Units undertaking to export their entire production of goods and services (except permissible sales in the DTA), may be set up under the Export Oriented Unit (EOU) Scheme, Electronic Hardware Technology Park (EHTP) Scheme, Software Technology Park (STP) Scheme or Bio-Technology Park (BTP) scheme for manufacture of goods, including repair, re-making, reconditioning, re-engineering, and rendering of services. Trading units, however, are not covered under these schemes.

Export and Import of Goods



An EOU/EHTP/STP/BTP unit may export all kinds of goods and services except items that are prohibited in the ITC (HS). Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be subject to fulfillment of the conditions indicated in the ITC (HS).




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. The units shall also be permitted to import goods including capital goods required for the approved activity, free of cost or on loan/lease from clients. The import of capital goods will be on a self certification basis.




State Trading regime shall not apply to EOU manufacturing units.




EOU/EHTP/STP/BTP units may import/procure from DTA without payment of duty certain specified goods for creating a central facility which will be used by software units. These software units can be EOU/ DTA units who will use the facility for export of software.




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 the bonded area.




Gems and jewellery EOUs may source gold/silver/platinum through the nominated agencies also. Units obtaining gold/silver/platinum from the nominated agencies shall export gold/silver/platinum jewellery within 60 days from the date of release. This shall not, however, apply to outright purchase of precious metal from the nominated agencies.




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 the buyer subject to RBI clearance, if any.




Procurement and supply of spares and consumables required for the goods manufactured by the units may be allowed to be exported along with goods upto 1.5% of FOB value of exports. This shall, however, not count towards NFE calculation, for concessional rate DTA sales or for Income Tax exemption.

Second Hand Capital Goods


Second hand capital goods without any age limit, may also be imported duty free.

Leasing of Capital Goods


An EOU/EHTP/STP/BTP unit may, on the basis of a firm contract between the parties, source the capital goods from a domestic/foreign leasing company without payment of customs/excise duty. In such a case, the EOU/EHTP/STP/BTP unit and the domestic/foreign leasing company shall jointly file the documents to enable import/procurement of the capital goods without payment of duty.

Net Foreign Exchange Earnings



EOU/EHTP/STP/BTP unit shall be a positive net foreign exchange earner. Net Foreign Exchange Earnings (NFE) shall be calculated cumulatively in blocks of five years, starting from the commencement of production.

Letter of Permission/ Letter of Intent and Legal Undertaking



On approval, a Letter of Permission (LOP) /Letter of Intent (LOI) shall be issued by the Development Commissioner/designated officer to EOU/EHTP/STP/BTP unit. The LOP/LOI shall have an initial validity of 3 years by which time the unit should have commenced production. Its validity may be extended further up to 3 years by the competent authority. However, proposals for extension beyond six years shall be considered in xceptional circumstances, on a case-to-case basis by the BOA. Once the 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 the Development Commissioner for a period of 5 years at a time.




LOP/LOI issued to EOU/EHTP/STP/BTP units by the concerned authority would be construed as a licence for all purposes.




The unit shall execute a legal undertaking with the Development Commissioner concerned . Failure to ensure positive NFE or to abide by any of the terms and conditions of the LOP/LOI/IL/LUT shall render the unit liable to penal action under the provisions of the Foreign Trade (Development & Regulation) Act, 1992 and the Rules and Orders made there under without prejudice to action under any other law/rules and cancellation or revocation of LOP/LOI/IL.

Investment Criteria



Only projects having a minimum investment of Rs.1 crore in plant and machinery shall be considered for establishment as EOUs under the scheme. 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 , handmade Jewellery and such other sectors as may be decided by the BOA. Sector-wise investment criteria shall be fixed by BOA.

Application & Approvals



Applications for setting up of units under EOU scheme other than proposals for setting up of unit in the services sector (except R&D , software and IT enabled services, or any other service activity as may be delegated by the BOA), shall be approved or rejected by the Units Approval Committee within 15 days as per the criteria indicated in Handbook (Vol-I).




In other cases, approval may be granted by the Board of Approval (BOA) set up for this purpose as indicated in the Handbook (Vol-I)




Proposals for setting up EOU requiring industrial licence may be granted approval by the Development Commissioner after clearance of the proposal by the Board of Approval and Department of Industrial Policy and Promotion within 45 days.

