility. Software EOU /DTA units may use such facility for export of software.
5. An EOU engaged in agriculture, animal husbandry, aquaculture, floriculture, horticulture, pisciculture, viticulture, poultry or sericulture may be permitted to remove specified goods in connection with its activities for use outside bonded area.
6. Gems and jewellery EOUs may source gold / silver / platinum through nominated agencies on loan / outright purchase basis. Units obtaining gold / silver / platinum from nominated agencies, either on loan basis or outright purchase basis shall export gold / silver / platinum within 90 days from date of release.
7. EOU / EHTP / STP / BTP units, other than service units, may export to Russian Federation in Indian Rupees against repayment of State Credit / Escrow Rupee Account of buyer subject to RBI clearance, if any.
8. (h) Procurement and export of spares/components upto 5% of FOB value of exports may be allowed to same consignee/buyer of the export article, subject to the condition that it shall not count for NFE and direct tax benefits.
   (Para 6.2(h) of FTP, 2004-2009 shall be substituted by the DGFT NOTIFICATION No. : 15/2007 DT. 20/07/2007).
   [OLD- (h) Procurement and export of spares / components upto 1.5% of FOB value of exports may be allowed to same consignee / buyer of export article within the warranty period.]

1. On approval, a Letter of Permission (LoP) / Letter of Intent (LoI) shall be issued by Development Commissioner/designated officer to EOU / EHTP / STP / BTP unit. LoP / LoI shall have an initial validity of 3 years by which time unit should have commenced production. Its validity may be extended further up to 3 years by competent authority. However, proposals for extension beyond six years shall be considered in exceptional circumstances, on a case-to-case basis by BOA. Once unit commences production, LOP / LOI issued shall be valid for a period of 5 years for its activities. This period may be extended further by DC for a period of 5 years at a time.
2. LoP / LoI issued to EOU / EHTP / STP / BTP units by concerned authority subject to compliance of provision in para 6.2 above, would be construed as an Authorisation for all purposes.
3. Unit shall execute a LUT with DC concerned. Failure to ensure positive NFE or to abide by any of the terms and conditions of LOP / LOI / IL / LUT shall render the unit liable to penal action under provisions of the FT (D&R) Act and Rules and Orders made thereunder without prejudice to action under any other law / rules and cancellation or revocation of LoP / LoI / IL.
4. Only projects having a minimum investment of Rs.1 Crore in Plant & Machinery shall be considered for establishment as EOUs . This shall, however, not apply to existing units and units in EHTP / STP / BTP, Handicrafts / Agriculture / Floriculture / Aquaculture / Animal Husbandry / Information Technology, Services, Brass Hardware and Handmade jewellery sectors. Board of Approval (BoA) may also allow establishment of EOUs with a lower investment criteria.

1. Applications for setting up of units under EOU scheme other than proposals for setting up of units in services sector (except R&D, software and IT enabled services, or any other service activity as may be delegated by BoA), shall be approved or rejected by the Units Approval Committee within 15 days as per criteria indicated in HBP v1.
2. In other cases, approval may be granted by BoA set up for this purpose as indicated in HBP v1.
3. Proposals for setting up EOU requiring industrial licence may be granted approval by Development Commissioner after clearance of proposal by BoA and DIPP within 45 days.

