Promotion Council for EOUs & SEZ Units
(Ministry 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 : firstname.lastname@example.org
CIRCULAR NO. 40 DATED 8.4.2005
Sub : Changes in EOU/SEZ
Scheme in the Annual Supplement to Foreign Trade Policy
announced by Honble Commerce & Industry Minister.
Five year Foreign Trade Policy
was announced by Shri Kamal Nath ji, Honble Commerce
& Industry Minister on 30-8-3004. In the Foreign Trade
Policy many substantive changes were brought in the EOU
Scheme and the new Chapter of Free Trade Warehouse Zone
was introduced. These changes were explained vide EPCES
Circular No. 1 dated 1-7-2004. Most of these provisions
relating to EOU and SEZ Scheme have already been implemented.
Annual Supplement for 2005-2006 to this FTP was released
by Honble Commerce & Industry Minister today.
In the Annual Supplement some more changes have been brought
about in the EOU/SEZ Scheme.
A. EOU SCHEME
i) Paragraph 6.2(f) of the
FTP has been amended. Gems & Jewellery units obtaining
gold/silver/platinum from the nominated agencies have been
permitted to export gold/silver/platinum jewellery within
90 days from the date of release. This time period was 60
days earlier. Hence the time period under this paragraph
has been increased from 60 days to 90 days.
ii) Paragraph 6.6(d) of the
FTP has been amended. Paragraph 6.6(d) prescribed the minimum
investment of Rs. 1 crore. This paragraph further prescribes
certain sectors which are exempted from the requirement
of investment of Rs. 1 crore on plant and machinery. The
last line of this paragraph had stated that sector-wise
investment criteria shall be fixed by Board of Approvals.
This sentence has been deleted. This sentence was creating
a bit of confusion. The deletion of this sentence has removed
the ambiguity and now units in handicrafts/agriculture/floriculture/aquaculture/animal
husbandry/ information technology, services, brass hardware,
handmade jewellery are exempted from investment criteria
of Rs. 1 crore in plant and machinery.
iii) Paragraph 6.8(d) has
been amended. Now this paragraph prescribes that rejects
within an overall limit of 50% may be sold in the
DTA on payment of duties as applicable to sale under paragraph
6.8(d) on prior intimation to customs authorities. This
change is basically clarificatory in nature.
iv) Paragraph 6.8(k) of the
FTP has been amended. As per the amendments in case of new
EOUs advance DTA sale will be allowed not exceeding 50%
of its estimated export for the first year except the pharmaceutical
units where this will be based on its estimated exports
for the first 2 years. Hence underlined sentence has been
added now and accordingly pharmaceutical units are entitled
for advance DTA sale based on estimated export for first
v) Paragraph 6.11(c )(iii)
has been deleted. This paragraph had provided reimbursement
of central excise duties/additional excise duty paid on
bulk tea procured from Licence Auction Centres. This has
been probably done as additional excise duty on tea has
been abolished in the Budget.
vi) Paragraph 6.11(c )(v)
has been amended. Existing paragraph has provided exemption
from payment of service tax. This paragraph has been
amended to read as cenvat credit on service tax paid.
It may be recalled that in the FTP supplies from DTA to
EOU were exempted from service tax. However DoR had issued
a circular stated that service tax will have to be paid
and a cenvat credit can be taken against the service tax.
Accordingly now the provision in the FTP has also been amended.
vii) Paragraph 6.12(c) of
the FTP has been deleted. Paragraph 6.12(c) had provided
that OBUs will extend credit to EOUs on the same terms and
conditions as extended to units in SEZs. However, RBI did
not issue guidelines for implementing this provisions. FTP
has deleted this provision.
viii) Paragraph 6.13(b) of
the FTP has been amended. Now EOUs have been allowed to
transfer capital goods or give on loan to other EOU/EHTP/STP
/BTP/SEZ units with prior intimation to the concerned DC
and Customs authorities. Earlier prior permission of the
DC was required. Hence instead of prior permission of the
DC now the capital goods can be transferred under prior
ix) Paragraph 6.14(b)(i)
has been amended. In the last FTP it was provided that EOU
can undertake job work for export on behalf of DTA exporters
and they shall be entitled for duty paid on the inputs by
way of All Industry Rate of Duty Drawback/brand rate of
duty drawback. Now the words All Industry Rate of Duty Drawback
have been deleted and the units will have to claim only
Brand Rate of Duty Drawback This change is certainly not
in accordance with the spirit of the Government which emphasized
on reduction in transaction cost.
x) Paragraph 6.17(a) of the
FTP has been amended. The existing paragraph provided that
the general provision of the policy relating to export
of replacement/repair of goods under paragraph 2.37 of Policy
would also apply equally to EOUs/EHTP/STP/BTP units.