DTA Sale of Finished Products/ Rejects Waste/ Scrap/ Remnants and By-products


The entire production of EOU/EHTP/STP/BTP units shall be exported subject to the following:



Units, other than gems and jewellery units, may sell goods upto 50% of FOB value of exports subject to fulfillment of positive NFE on payment of concessional duties . Within the entitlement of DTA sale, the unit may sell in DTA its products similar to the goods which are exported or expected to be exported from the units. No DTA sale at concessional duty shall be permissible in respect of motor cars, alcoholic liquors, books and tea (except instant tea) or by a packaging/ labeling /segregation/ refrigeration unit/ compacting/micronisation/pulverization/granulation /conversion of mono-hydrate form of chemical to anhydrous form or vice-versa and such other items as may be notified from time to time.

Sales made to a unit in SEZ shall also be taken into account for the purpose of arriving at FOB value of export by EOU provided payment for such sales are made from EEFC Account. Sale to DTA would also be subject to mandatory requirement of registration of pharmaceutical products (including bulk drugs).




For services, including software units, sale in the 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.




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, the 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.




Unless specifically prohibited in the LOP, rejects may be sold in the Domestic Tariff Area (DTA) on payment of duties as applicable to sale under paragraph 6.8(a) on prior intimation to the 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.












Scrap/ waste/ remnants arising out of production process or in connection therewith may be sold in the DTA as per the Standard Input-Output norms notified under the Duty Exemption Scheme on payment of concessional duties as applicable within the 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, the Development Commissioner may fix ad-hoc norms on the basis of data for a period of six months and within this period, he shall get the norms fixed by the BOA. Sale of waste/scrap/remnants by units not entitled to DTA sale or sales beyond the DTA sale entitlement, shall be on payment of full duties. The scrap/waste/remnants may also be exported.




There shall be no duties/taxes on scrap/waste/ remnants in case the same are destroyed with the permission of Customs authorities.




By-products included in the LOP may also be sold in the 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 the entitlements of paragraph 6.8 (a) shall also be permissible on payment of full duties.




EOU/ EHTP/ STP/BTP units may sell finished products, which are freely importable under the Policy in the DTA under intimation to the Development Commissioner against payment of full duties provided they have achieved the positive NFE.




In the case of units manufacturing electronics hardware and software, the NFE and DTA sale entitlement shall be reckoned separately for hardware and software.




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 the purpose of payment of duty.




In case of new EOUs, advance DTA sale will be allowed based on its estimated exports for the first year .

Other Supplies in DTA


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




Supplies effected in DTA to holders of advance licence, advance licence for annual requirement/DFRC /EPCG scheme.




Supplies effected in DTA against payment from the Exchange Earners Foreign Currency (EEFC) Account of the buyer in the DTA or against foreign Exchange remittance received from overseas.



( c)

Supplies to other EOU/EHTP/STP//BTP/SEZ units provided that such goods are permissible for procurement in terms of paragraph 6.2 of the Policy.




Supplies made to bonded warehouses set up under the policy and/ or under section 65 of the customs act and free trade and warehousing zones, where payment is received in foreign exchange.




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 the Ministry of Finance .




Supply of services (by services units) relating to exports paid for in free foreign exchange or for such services rendered in India Rupees which are otherwise considered as having been paid for in free foreign exchange by RBI.




Supplies of Information Technology Agreement (ITA -1) items and notified zero duty telecom/ electronic items.

Export through others


An EOU/EHTP/STP/BTP unit may export goods manufactured/software developed by it through another exporter or any other EOU/EHTP/STP/SEZ unit subject to the conditions mentioned in para 6.19 of Handbook.

Entitlement for supplies from the DTA



Supplies from the DTA to EOU/EHTP/STP/BTP units will be regarded as "deemed exports" and the DTA supplier shall be eligible for the relevant entitlements under chapter 8 of the Policy 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 the DTA supplier, be eligible for obtaining the entitlements specified in chapter 8 of the Policy. For the purpose of claiming deemed export duty drawback, they shall get Brand Rates fixed by the Development Commissioner wherever All Industry Rates of Drawback are not available.




Suppliers of precious and semi-precious stones, synthetic stones and processed pearls from DTA to EOU shall be eligible for grant of Replenishment Licenses at the rates and for the items mentioned in the Handbook (Vol.1).



( c)

In addition, the EOU/EHTP/STP/BTP units shall be entitled to the following:-





Reimbursement of Central Sales Tax on goods manufactured in India .





