Handbook for Procedure-Chapter 6
EXPORT ORIENTED UNITS (EOUs), UNITS IN EXPORT PROCESSING ZONES (EPZs), ELECTRONICS HARDWARE TECHNOLOGY PARKS (EHTPs) AND SOFTWARE TECHNOLOGY PARKS (STPs)
The Policy relating to Export Oriented Units (EOUs), units in Export Processing Zones (EPZs), Electronic Hardware Technology Parks (EHTP) and Software Technology Parks (STP) is given in Chapter 6 of the Policy.
(b) Software Technology Park (STP)/Electronics Hardware Technology Park (EHTP) complexes can be set up by the Central Government, State Government, Public or Private Sector Undertakings or any combination thereof, duly approved by the Inter-Ministerial Standing Committee (IMSC) in the Ministry of Communication and Information Technology (Department of Information Technology).
(c) Software units may undertake exports using data communication links or in the form of physical exports (which may be through courier service also), including export of professional services.
(i) DG sets, captive power plants, transformers and accessories and consumables and spares for all above.
(ii) Pollution control equipment.
(iii) Quality assurance equipment.
(iv) Material handling equipment, like fork lifts and overhead cranes.
(v) Un-interrupted Power Supply System (UPS), Special racks for storage, storage systems, modular furniture, computer furniture, anti-static carpet, tele-conference equipment, Servo Control System, Air-conditioning system, panel for electricals.
(vi) Security Systems.
(vii) Tools, jigs, fixtures, gauges, moulds, dyes, instruments and accessories;
(viii) Raw material for making capital goods for use within the unit.
(b) Raw materials, components, consumables, intermediates, spares and packing materials.
Conditions of Import
The import shall be subject to the following conditions:
(i) The goods shall be imported into the EOU/EPZ/EHTP/STP premises. However, agriculture and allied sectors and granite sector units in EOU/EPZ may supply/ transfer the capital goods and the inputs in the farms/fields/quarries with prior intimation to the jurisdictional Customs/ Central Excise authorities, provided the ownership of the goods rests with EOU/EPZ units.
(ii) The normal procedure as prescribed under Customs/Excise rules for EOUs and units in EPZs/EHTP/STP will be followed and appropriate bond executed with Customs/ Excise authorities.
(iii) The goods, except capital goods and spares, shall be utilised by EOU as per Policy within a period of two years or as may be extended by Customs authorities.
(iv) Goods already imported/shipped/arrived before the issue of LOP/ LOI are also eligible for duty free clearance under the EOU/EPZ/EHTP/STP scheme provided customs duty has not been paid and the goods have not been cleared from Customs.
(v) EOU/EPZ units may import plain/studded gold/platinum or silver jewellery for export after repairs/remaking.
(vi) EOU/EPZ units may obtain gold/ silver/ platinum from the nominated agencies on loan basis subject to the condition that the gold/silver/platinum jewellery shall be exported within the specified period from the date of release. This shall not, however, apply to outright purchase of precious metals from nominated agencies or if the same is obtained on loan other than from the nominated agencies.
Import of capital goods
In the case of EOU/EPZ/EHTP/STP units, import of capital goods including second hand capital goods, may be permitted in accordance with the list attested by the Development Commissioner concerned.
The units may be allowed by the Customs/Central Excise authorities concerned to re-import, after repairs abroad, machinery/ equipment exported by them for this specific purpose. Any foreign exchange payment for this purpose will also be allowed.
Utilisation of goods
(j)The unit shall be able to account for the entire quantity of goods imported/procured duty free, by way of exports and sales in DTA or transfer to other EOU/EPZ/ EHTP/ STP/ SEZ units, and balance in stock. However, at no point of time the units shall be required to co-relate every import consignment with each category of homogenous goods exported, transferred to other EOU/ EPZ/EHTP/STP/SEZ units, sales in DTA and balance in stock. In case of doubt the matter shall be referred to BOA for decision.