1. Entire production of EOU / EHTP / STP / BTP units shall be exported subject to following:
   
   Units, other than gems and jewellery units, may sell goods upto 50% of FOB value of exports subject to fulfilment of positive NFE on payment of concessional duties. Within entitlement of DTA sale, unit may sell in DTA its products similar to goods which are exported or expected to be exported from units. No DTA sale at concessional duty shall be permissible in respect of motor cars, alcoholic liquors, books, tea (except instant tea), pepper & pepper products, marble and such other items as may be notified from time to time. Such DTA sale shall also not be permissible to units engaged in activities of packaging / labeling / segregation / refrigeration / compacting / micronisation / pulverization / granulation / conversion of monohydrate form of chemical to anhydrous form or vice-versa. Sales made to a unit in SEZ shall also be taken into account for purpose of arriving at FOB value of export by EOU provided payment for such sales are made from Foreign Exchange Account of SEZ unit. Sale to DTA would also be subject to mandatory requirement of registration of pharmaceutical products (including bulk drugs).
2. For services, including software units, sale in DTA in any mode, including on line data communication shall also be permissible up to 50% of FOB value of exports and /or 50% of foreign exchange earned, where payment of such services is received in foreign exchange.
3. Gems and jewellery units may sell upto 10% of FOB value of exports of the preceding year in DTA subject to fulfillment of positive NFE. In respect of sale of plain jewellery, recipient shall pay concessional rate of duty as applicable to sale from nominated agencies. In respect of studded jewellery, duty shall be payable as applicable.
4. Unless specifically prohibited in LoP, rejects within an overall limit of 50% may be sold in Domestic Tariff Area (DTA) on payment of duties as applicable to sale under paragraph 6.8(a) on prior intimation to Customs authorities. Such sales shall be counted against DTA sale entitlement. Sale of rejects upto 5% of FOB value of exports shall not be subject to achievement of NFE.
5. Scrap / waste / remnants arising out of production process or in connection therewith may be sold in DTA as per SION notified under Duty Exemption Scheme on payment of concessional duties as applicable within overall ceiling of 50% of FOB value of exports. Such sales shall not, however, be subject to achievement of positive NFE. In respect of items not covered by the norms, DC may, fix ad-hoc norms for a period of six months and within this period, he shall get norms fixed by BoA. Sale of waste / scrap / remnants by units not entitled to DTA sale or sales beyond DTA sale entitlement, shall be on payment of full duties. Scrap / waste / remnants may also be exported.
6. There shall be no duties / taxes on scrap / waste / remnants in case same are destroyed with permission of Customs authorities.
7. By-products included in LoP may also be sold in DTA subject to achievement of positive NFE on payment of applicable duties within the overall entitlement of paragraph 6.8(a). Sale of by-products by units not entitled to DTA sales or beyond entitlements of paragraph 6.8 (a) shall also be permissible on payment of full duties.
8. EOU / EHTP / STP / BTP units may sell finished products, except pepper and pepper products and marble which are freely importable under FTP in DTA under intimation to DC against payment of full duties provided they have achieved positive NFE.
9. In case of units manufacturing electronics hardware and software, NFE and DTA sale entitlement shall be reckoned separately for hardware and software.
10. In case of DTA sale of goods manufactured by EOU / EHTP / STP / BTP, where basic duty and CVD is nil, such goods may be considered as non-excisable for payment of duty.
11. In case of new EOUs, advance DTA sale will be allowed not exceeding 50% of its estimated exports for first year except pharmaceutical units where this will be based on its estimated exports for first two years.

Following supplies effected from EOU / EHTP / STP / BTP units to DTA will be counted for fulfillment of positive NFE:

1. Supplies effected in DTA to holders of AdvanceAuthorisation /Advance Authorisation for annual requirement / DFIA under duty exemption / remission scheme / EPCG scheme.
2. Supplies effected in DTA against foreign exchange remittance received from overseas.
3. Supplies to other EOU / EHTP / STP / BTP / SEZ units provided that such goods are permissible for procurement in terms of paragraph 6.2 of FTP.
4. Supplies made to bonded warehouses set up under FTP and / or under section 65 of Customs Act and free trade and warehousing zones, where payment is received in foreign exchange.
5. Supplies of goods and services to such organizations which are entitled for duty free import of such items in terms of general exemption notification issued by MoF.
6. Supply of services (by services units) relating to exports paid for in free foreign exchange or for such services rendered in Indian Rupees which are otherwise considered as having been paid for in free foreign exchange by RBI.
7. Supplies of Information Technology Agreement (ITA -1) items and notified zero duty telecom / electronic items.
8. (h) Supplies of items like tags, labels, printed bags, stickers, belts, buttons or hangers to DTA Unit for export. (This Para amended by DGFT  Notification No. 54 Date  21.11.2007).
   
   Supplies of accessories including tags, labels, printed bags, stickers, belts, buttons or hangers to DTA Unit for export.
   
9. Supply of LPG produced in an EOU refinery to Public Sector domestic oil companies for being supplied to household domestic consumers at subsidized prices under the Public Distribution System (PDS) Kerosene and Domestic LPG Subsidy Scheme, 2002, as notified by the Ministry of Petroleum and Natural Gas vide notification No. E-20029/18/2001-PP dated 28.01.2003 (hereinafter referred to as PDS Scheme) subject to the following conditions:-
   1. Only supply of such quantity of LPG would be eligible for which Ministry of Petroleum and Natural Gas declines permission for export and requires the LPG to be cleared in DTA; and
      
   2. The Ministry of Finance by a notification has permitted duty free imports of LPG for supply under the aforesaid PDS Scheme.

(The Para (i) is inserted by DGFT Notification No. 55 Dated 21.11.2007)

1. Supplies from DTA to EOU / EHTP / STP / BTP units will be regarded as “deemed exports” and DTA supplier shall be eligible for relevant entitlements under chapter 8 of FTP besides discharge of export obligation, if any, on the supplier. Notwithstanding the above, EOU / EHTP / STP / BTP units shall, on production of a suitable disclaimer from DTA supplier, be eligible for obtaining entitlements specified in chapter 8 of FTP. For claiming deemed export duty drawback, they shall get Brand Rates fixed by Development Commissioner wherever All Industry Rates of Drawback are not available.
2. Suppliers of precious and semi-precious stones, synthetic stones and processed pearls from DTA to EOU shall be eligible for grant of Replenishment authorisations at rates and for items mentioned in HBP v1.
3. In addition, EOU / EHTP / STP / BTP units shall be entitled to following:-
   1. Reimbursement of Central Sales Tax (CST) on goods manufactured in India.
      