Exemption from payment of Central Excise Duty on goods procured from DTA on goods manufactured in India.





Reimbursement of Central Excise Duty/ additional excise duty paid on bulk tea procured from licenced auction centres.


Reimbursement of Duty paid on fuels procured from domestic oil companies. as per the rate of Drawback notified by the DGFT from time to time.





Exemption from payment of service tax.

Other Entitlements




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


Exemption from payment of Income Tax as per the provisions of Section 10A and 10B of Income Tax Act.



Exemption from industrial licensing for manufacture of items reserved for SSI sector.


( c)

An Offshore Banking Unit will extend credit on the same terms and condition as extended to units to SEZ.



Export proceeds will be realized within 12 Months.



Will be allowed to retain 100% of its export earning in the EEFC account.



The Units will not be required to furnish bank guarantee at the time of import or going for job work in DTA, where the unit has (i) a turnover of rupees 5 crores or above, (ii) the unit is in existence for at least three years and (iii) unit having an unblemished track record.



100% FDI investment permitted through Automatic Route similar to SEZ units.



Inter Unit Transfer



Transfer of manufactured goods from one EOU EHTP/STP/BTP unit to another EOU/EHTP/STP/BTP/ SEZ unit will be allowed.



( b)

Capital goods may be transferred or given on loan to other EOU/EHTP/STP/BTP/SEZ units with prior permission of the concerned Development Commissioner with prior intimation to Customs authorities.




Goods supplied by one unit of EOU/EHTP/STP/BTP to another unit shall be treated as imported goods for the second unit for the purpose of payment of duty, on DTA sale by the second unit.










EOU/EHTP/STP/BTP units, including gem and jewellery units, may on the basis of annual permission from the 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 the DTA.

These units may also subcontract upto 50% of the overall production of the previous year in value terms for job work in DTA with the permission of the Customs Authorities.




EOU may, on the basis of annual permission from the Customs authorities, undertake job work for export, on behalf of DTA exporter, provided that the goods are exported directly from EOU and export document shall jointly be in the name of DTA/EOU. For such exports, the DTA units will be entitled for refund of duty paid on the inputs by way of All Industry Rates of drawback/ Brand Rate of duty drawback.







Duty free import of goods for execution of export order placed on EOU by Foreign Supplier on job work basis would be allowed subject to the condition that no DTA clearance shall be allowed .




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 the unit. .




Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner. 



( c)

Scrap/waste/remnants generated through job work may either be cleared from the job worker’s premises on payment of applicable duty on transaction value or destroyed in the presence of Customs/ Excise authorities or returned to the unit. Destruction shall not apply to gold, silver, platinum, diamond, precious and semi precious stones.




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 Handbook (Vol-I).

Sale of Un-utilised Material



In case an EOU/EHTP/STP/BTP unit is unable to utilize the goods and services, imported or procured from DTA, it may be (i) transferred to another EOU/SEZ/EHTP/STP/BTP unit or (ii) disposed off in the DTA with the approval of the Customs authorities on payment of applicable duties and submission of import licence , if required, or (iii)exported. Such transfer from EOU/EHTP/STP/BTP unit to another such unit would be treated as import for the receiving unit.




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 the DTA on payment of applicable duties. The 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 the Unit after intimation to the Custom authorities or destroyed outside the Unit with the permission of Custom authorities. Destruction as stated above shall not apply to gold, silver, platinum, diamond, precious and semi precious stones.



(c )

In the case of textile sector , disposal of leftover 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/custom officers certify that these are leftover items.




Disposal of used packing material will be allowed on payment of duty on transaction value.

Reconditioning Repair and Re-engineering


EOU/EHTP/STP/BTP units may be set up with the approval of BOA to carry out reconditioning, repair, remaking, testing, calibration, quality improvement, up-gradation of technology and re-engineering activities for export in foreign currency. The provisions of paragraphs 6.8, 6.9,6.10, 6.13, 6.14 of policy and para 6.29 of Handbook shall not, however, apply to such activities.

Replacement/ Repair of imported/ Indigenous Goods



The general provisions of the Policy relating to export of replacement/repair of goods under para 2.37 of Policy would also apply equally to EOU/EHTP/STP/BTP units . Cases not covered by these provisions shall be considered on merits by the Development Commissioner.




