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Ref : B16A

EXPORT ORIENTED UNITS AND EXPORTS PROCESSING ZONES MAJOR BENEFITS AVAILABLE TO EOUS (100%)/ EPZS

Units undertaking to export their entire production of goods except for the permitted levels of rejects may be set up under the EXPORT ORIENTED UNIT (EOU) Scheme or EXPORT PROCESSING ZONE (EPZ) Scheme. Such units may be engaged in manufacturing , production of software, horticulture, agriculture, aquaculture, animal husbandry or similar activity. Units engaged in service activities may also be considered on merits.

While the EPZ operating units broadly fall under the product groups of electronics, engineering items, chemicals & allied products, Gem & Jewellery, textiles, garments, plastics and rubber products, EOUs are mainly concentrated in engineering , Chemcials & plastics, granites, textiles, food processing, agriculture, aquaculture, steel, forest products, electronics and minerals / ores.

Export oriented units are characteristically categorised into three types :
1. 100% Export Oriented Units - Unit established anywhere in India and exporting 100% of its product(s).
2. Units in Free Trade Zones / EPZ(s) Unit established in any of the 7 EPZ/ Free Trade Zones in India and exporting 100% of product(s).
3. 100% Export Oriented Unit set up in software technology parks and electronics hardware parks for development of software and electronics hardware, software & electronics hardware technology and software & electronics hardware services for export.

The EPZs / EOU are designed to provide an internationally competitive duty free environment at low cost for export production through basic infrastructure facilities like developed land, standard design factory buildings, built up sheds, roads, power, water supply and drainage and customs clearance facilities.

Details of exports from EPZs / EOU during the last 2 years are indicated below :-

Year EPZs (Rs.) EOUs (Rs) Total (Rs.)
1992-93 1376.31 1940 3316.31
1993-94 1959.91 2900 2859.91
1994-95 1121.00* 1642* 2763.00


Facilities & incentives

The importing / exporting units established in FTZ / EPZ get the following facilities & incentives.

1. EOUs / EPZ units can import industrial inputs free of customs duty.
2. 100% foreign equity is welcomed in EOUs / EPZ units.
3. Leasing of capital goods from domestic companies by EPZ / EOUs are permitted.
4. EOUs / EPZ units can raise foreign currency loans, subject to certain conditions.

A five year tax holiday was allowed to any industrial undertaking in a FTZ which manufacture or produces any article or thing. Similarly the entire profits of 100% EOU are exempted from income tax . Units in FTZs / 100% EOUs are provided economic flexibility. They are allowed to dispose of the export reject and by-products to the tune of 25% of total produce in the domestic market. In effect, such units get exemption for 5 years even in respect profits from the 25% domestic sales allowed to them.

However this benefit is restricted only to 100% EOUs /FTZs which export at least 75% of their turnover can avail of the normal 100% tax exemption to the extent of the export profits only. This restriction will apply to new units which begin to manufacture or produce an article on or after 1.5.95.

This is w.e.f. 1st April 1996 & will accordingly apply in relation to assessment year 1996-97 & subsequent years.

(Source Ministry of Commerce - 1Annual Report 94-95 Govt. of India)

5. Industrial plots and standard design factories are available to EOUs / EPZ units at concessional rates. For plots the concession will be 75% for the first year, 50% for the second year, 25% for the third year, if and only if production had commenced in the first year or the second year not otherwise.For SDF building sheds the concession will be 50% for the first year and 40% for the second year if production had commenced in the first year. The concession will be 25% for the third year. These concessions are also only if production had commenced by the end of the first year, not otherwise.

6. FOB Value of exports of EOUs / EPZ units are allowed to be clubbed with that of parent / associate companies located in the Domestic Tariff Area (DTA) for the purposed of getting star Trading House, Export House Status.

