Promotion Council for EOUs & SEZ Units
of Commerce and Industry, Govt. of India)
Bhikaiji Cama Bhawan, Bhikaiji Cama Place, New Delhi-110066
Tel : 011-26167042/ 26165805/26166185 Fax : 011-26165538
Email : email@example.com
CIRCULAR NO. 1
DETAILED ANALYSIS OF THE NEW EXIM POLICY BY SHRI L. B. SINGHAL,
DIRECTOR GENERAL, EXPORT PROMOTION COUNCIL FOR EOUS & SEZ UNITS
edition 2003-04 of EXIM Policy 2002-07 has been released by the
Honourable Commerce Minister on March 31, 2003. Some of the prominent
changes, incorporated in this edition, in the EOU/SEZ Scheme are
given as follows:-
Export Oriented Units are now required to maintain only positive
Net Foreign Exchange Earning. The requirement of export commitments
has also been done away with. As you are aware in the last EXIM
Policy there was an Appendix 1 in the EXIM Policy which prescribed
various NFEP requirements for different categories of EOUs. This
NFEP varied from positive to 25%. Similarly, this Appendix also
required that EOUs shall have to achieve minimum export performance
level of US$ 3.5 million or three times the CIF value of imported
capital goods whichever is higher. This Appendix 1 has been deleted
in this EXIM Policy. Accordingly the requirement of minimum export
performance has been deleted. Now, Paragraph 6.5 of the EXIM Policy
simply prescribe that EOUs/EHTP/STP Units shall be a positive net
foreign exchange earner. NFE shall be calculated cumulatively for
a period of 5 years from the commencement of the production.
is a major change for EOU Scheme. Earlier, because of export performance
commitments, many units had to face adjudication proceedings because
inspite of achieving minimum prescribed NFEP, they were not able
to achieve export performance level.
Export Oriented Units have been allowed to export all goods except
the items which are prohibited and the items which are SCOMET items.
Earlier, Paragraph 6.1 of the EXIM Policy has provided that EOUs
can export all products except restricted and prohibited items on
export. Now Paragraph 6.2 of the EXIM Policy prescribes that it
can export al items except prohibited items and SCOMETE items. However,
in this context, Paragraph 17.7 of Appendix 14-I of Handbook of
Procedures may please be referred to.
Agriculture/horticulture processing EOUs have now been allowed to
provide inputs and equipments to contract farmers in DTA to promote
production of goods. Paragraph 6.2(e) of the EXIM Policy now provides
that such units may be permitted to take specific goods for use
outside the bonded area. List of these goods have been given in
Appendix 14-I J of Handbook of Procedure Volume-I.
should provide a major boost to agriculture EOUs as this kind of
requests have been coming specifically from GHERKINS units from
Jewellery sector has been given a major thrust in this EXIM Policy.
Paragraph 3.10 of EXIM Policy identifies areas as thrust sectors
Textiles including garments
Gem & Jewellery
view of identification of Gem & Jewellery Sector as thrust sector,
following major changes have been incorporated for Gem & Jewellery
Sector in the EOU/SEZ Scheme.
Job work facility has been extended for jewellery units in EOUs.
Accordingly Paragraph 6.15(a) of the EXIM Policy has been amended.
Earlier, Paragraph 6.15(a) provided that EOUs other than gem &
Jewellery units may sub-contract in DTA. Now Paragraph 6.15(a) of
EXIM Policy provide that EOUs including Gem & Jewellery Units
may sub-contract in DTA.
Jewellery units have also been allowed wastage for sub-contracting.
Earlier Paragraph 6.15(d) of EXIM Policy specifically prescribed
that EOUs/SEZ Units shall not be eligible for wastage of manufacturing
loss against jewellery. Now Paragraph 18.2(d) of Appendix 14.I of
Handbook of Procedures specifically prescribe that EOUs shall be
eligible for wastage as applicable for sub-contracting and against
Jewellery EOUs are permitted to export jewellery on the submission
of national rate certificate issued by the nominated agency. The
time period of this certificate has been increased to three days
from the existing one day. In this context Paragraph 6.4 of Appendix
14-I of Handbook of Procedures Volume I may please be seen. This
was also a major irritant for jewellery units which has been removed.
EOUs/EHTP/STP units have now been allowed to procure duty free goods
and services from bonded warehouses in DTA/international exhibitions
held in India. In this context Paragraph 7.1 of Appendix 14-I of
Hanbook of Procedures Volume I may please be seen.
Time period for utilization of the goods by the EOUs has been extended
from a period of 3 years. Earlier, Paragraph 6.2© (iii) had
provided that goods shall be utilized by EOUs within a period of
2 years. Now Paragraph 7.8© of Appendix 14-I of Handbook of
Procedures Volume I prescribes that goods shall be utilized within
a period of 3 years or as may be extended by customs authorities.
Second hand capital goods have been permitted to be imported without
any age limit. Earlier, paragraph 6.3 of the EXIM Policy provided
that second hand capital goods may also be imported without payment
of duty. Now this has been amended to read as second hand capital
goods may be imported duty free without any age limit.
In Paragraph 9.1 of Appendix 14-I of Handbook of Procedures Volume
I it has been specifically provided that NFE shall be calculated
cumulatively for a period of 5 years from the commencement of production.
This was not prescribed in Paragraph 6.5 of the Handbook of Procedures.
Another substantive change has been brought about regarding amortization
of capital goods. Earlier, as per Paragraph 6.5 of the EXIM Policy
(not iii) imported capital goods had to be amortized over a period
of 8 years where investment was above Rs. 5 crore and in 5 years
in other cases. Now Capital Goods can be amortized over a period
of 10 years at a uniform rate of 10% for all the units irrespective
of level of investment. Paragraph 9.4 of Appendix 14-I of Handbook
of Procedures Volume I may please be referred to.
change coupled with the requirement of only positive foreign exchange
earning and deletion of condition of export performance will help
in a big way to these units and chances of default have been minimized.