Export of jewellery at notional rate
(k) (i)The EOU/EPZ units shall be permitted to export the jewellery on the basis of a notional rate certificate to be issued by the nominated agency. This rate will be based on the prevailing Gold/USD rate and the USD/INR rate on the date of the Shipment.(ii)The exporter shall have the flexibility to fix the price and repay the gold loan within 180 days from the date of export. The price shall be communicated to the nominated agencies who will issue a certificate showing the final confirmation of the rate to the bank negotiating the document, to ensure export proceeds are realized at this rate
(l) Gem and Jewellery EOU/ EPZ units may re-export imported goods and export domestically procured goods, including goods generated out of partial processing/ manufacture. Besides, supply of unsuitable/ broken cut and polished diamonds, precious and semi-precious stones upto 5% of the value of imported or indigenously procured goods to the DTA against the valid Gem REP as applicable on payment of appropriate duty is also permitted.
| Second Hand Capital Goods
The licence for import of second hand capital goods shall, in the case of EOU/EPZ/ EHTP/ STP units, deemed to be the approval given by the concerned Development Commissioner.
| Leasing of Capital Goods
Capital goods procured from indigenous sources on the basis of lease agreement between the leasing company and the EOU/EPZ/ EHTP/ STP unit, will be eligible for Central Excise exemption.
The value of imported capital goods financed through leasing companies or obtained free of cost and/or on loan basis shall also be taken into account for the purpose of calculation of NFEP as defined in paragraph 6.5 of the Policy.
|Minimum level of Net Foreign Exchange as a Percentage of exports (NFEP) and minimum Export Performance (EP)
(a) Minimum level of Net Foreign Exchange as a Percentage of exports (NFEP) and minimum Export Performance (EP)
Net foreign exchange earning as a percentage of exports (NFEP) under EOU/EPZ/ EHTP/STP schemes, shall be calculated according to the following formula:
A - B
NFEP= --------- x 100,
A) A Where NFEP is Net Foreign Exchange Earning as a Percentage of Exportis the FOB value of exports by the EOU/EPZ/EHTP/STP unit; and
B) B is the sum total of the CIF value of all imported inputs, the CIF value of all imported capital goods, and the value of all payments made in foreign exchange by way of commission, royalty, fees, dividends, interest on external borrowings during the first five year period or any other charges. "Inputs" mean raw materials, intermediates, components, consumables, parts and packing materials.
*If any goods are/ is obtained from another EOU/EPZ/EHTP/STP unit, or procured from an international exhibition held in India and precious metals procured from nominated agencies ,the value of such goods shall be included under B.
* If any capital goods imported duty free is leased from a leasing company, received free of cost and/or on loan basis or transfer, the CIF value of the capital goods shall be included or excluded, as the case may be, pro-rata, under B for the period it remains under bond
* For annual calculation of net foreign exchange as a percentage of exports, imported capital goods and lumpsum payment of foreign technical know-how fee shall be included under B above as under:
|Units with actual investment in plant and machinery of Rs.5 crores and above. Others
|1st -2nd year : 5% each year
||1st-2nd Year : 10%
|3rd - 5th year : 10% each year
||3rd Year : 20%
|6th-8th year : 20% each year
||4th year : 30%
5th Year : 30%
* The minimum NFEP and EP are indicated in Appendix 1 of the Policy. In case of existing units the earlier NFEP and EP may be repeated at the time of renewal. However, NFEP and EP of such units will be revised, as per Policy, at the time of renewal of the approval or mid-term revision by the Development Commissioner, if such proposal envisages addition of installed capacity.
|Letter of Permission/Letter of Intent and Legal Undertaking
(a) The LOP/LOI shall specify the items of manufacture/service activity, annual capacity, projected annual export performance (EP) for the first five years in dollar terms, Net Foreign Exchange earnings as a Percentage of exports (NFEP), limitations, if any, regarding sale of finished goods, by-products and rejects in the DTA and such other matter as may be necessary and also impose such conditions as may be required.
(b) The approved EOU/EPZ unit shall be required to execute a legal undertaking with the Development Commissioner concerned in the form given in Appendix 14-D of the Handbook.
Application and Approvals
Letter of Permission/Letter of Intent and Legal Undertaking
(a) For setting up a unit in an EPZ or an EOU, three copies of the application in the form given in Appendix 14-A may be submitted to the Development Commissioner (DC) of the EPZ concerned.
(b) Application for setting up EHTP/STP unit shall be in the format prescribed by the Ministry of Communication and Information Technology (Department of Information Technlology) and shall be submitted to the officer designated by the Department of Information Technology for this purpose.
(c) Sector specific conditions: The approval of proposals for setting up of EOUs for the manufacture and export of cotton yarn, tea, rice, meat, granite and petroleum products would be subject to the conditions mentioned in Appendix-14-B.
(d) Foreign investment into EOU/EPZ/EHTP/STP shall be governed by the guidelines of Department of Industrial Policy and Promotion on the subject.