The goods sold in the DTA and not accepted for any reasons may be brought back for repair/ replacement, under intimation to the concerned jurisdictional Customs/Excise authorities.




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, the goods may be brought back from the foreign suppliers or their authorized agents in India or indigenous suppliers. However destruction shall not apply to precious and semi precious and precious metals.

Exit from EOU Scheme



With the approval of the Development Commissioner, EOU units may opt out of the scheme. Such exit from the scheme shall be subject to payment of Excise and customs duties and the industrial policy in force at the time of exit.




If the unit has not achieved the obligations under the scheme, it shall also be liable to penalty at the time of exit.




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 the Ministry of Commerce and Industry (Department of Commerce) at the price to be determined by that agency.




An EOU//EHTP/STP/BTP unit may also be permitted by


the Development Commissioner, to exit from the scheme on payment of duty on capital goods under the prevailing EPCG Scheme as a one time option. This will be subject to fulfillment of the eligibility criteria under that Scheme and standard conditions indicated in Handbook (Vol-I).




Units proposing to exit from EOU scheme should obtain permission for in principle approval and submit details of imports and exports made to the Central Excise/Customs Authority. After such verification, the said authority will assess the duty payment and the unit will pay the duty so assessed and obtain ‘no dues certificate’ from the excise authority. During the period between such payment of customs duty and obtaining the final debonding letter , the unit will not be entitled to claim any exemption for procurement of capital goods or inputs. They can however, claim DEEC/DEPB/DFRC/Duty Drawback .




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 the units are subsequently converted to EOU, in such cases removal of such capital goods to DTA after de-bonding would be without payment of duty. Similarly in cases where a DTA unit imported capital goods under the EPCG Scheme as a DTA units and after completely fulfilling the export obligation under the EPCG scheme gets converted into EOU, the unit would not be charged customs duty on CG at the time of removal of such capital goods in DTA .




Existing DTA units, may also apply for conversion into an EOU/EHTP/STP/BTP unit, and Income Tax benefits under Section 10B will be available under the scheme for plant, machinery and equipment already installed.




The existing EHTP/STP units may also apply for conversion/merger to EOU unit and vice-versa. In such cases the units will remain in bond and avail the exemptions in duties and taxes as applicable under the relevant scheme.

Monitoring of NFE



The performance of EOU/EHTP/STP/BTP units shall be monitored by the Units Approval Committee as per the guidelines given in Handbook (Vol-I).


Export through Exhibitions/Export Promotion Tours /Export through showrooms abroad/Duty Free Shops.




EOU/EHTP/STP/BTP are permitted to :



Export goods for holding/ participating in exhibitions abroad with the permission of Development Commissioner.




Personal carriage of gold/ silver/ platinum jewellery, precious, semi-precious stones, beads and articles.



Export goods for display/sale in the permitted shops set up abroad.




Display/sell in the permitted shops set up abroad or in the show rooms of their distributors/agents.




Set up show rooms/retail outlets at the International Airports.

 Personal Carriage Of Import / Export Parcels Including Through Foreign bound Passengers


Import/ export through personal carriage of gem and jewellery items may be under-taken as per the procedure prescribed by Customs. The export proceeds shall, however, be realized through normal banking channel. Import/export through personal carriage for units, other than gem and jewellery units, shall be allowed provided the goods are not in commercial quantity.

Export /Import by Post /Courier


Goods including free samples, may be exported/imported by airfreight or through Foreign Post Office or through courier, subject to the procedure prescribed by Customs.

Administration of EOUs/Power of Development Commissioner


Details of administration of EOUs and Power of Development Commissioner are given in Handbook (Vol.1).

Revival of Sick units


Subject to a unit being declared sick by the appropriate authority, proposals for revival of the unit or its take over may be considered by the Board of Approval.

Approval for EHTP/STP


In the case of units under EHTP/STP Schemes, necessary approval / permission under relevant paragraphs of this Chapter shall be granted by the officer designated by the Ministry of Communication and Information Technology, Department of Information Technology for the purpose instead of the Development Commissioner and by the Inter-Ministerial Standing Committee (IMSC) instead of BOA.

Approval of BTP


Bio-Technology Parks (BTP) would be notified by the DGFT on the recommendations of Department of Biotechnology. In the case of units in the BTP, necessary approval/permission under relevant provisions of this chapter will be granted by designated officer of the Department of Biotechnology.