It is expected that with these changes our exporters will be able
to increase their exports in substantial way.
In EOU sector only projects having minimum investment of Rs. 1 crore
and above in building, plant and machinery shall be allowed. This
limit was earlier Rs. 50 lakhs. Accordingly, Paragraph 6.7(a) of
the EXIM Policy has been amended.
Duty structure on the DTA sale has been continued as earlier.
Sector specific requirements which were given earlier in Appendix
14B of Handbook of Procedures have been now indicated in Appendix
(1) © of Handbook of Procedures. Now sector specific conditions
are there for coffee, high grade iron ore, sale of surplus power,
plastic units. Sector specific conditions relating to rice, tea,
granite is not appearing this time.
LOP/LOI shall be valid for a period of 5 years from the date of
commencement of production. This period can be extended further
by the Development Commissioner concerned for a period of 5 years
at a time. EOUs shall have separate earmark premises for separate
LOPs. Paragraph 4.9 and 4.10 of Appendix 14-I of Handbook of Procedures
may please be seen.
Sale of scrap/waste/remnants arising out of production process or
in connection therewith in DTA shall be as per the standard input/output
norms notified under the Duty Exemption Scheme. Paragraph 12.1(d)
of Appendix 14-I of Handbook of Procedure Volume I may please be
For export of samples, a major simplification has been brought about.
Earlier, certain limit of supply of samples in DTA up to 1% of value
of previous years exports was there. Now Paragraph 24.3 of Appendix
14-I of Handbook of Procedures Volume I prescribes that EOUs may
export free samples without any limit including samples made in
wax moulds, silver moulds and rubber moulds through all permissible
mode of export including through courier agencies/post.
Paragraph 24.1 of EXIM Policy permits supply or sale of samples
in DTA for display for market promotion without any limit.
Another substantial change has been brought about in the depreciation
norms. As per Paragraph 6.20(d) of earlier Handbook of Procedures,
the depreciation norms for capital goods of units including electronics
were subject to overall limit of 90%. However, now, Paragraph 29.6
of Appendix 14-I of Handbook of Procedures Volume I prescribes that
the depreciation upto 100% is permissible for capital goods in 5
years in case of IT items and 10 years in case of other items.
Export/import of all products through post, parcel/courier have
been allowed sale of products through exhibitions and duty free
shops or shops set up abroad. Paragraphs 20, 21 and 22 of Appendix
14-I of Handbook of Procedures may please be seen.
Chapter 6 of Handbook of Procedures has been deleted. Comprehensive
regulations have been given in Appendix 14-I of Handbook of Procedures.
Domestic Sale from EOUs have been exempted from SAD. Though, Highlights
mentions exemption of SAD for sale from SEZs only, but Ministry
of Commerce has confirmed that this exemption is also applicable
for sale from EOUs.
Council has been requesting that unified customs notification must
be issued. This request has also been accepted and unified customs
notification is being issued.
relating to agriculture sector, exemption from SAD, wastage for
gem & jewellery units, exports/imports of all products through
post, parcel/courier, amortization period of capital goods over
a period of 10 years, sale of all products through exhibitions,
duty free capital goods over a period of 10 years, sale of all products
through exhibitions, duty free shops or shops set up abroad, validity
of LOP/LOI, sale of scrap/waste/remnants as per standards input/
output norms, 100% depreciation of capital goods, import of second
hand capital goods without age restrictions, export of samples without
any limit etc. as explained above have been applicable for SEZ units
also. The detailed guidelines relating to SEZs are given in Appendix
14.2 (Page No. 198-219) of Handbook of Procedures Volume I. Chapter
7 of earlier Handbook of Procedures has been deleted.
addition to the above stated changes following other changes have
been brought about in SEZs:-
Supply from DTA to SEZs shall be entitled for benefit of drawback
or DEPB. Paragraph 7.9(a) of the EXIM Policy may please be seen.
SEZ Units shall be entitled for exemption from Central Sales Tax.
Earlier Paragraph 7.9(a) (iii) had provided that SEZ units shall
be entitled for reimbursement from CST. Now this paragraph prescribes
that these units shall be entitled for exemption from CST.
Paragraph 7.1(b) of the EXIM Policy also has been amended to provide
that goods and services going into SEZ area from DTA shall be treated
Paragraph 7.2(a) has been amended. Accordingly, now prohibited items
and SCOMET items cannot be exported from SEZ units.
Paragraph 7.2(f) of the EXIM Policy has been amended. Earlier, Paragraph
7.2(f) had permitted SEZ Units to import/procure goods from DTA
without payment of duty for setting up of units in the Zone. Now
SEZ units are permitted to import/procure goods and services without
payment of duty for setting up, operation and maintenance of units
in the Zone.
A substantive change has also been brought about in Para 7.2(d)
of the EXIM Policy. As per earlier para SEZ units were allowed to
import without payment of duty, all types of goods by creating a
central facility for use by software development units in SEZ. Now,
as per the amended Paragraph 7.2(d) all SEZ units have been extended
this facility for creating a central facility for use by units in
Supply of all Information Technology Agreement Items (ITA-1) in
DTA shall be taken into account for the purpose of NFEP for both
EOUs and SEZ units. Paragraphs 6.9(h) and 7.8© (vii) of the
EXIM Policy have been amended accordingly.
Paragraph 20.2 has been specifically incorporated in Appendix 14.II
of Handbook of Procedures providing for exemption from Service Tax.