(e) All EOUs should have their own web site and permanent e-mail address. No LUT for new units shall be executed unless the unit has its own web site and permanent e-mail address.
|DTA sale of finished products/rejects/waste/scrap and by-products
EOU/EPZ/EHTP/STP units may sell in the DTA rejects, subject to the following conditions:
(a) The term 'rejects' shall cover the products which have definite manufacturing defects and are not exportable as per declaration of the unit concerned and shall include sub-standard products, but not spares, tools, waste/scrap/remnants and by-products.
(b) The following parameters shall be kept in view for determining 'rejects'.
(i) The unit must certify that the rejects were an unavoidable feature on account of flaws of technology, technique or material deployed in manufacture.
(ii) 'Rejects' must be invoiced and stamped by the manufacturer as 'Rejects' at the time of clearance into the Domestic Tariff Area.
DTA sale shall be admissible only to similar goods as that of the goods manufactured and exported from the unit. In case of doubt in regard to similar nature of goods, the matter shall be referred to the BOA for decision.
Within the entitlement of DTA sale, as provided in paragraph 6.8 (b )of the Policy, the unit may sell in DTA its products and services. Entitlement will be determined in totality and not with reference to specific items.
|Export through Status Holder
Permission to export goods through Status Holder/Merchant Exporter or other EOU/EPZ/EHTP/STP/SEZ units, extends only to the marketing of the goods by the Status Holder/ Merchant exporter or other EOU/EPZ/ EHTP/ STP/ SEZ unit. The manufacture of the goods shall be done in the EOU/ EPZ/ EHTP/STP unit concerned. The level of NFEP and EP as well as any other conditions relating to the imports and exports as prescribed shall continue to be discharged by the EOU/ EPZ/ EHTP/ STP unit concerned. Such export shall fulfil the following conditions:
(i) The export orders so procured shall be executed within the parameters of EOU/EPZ/EHTP/STP schemes and the goods shall be directly transferred from the Customs bonded unit to the port of shipment.
(ii) Fulfilment of NFEP/EP by EOU/EPZ/ EHTP/ STP units in regard to such exports shall be reckoned on the basis of the price at which the goods are supplied by EOU/EPZ units to Status Holder/ Merchant Exporter or other EOU/EPZ/ EHTP/ STP/SEZ unit.
(iii) All export entitlements, including recognition as Status Holder would accrue to the exporter in whose name foreign exchange earnings are realised.
EOU/EPZ/EHTP/STP units may on the basis of records maintained by them, and on prior intimation to Custom authority :
a) 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.
b) Remove samples without payment of duty, on furnishing a suitable undertaking to Customs authorities for bringing the samples back within a stipulated period;
c) Export samples, including through courier agencies.
d) Samples made in wax models, silver models and rubber moulds may also be exported by Gem & Jewellery units.
|Entitlement for supplies from the DTA
(a) An application for reimbursement of Central Sales Tax and grant of entitlements may be made to the Development Commissioner of the EPZ concerned. The procedure to be followed and the form of the application for reimbursement of Central Sales Tax (CST) is given in Appendix 14-G of Handbook (Vol.1).
(b) The procedure for submission of application for grant of Replenishment License shall be applicable. However, the application shall be made to the Development Commissioner of the EOU/EPZ concerned. Such supplies to EOU/EPZ are not treated as deemed exports for the purpose of any of the deemed export benefits.
(c) Valuation of goods for deemed export benefit:
For determining deemed export benefit the price declared by the DTA unit to the jurisdictional excise authorities shall be treated as the fair price
(d) For reimbursement of Central Excise Duty paid on bulk tea procured from licenced auction centers, the unit shall submit documentary evidence showing that the tea was procured from licenced auction centers along with the claim.
(a) Units set up in EPZs will be charged rent for lease of industrial plots and standard design factory buildings/sheds as per rates fixed from time to time.
(b) Corporate tax: EOU/EPZ/EHTP/STP units engaged in manufacturing and services will be eligible for entitlements in respect of payment of income tax as per the provisions of Income Tax Act.
(c) FOB value of export of an EOU/EPZ/ EHTP/STP units may be clubbed with FOB value of export of its parent company in the DTA or vice versa for the purpose of according Export House, Trading House, Star Trading House or Super Star Trading House status.