      Interest on delay in refund of CST would be paid, as notified.
   2. Exemption from payment of Central Excise Duty on goods procured from DTA on goods manufactured in India.
   3. Deleted
   4. Reimbursement of duty paid on fuel procured from domestic oil companies / Depots of domestic oil Public Sector Undertakings as per drawback rate notified by DGFT from time to time. (This para amended by DGFT Notification No. 70(RE-2007)/2004-2009, Dated 27-12-2007)
      
      [Old -Reimbursement of Duty paid on fuels procured from domestic oil companies as per Drawback rate notified by DGFT from time to time.]
   5. CENVAT Credit on service tax paid.

Other entitlements of EOU / EHTP / STP / BTP units are as under:

1. Exemption from Income Tax as per Section 10A and 10B of Income Tax Act.
2. Exemption from industrial licensing for manufacture of items reserved for SSI sector.
3. Deleted
4. Export proceeds will be realized within 12 months.
5. Units will be allowed to retain 100% of its export earning in the EEFC account.
6. Units will not be required to furnish bank guarantee at the time of import or going for job work in DTA, where unit has
   1. a turnover of Rupees 5 crores or above;
   2. unit is in existence for at least three years; and
   3. unit is having an unblemished track record.
7. 100% FDI investment permitted through Automatic
   Route similar to SEZ units.

1. Transfer of manufactured goods from one EOU / EHTP / STP / BTP unit to another EOU / EHTP / STP / BTP unit is allowed with prior intimation to concerned Development Commissioner and Customs authorities following procedure of in bond movement of goods. Transfer of manufactured goods shall also be allowed from EOU / EHTP / STP / BTP unit to a SEZ Developer or Unit following procedure prescribed in SEZ Rules, 2006.
2. Capital goods may be transferred or given on loan to other EOU / EHTP / STP / BTP / SEZ units with prior intimation to concerned Development Commissioner and Customs authorities.
3. Goods supplied by one unit of EOU/EHTP/STP/BTP to another unit shall be treated as imported goods for second unit for payment of duty, on DTA sale by second unit.

1. 1. EOU / EHTP / STP / BTP units, including gem and jewellery units, may on the basis of annual permission from Customs authorities, subcontract production processes to DTA through job work which may also involve change of form or nature of goods, through job work by units in DTA.
   2. These units may subcontract upto 50% of overall production of previous year in value terms in DTA with permission of Customs authorities.
2. 1. EOU may, with annual permission from Customs authorities, undertake job work for export, on behalf of DTA exporter, provided that goods are exported directly from EOU and export document shall jointly be in name of DTA / EOU. For such exports, DTA units will be entitled for refund of duty paid on inputs by way of Brand Rate of duty drawback.
   2. Duty free import of goods for execution of export order placed on EOU by Foreign Supplier on jobwork basis would be allowed subject to condition that no DTA clearance shall be allowed.
   3. Subcontracting of both production and production processes may also be undertaken without any limit through other EOU / EHTP / STP / SEZ / BTP units on the basis of records maintained in unit.
   4. EOU/EHTP/STP/BTP units may subcontract part of production process abroad and send Intermediate products abroad as mentioned in LOP. No permission would be required when goods are sought to be exported from subcontractor premises abroad. When goods are sought to be brought back, prior intimation to concerned Development Commissioner and Customs authorities shall be given. (This Para is amended by DGFT NOTIFICATION No.:31/2007, Dated :04-10-2007)
      
      [Old-Subcontracting of part of production process may also be permitted abroad with approval of Development Commissioner.]
3. Scrap / waste / remnants generated through job work may either be cleared from job worker’s premises on payment of applicable duty on transaction value or destroyed in presence of Customs / Excise authorities or returned to unit. Destruction shall not apply to gold, silver, platinum, diamond, precious and semi precious stones.
4. Sub-contracting / exchange by gems and jewellery EOUs through other EOUs or SEZ units or units in DTA shall be as per procedure indicated in HBP v1.