7. EOUs / EPZ units are exempted from the payment of central & state sales tax.

8. Supplies from the Domestic Tariff Area (DTA) to EOU?s / EPZ units are regarded as deemed exports and are hence exempted from payment of excise duty which means quality inputs are available at lower costs.

9. EOUs / EPZ units may export goods through Star Trading House, Trading Houses and Export Houses.

10. Revision of value addition formula by excluding indigenous raw materials to make value addition on the basis of net foreign exchange earnings.

11. Encouragement of agro electronic units by providing higher domestic access.

12. Broadening the area of activity in EPZs to include trading, re-export after labelling, repacking, repair, reconditioning & re-engineering.

13. Allowing private bonded warehouses in the EPZs to facilitate importing & warehousing goods without payment of duty & clearing them for house consumption after paying the customs duty applicable at the time of clearance.

The benefits available to a Free Trade Zone will be available to industrial undertaking newly established in a FTZ & manufacturing or producing any article or thing on or after the 1st April 1995, only if the exports by the undertaking are not less than 75% of the total sales of articles or things during the previous year. This is w.e.f. April 1996 & will accordingly apply in relation to assessment year 1996-97 & subsequent years.

To : Indian Registered Exporters

Sub : Approval of 100% EOU / EPZ Scheme

Dear Sirs,

Please give following details / documents to enable us to process your application for preparing application for 100% EOU / EPZ

1. Nature of Industry (pl. specify whether Industry falls under schedule I & II or III.)
     
2. Rs.5,000/- cash for Demand Draft.  
     
3. Name & Full address of Industrial Undertaking.
     
4. Status of Industrial Undertaking (Central Govt., (State Development Investment Corporation ), Co-operative, Joint Sector, Assisted Sector Undertaking, Private Sector Individual).
     
5. Whether the undertaking is covered under fera.
     
6. Whether the undertaking is for new undertaking, substantial expansion, new articles or conversion of DTA to EOU.
     
7 Exact location of factory.
     
8. Location of factory (backward area, within 25kms from periphery of S.U.A. (Standard urban Area), Industrial Estate.
     
9. Category of Industry (Polluting / Non-polluting).
     
10. Item of manufacture (Description, capacity, Item Code Sr. No.)
     
11. Item is covered by schedule I, II, or III.
     
12. Production estimation in quantity unit (Ist year, IInd year, IIIrd year, IVth year, Vth year)
     
13. Realisation of FOB in Rs. & US.$ (Ist year, IInd year, IIIrd year, IVth year, Vth year)
     
14. Estimation of import required in Rs. & US.$ (Ist year, IInd year, IIIrd year, IVth year, Vth year)  
(a) Capital goods (imports) (Ist year, IInd year, IIIrd year, IVth year, Vth year)
(b) Raw materials (imports) including Components, Intermediates and packing material (Ist year, IInd year, IIIrd year, IVth year, Vth year)
(c) Consumables (Components & Spares for capital goods only) (Ist year, IInd year, IIIrd year, IVth year, Vth year)
     
15. Estimation of indigenous requirement in Rs. ( ) (Ist year, IInd year, IIIrd year, IVth year, Vth year)  
(a) Capital goods (Indigenous) (Ist year, IInd year, IIIrd year, IVth year, Vth year)
(b) Raw materials (Indigenous) (including components , intermediates and packing material) (Ist year, IInd year, IIIrd year, IVth year, Vth year)
(c) Consumables (Components & Spares for capital goods only) (Ist year, IInd year, IIIrd year, IVth year, Vth year)
     
16. Investment in Rs. (Lakhs)  
(a) Land
(b) Building &
(c) Plant & Machinery
(I) Indigenous
(II) Imported (CIF value (US.$)
  Total c (I) + (II)
     
17. Total project cost in Rs.
     
18. Any foreign technology agreement envisaged (yes / no)
(i) Name & Address of foreign collaborator and country
(ii) Terms of collaboration : (gross of taxes in Rs.(Lakhs))
(a) Lumpsum payment
(b) Design and drawing fees
(c) Payment to foreign technicians
(d) Royalty (on exports) (% & period)
(e) Royalty on dta sales (% & period)
(f) Duration of agreement (years)
     