(d) 100% Foreign Equity: 100% FDI in the manufacturing sector is permissible to the EOU/EPZ/EHTP/STP units. For FDI in services and trading sector, the sectoral norms as notified by the Department of Industrial Policy & Promotion shall be applicable."
(e) Software units may, in addition, also be allowed to use the computer system for training purpose (including commercial training) subject to the condition that no computer terminal shall be installed outside the bonded premises for the purpose.
(f) Procurement of raw materials, components and consumables and export of finished products shall be exempt from Central levies.
(g) Exemption from industrial licensing for manufacture of items reserved for SSI sector.
EOU/EPZ/EHTP units may be permitted to remove moulds, jigs, tools, fixtures, tackles, instruments, hangers and patterns and drawings to the premises of sub contractors subject to the condition that these shall be brought back to the bonded premises of EOU/EPZ/EHTP unit on completion of the job work within a stipulated period. Export of finished goods directly from the job worker's premises may be permitted provided the job workers premises is registered with the Central Excise authorities. However, export of such products from the job worker's premises shall not be allowed through third parties.
Depreciation norms for capital good:
The depreciation norms for capital goods of units, including electronics, would be subject to an overall limit of 90% as notified by the Department of Revenue.
Conversion of an existing Domestic Tariff Area (DTA) unit into an EOU/EPZ/EHTP/STP may be permitted. For this purpose, the DTA unit may apply to the concerned DC, EPZ in the same manner as applicable to new units. In case there is an outstanding export commitment under the EPCG scheme, it will be subsumed in the export performance (EP) of the unit. If the unit is having outstanding export commitment under the Advance Licensing Scheme, it will apply to the Advance Licensing Committee for reducing its export commitment in proportion to the quantum of duty free material actually utilised for production and permitted to carry forward the unutilized material imported against the Advance Licence, if any, under the EOU/EPZ/ EHTP/ STP scheme.
(b) Existing EHTP/STP units desiring conversion as an EOU may apply to the DC of the EPZ concerned through the Officer designated by the Department of Information Technology IN the same manner as applicable to new units. Likewise EOU desiring conversion into EHTP/STP may apply to the officer designated by the Department of Information Technology through the DC of the EPZ concerned.
(c) An EOU may be shifted to SEZ with the approval of BOA provided the EOU unit has achieved NFEP and pro-rata EP.
|Export through Exhibitions /Export Promotion Tours /Export of Branded Jewellery/ sale through Show rooms abroad/ international airports.
(a) EOU/EPZ unit shall produce to the Customs authorities the letter in original or its certified copy containing approval of the Development Commissioner for holding exhibitions/export promotion tour. For Gems and jewellery exhibition/export of branded jewellery, a self certified photograph of the products shall also be submitted. In case of re-import, such items, on arrival shall be verified along with the export documents before clearance.
(b) The exports through exhibitions/export promotion tours/export of branded jewellery shall be subject to the conditions that items not sold abroad shall be re-imported within 60 days of the close of the exhibition. However, in case the exporter is participating in more than one exhibition within 45 days of close of the first exhibition, then the 60 days shall be counted from the date of close of the last exhibition. In case of personal carriage of gems and jewellery for holding/participating in overseas exhibitions, the value of such gems and jewellery shall not exceed US $ 2 million.
(c) Personal carriage of gold/silver/platinum jewellery, precious, semi-precious stones, beads and articles as samples upto US $ 1,00,000 for export promotion tours and temporary display/sale abroad is also permitted with the approval of Development Commissioner subject to the condition that the EOU/EPZ unit shall bring back the jewellery/goods or repatriate the sale proceeds within 45 days from the date of departure through normal banking channel. In case of personal carriage for export promotion tours, the unit shall declare personal carriage of such samples to the Customs while leaving the country and obtain necessary endorsement on the Export Certificate issued by the Customs.
(d) In case of export of jewellery through permitted shops set up abroad or in the showrooms of their distributors/agents items not sold abroad within 180 days shall be re-imported within 45 days.
(e) In case of sale of jewellery to foreign tourists through permitted showrooms/retails outlets at the International Airports in accordance with the procedure laid down by the Customs authorities, jewellery items unsold after a period of 60 days be exported or returned to the respective EOU/EPZ units.
|Export by Post/Courier
In case of export through Foreign Post Office or by courier, at the time of exports, the EOU/EPZ unit shall submit the following documents:
i) Shipping Bill or invoice presented at the Foreign Post Office.
ii) Three copies of invoice.
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