Now this sentence has been amended to read as the
general provision of the policy relating to export/import
of replacement/repair of goods would also apply to EOU/EHTP/STP/BTP
units. Accordingly the words under Paragraph
2.37 have been deleted. This would help as para 2.37
covered only replacement of goods. Import of goods for repair
and subsequent re-export were covered under Paragraph 2.38
of the FTP. Hence it seems that now the facility covered
under paragraph 2.38 of the FTP also stand extended.
xi) Paragraph 6.18(d) of
the Policy has been amended substantially. The procedure
of de-bonding of EOUs has been simplified considerably.
Now the unit proposing to exit from the EOU Scheme shall
intimate the DC and customs and central excise authorities
in writing. The unit shall assess the duty liability arising
out in de-bonding and submit the details of such assessment
to customs and central excise authorities. The Customs and
Central excise Authorities shall confirm the duty liability
on priority basis. After payment of duty and clearance of
all dues the unit shall obtain "No Dues Certificate"
from the Customs and Central Excise authorities. On the
basis of No dues certificate so issued by the Customs and
Central Excise authorities, the unit shall apply to the
Development Commissioner for final debonding. In case there
is no proceeding pending under FT(DR) Act 1992, the Development
commissioner shall issue final debonding order within a
period of 7 working days. During the period between "No
dues certificate" issued by the Customs and Central
Excise authorities and the final debonding order by the
Development Commissioner, the unit shall not be entitled
to claim any exemption for procurement of capital goods
or input. The unit can however, claim Advance License /
DFRC / DEPB / Duty Drawback.
xii) Paragraph 6.7(a) of
the Handbook of Procedures has been amended. In this paragraph
last sentence has been added as The Granite Sector
would also be allowed to take spares upto 5% of the value
of the Capital Goods to the quarry site. Hence the transfer
of spares to the query site has been permitted for the granite
sector. This request was strongly made by granite units
in Hyderbad Open House.
xiii) Paragraph 6.29.4 has
been added in the FTP. As per this new provision a EOU has
been allowed on the basis of the records maintained by them
on prior intimation to customs authorities to send samples
to other EOUs for display on returnable basis within a period
of 30 days. This request had been received from Gem &
Jewellery sector and was discussed in the Open Houses. This
has been accepted in the FTP.
xiv) As per the highlights
released by the DGFT EOUs have been permitted to claim IT
exemption in respect of income on export proceeds realized
within a period of 12 months from the date of export. It
may be recalled that paragraph 6.12(d) of the FTP had permitted
EOUs to realize export proceeds within 12 months. However,
Section 10B of the IT Act permits IT exemption only if the
export proceeds are realized within 6 months. EPCES had
represented to Secretary Revenue that Section 10B of the
IT Act should be amended. Now in view of the specific highlights
hopefully the provisions relating to IT Act would also be
xv) Highlights have pointed
out that Advance Licence Holders have been permitted to
take goods from EOUs/EHTP/STP/BTP without the requirement
of ARO and direct debit of advance licence should be allowed
by the Bond Officer to these units. The provision to this
extent was already existing in Paragraph 4.1.11 of FTP.
Now highlights clearly point out that a detailed procedure
in this regard shall be prescribed by the CBEC.
xvi) Paragraph 6.16 of the
Handbook of Procedures has been amended. As per the amended
provison transfer of power from captive power plants (DG
Sets) from one unit of EOU/EHTP/STP/BTP to another is permitted.
Earlier transfer of power from DG sets only was allowed
and accordingly the word captive power plant has been
i) Shri Kamal Nath ji, Honble
Commerce & Industry Minister, while releasing the FTP
specifically announced that the Draft SEZ Act has already
been sent to the Cabinet for further discussions. He assured
that SEZ Bill will be introduced in this session of Parliament
when the Parliament is re-convened.
ii) DoR has issued circular
No. 21/2005-Cus dated 6-4-2005 clarifying that supply of
goods from DTA to SEZ units during the period 1-4-2003 to
11-5-2004 shall be entitled for DEPB benefits. Through this
circular DoR has withdrawn its circular No. 11/2004-Cus
dated 5.2.2004. I have already sent a copy of this circular
vide EPCES Circular No. 39 dated 7-4-2005.
iii) Paragraph 7.9 (b)(iii)
of the FTP has been deleted. This paragraph has provided
reimbursement of central excise duties/additional excise
duty paid on bulk tea procured from Licence Auction Centres.
This has been probably done as additional excise duty on
tea has been abolished in the Budget.
iv) Paragraph 7.12(b)(i)
has been amended. Accordingly the SEZ units have been permitted
to send goods, finished or semi-finished, including studded
jewellery to be taken outside the zone for sub-contracting
and to be brought back within 90 days. Earlier the time
period prescribed was 30 days.