1. In case an EOU / EHTP / STP / BTP unit is unable to utilize goods and services, imported or procured from
   DTA, it may be
   1. transferred to another EOU / SEZ / EHTP / STP / BTP unit or
   2. disposed off in DTA with approval of Customs authorities on payment of applicable duties and submission of import authorisation, or
   3. exported. Such transfer from EOU / EHTP / STP / BTP unit to another such unit would be treated as import for receiving unit.
2. Capital goods and spares that have become obsolete / surplus, may either be exported, transferred to another EOU / EHTP / STP / BTP / SEZ or disposed of in DTA on payment of applicable duties. Benefit of depreciation, as applicable, will be available in case of disposal in DTA. No duty shall be payable in case capital goods, raw material, consumables, spares, goods manufactured, processed or packaged, and scrap / waste
   / remnants / rejects are destroyed within Unit after intimation to Customs authorities or destroyed outside Unit with permission of Customs authorities. Destruction as stated above shall not apply to gold, silver, platinum, diamond, precious and semi precious stones.
3. In case of textile sector, disposal of left over material / fabrics upto 2% of cif value or quantity of import, whichever is lower, on payment of duty on transaction value may be allowed, subject to certification of Central
   Excise / Customs officers that these are leftover items.
4. Disposal of used packing material will be allowed on payment of duty on transaction value.

1. General provisions of FTP relating to export / import of replacement / repair of goods would also apply equally to EOU / EHTP / STP / BTP units. Cases not covered by these provisions shall be considered on merits by DC.
2. Goods sold in DTA and not accepted for any reasons may be brought back for repair / replacement, under intimation to concerned jurisdictional Customs / Excise authorities.
3. 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 subsequently may be returned and replacement obtained or destroyed. In the event of replacement, goods may be brought back from foreign suppliers or their authorized agents in India or indigenous suppliers. However destruction shall not apply to precious and semi precious stones and precious metals.

1. With approval of DC, EOU units may opt out of scheme. Such exit shall be subject to payment of Excise and Customs duties and industrial policy in force.
2. If unit has not achieved obligations, it shall also be liable to penalty at the time of exit.
3. 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 DoC at price to be determined by that agency.
4.  An EOU/EHTP/STP/BTP unit may also be permitted by Development Commissioner, to exit from the scheme at any time on payment of duty on capital goods under the prevailing EPCG Scheme for DTA Units. This will be subject to fulfillment of positive NFE criteria under EOU scheme, eligibility criteria under EPCG Scheme and standard conditions indicated in HBP V.1. (This para amended by DGFT Notification No. : 72/2007
   
   [Old- An EOU / EHTP / STP / BTP unit may also be permitted by Development Commissioner, to exit on payment of duty on capital goods under the prevailing EPCG Scheme as a one time option. This will be subject to fulfilment of eligibility criteria under that Scheme and standard conditions indicated in HBP v1.]
5. Unit proposing to exit out of EOU scheme shall intimate DC and Customs and Central Excise authorities in writing. Unit shall assess duty liability arising out of debonding and submit details of such assessment to customs and Central Excise authorities. Customs and Central Excise authorities shall confirm duty liabilities on priority basis. After payment of duty and clearance of all dues, unit shall obtain “No Dues Certificate” from Customs and Central Excise authorities. On the basis of “No Dues Certificate” so issued by the Customs and Central Excise authorities, unit shall apply to DC for final debonding.
   
   In case there is no proceeding pending under FT(D&R) Act, DC shall issue final debonding order within a period of 7 working days. Between “No Dues Certificate” issued by Customs and Central Excise authorities and final debonding order by DC, unit shall not be entitled to claim any exemption for procurement of capital goods or input. Unit can however, claim Advance Authorisation / DEPB / Duty Drawback. Since the duty calculations and dues are disputed and take a long time, a BG / Bond / Installment processes backed by BG shall be provided for expediting the exit process.
6. In cases where a unit is initially established as DTA unit with machine procured from abroad after payment of applicable import duty or from domestic market after payment of excise duty and unit is subsequently converted to EOU, in such cases removal of such capital goods to DTA after debonding would be without payment of duty. Similarly, in cases where a DTA unit imported capital goods under EPCG Scheme and after completely fulfilling export obligation gets converted into EOU, unit would not be charged customs duty on capital goods at the time of removal of such capital goods in DTA when debonding.
7. An EOU / EHTP / STP / BTP Unit may also be permitted by Development Commissioner to exit under Advance Authorization as a one time option. This will be subject to fulfillment of positive NFE criteria.

1. Existing DTA units, may also apply for conversion into an EOU / EHTP / STP / BTP unit, and Income Tax benefits under Section 10A and 10B will be available for plant, machinery and equipment already installed.
2. Existing EHTP / STP units may also apply for conversion / merger to EOU unit and vice-versa. In such cases, units will remain in bond and avail exemptions in duties and taxes as applicable.

EOU / EHTP / STP / BTP are permitted to:

1. Export goods for holding / participating in exhibitions abroad with permission of Development Commissioner.
2. Personal carriage of gold / silver / platinum jewellery, precious, semi-precious stones, beads and articles.
3. Export goods for display / sale in permitted shops set up abroad.
4. Display / sell in permitted shops set up abroad or in show rooms of their distributors / agents.
5. Set up show rooms / retail outlets at International Airports