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| Export Oriented Unit |
Export Oriented Units (EOUs) is another form of industrial unit that plays a significant role in the Indian economy, contributing to foreign exchange earnings and boosting industrial growth. In this article, we will delve into the concept of EOUs in India, their benefits, and the process of setting-up an EOU.
Export Oriented Unit (EOU) is a specialized industrial unit in India that is set up for the purpose of manufacturing goods and services primarily. These units are granted various incentives and benefits by the Indian government to promote exports and boost economic growth. EOUs are considered as a key player in India's export-driven economy, help in increasing foreign exchange earnings and creating employment opportunities.
Benefits of setting-up an EOU
There are numerous benefits associated with setting up an EOU in India, which make it an attractive option for companies looking to expand their export operations. Some of the key benefits include:
1. Tax incentives: EOUs are eligible for various tax incentives and exemptions, such as exemption from customs duty on imported raw materials and capital goods, exemption from goods and services tax on finished goods for export, and income tax benefits.
2. Duty-free imports: can import raw materials, capital goods, and other necessary inputs duty-free for the manufacturing of goods meant for export. This helps in reducing production costs and making the products more competitive in the international market.
3. Flexibility in operations: EOUs are given flexibility in their operations, such as the freedom to sell goods in the domestic market up to a certain percentage of their total turnover. This allows them to cater to both domestic and international markets, thereby diversifying their revenue streams.
4. Simplified procedures: Setting up an EOU involves simplified procedures for obtaining various licenses and approvals from the government. This helps in reducing the administrative burden on companies and expedites the process of starting operations.
5. Access to export promotion schemes: EOUs are eligible to avail various export promotion schemes offered by the government, such as the Merchandise Exports from India Scheme (MEIS) and the Export Promotion Capital Goods (EPCG) scheme. These schemes provide financial support and incentives to EOUs for enhancing their export capabilities.
Process of setting-up an EOU in India
Setting-up an EOU in India involves a series of steps that need to be followed in a systematic manner to ensure compliance with the regulatory requirements. The process can be broadly classified into the following stages:
1. Eligibility Criteria: The first step in setting-up an EOU is to ensure that the company meets the eligibility criteria specified by the government. Some of the key eligibility criteria include an estimate of positive Net Foreign Exchange Earning (NFE), compliance with environmental regulations, and adherence to export commitments.
2. Application submission: The next step involves submitting an application to the Director General of Foreign Trade (DGFT) for obtaining approval as an EOU. The application should include details such as the proposed location of the unit, the nature of the business, the products to be manufactured, and the export market.
3. Approval process: After the application is submitted, the DGFT will review the proposal and grant approval if it meets the eligibility criteria. The approval is typically valid for a period of 5 years and can be renewed thereafter.
4. Setting-up the unit: Once the approval is obtained, the company can proceed with setting up the EOU by acquiring land, constructing the factory, installing machinery, and recruiting personnel. The unit should comply with all relevant regulations and obtain necessary clearances from the designated authorities.
5. Operations and compliance: Once the unit becomes operational, it is required to comply with various regulations related to exports, customs, goods and services tax, and the income tax. Regular audits and inspections may be conducted by the designated authorities to ensure compliance with the regulatory requirements.
In conclusion, Export Oriented Units play a crucial role in driving India's export-led growth strategy and contributing to the country's economic development. The benefits offered to EOUs by the government, such as tax incentives-free imports, and access to export promotion schemes, make them an attractive option for companies looking to expand their export operations. Setting-up an EOU involves process that requires compliance with regulatory requirements and adherence to operational guidelines.
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