19 Equity capital (including foreign investment)  
(i)(a) Authorised (Rs.) & (US.$)
(b) Subscribed (Rs.) & (US.$)
(c) Paid - up
(ii) Pattern of share holding in paid-up capital  
(a) foreign holding (Rs.) & (US.$) (%)
(b) N.R.I. (Individual / Co.)
(i) Repatriable (Rs.) & (US.$) (%)
(ii) Non repatriable (Rs.) & (US.$) (%)
(c) Resident holding (Rs.) & (US.$) (%)
(d) Total equity (a + b (i + ii) + c )
(iii) External Commercial borrowing (ECW) (US.$)
     
20. Foreign Exchange Earning in Rs. & US.$ in 1st, 2nd, 3rd, 4th, 5th year (based on FOB value of exports (Rs.) & (US.$) of Entire Production)
     
21. Foreign Exchange outgo  
(1) Import of machinery
(2) Import of raw material & components
(3) Import of spares & consumables
(4) Repatriation of dividends & profits to foreign collaborators.
(5) Royalty
(6) Lumpsum know-how fee
(7) Design & Drawing fee
(8) payment to foreign technicians
(9) payment on training of indian technicians abroad
(10) Commission on export etc.
(11) Foreign travel
(12) Amount of interest to be paid on external commercial borrowing / deferred payment credit (specify details)
(13) Any other payments (specify details) net foreign exchange earnings in five years (in US.$)
     
22. Generation of rejects / sub-standard goods of the finished goods (in case rejects are more than 5% estimated percentage with justification may be given)  
1. Percentage of 5 years production
2 (Quantity) Unit
3 Value in Rs. (Lacs)
     
23. (a) State whether any of the required components are proposed to be sub-contracted to Small Scale and ancillary units (yes / no)
(b) Name of the component.
(c) Percentage of this component in relation to the total expected value of production (%)
(d) Whether item of sub-contracting envisages any change in form / nature / character of the goods(yes / no)
     
24. Employment  
(a) Supervisory (Existing and proposed)
(b) Non - supervisory (Existing and proposed)
     
25. Average value addition on FOB Value of exports in 5 years(%).
     
26. (a) Whether marketing tie-up / buy-back envisaged / finalised (yes / no)
(Submit documents, if any)
(b) Destination of exports (in percentage)
(1) general currency area (%)
(2) rupee payment area (%)
     
27.(i) Any special feature of the project proposal which you want to highlight (Please attach the Project report, for new units)  
(ii) (a) Whether any industrial licence or loi / lop has been issued under EOU / EPZ scheme? If
so, please give full particulars especially reference number, date of issue , items of manufacture and progress of implementation of each project.
 
(b) Whether you have submitted any other application for loi / lop which is pending with the
board of approval (s) ? if so, please give particulars like reference number, name under which application made, items of manufacture etc.
 
(iii) Whether your firm or nay of partners / directors who are also partners / directors of another
company or its associate concerns have been debarred from getting any licence / letter of indent / letter of permission under the export and import (control) act., 1947 / foreign trade (development and regulation) act., 1992 or otherwise penalised.
 
     
28. Full name and residential address of the signatory with designation.
     
29. 30 - Letterheads duly signed of right hand side bottom & 15 letterheads unsigned.  
     
30. One rubber stamp with designation.  
     
31 Advance Cheque of Rs. 10,000/- from Rs. 40,000/- being our service charges EOU / EPZ. (Cheque favouring Bigis Impex Consultancy) and balance within 7 days on receipt of sanction / approval.  

If you have any queries, please feel free to call or fax us. We will be glad to serve you.

Thanking you,

Yours faithfully,
Impex Solution


Bharat Parekh
Partner