Lok Sabha Question No. 3479 (UNSTARRED), answered on 2015-12-21
Subject: Export Oriented Units
Ministry: COMMERCE AND INDUSTRY
Asked by: ANURAG SINGH THAKUR

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY (DEPARTMENT OF COMMERCE)

## LOK SABHA UNSTARRED QUESTION NO. 3479 TO BE ANSWERED ON 21 ST     DECEMBER, 2015

## EXPORT ORIENTED UNITS

## 3479. SHRI ANURAG SINGH THAKUR:

Will the Minister of COMMERCE & INDUSTRY ( वाणिज्य एवं उद्योग मंत्री ) be pleased to state:

- a) the  details  of  Export  Oriented  Units  (EOUs)  presently  functional  in  the  country, State/UT-wise;
- b) whether the number of EOUs has reduced during the last three years and the current year and if so, the details thereof, year-wise and the reasons therefor;
- c) whether there are certain issues concerning EOU scheme and if so, the details thereof along with the steps taken by the Government to address them;
- d) whether the Government has set up a committee to review, remodel and revamp EOU scheme and if so,  the  details  thereof  along  with  the  recommendations  made  by  the committee and the action taken by the Government thereon; and
- e) whether  the  Government  has  conducted  any  financial  study  or  comparative  study between  Special  Economic  Zone,  Export  Oriented  Units  and  Domestic  Tariff  Area Units and if so, the details thereof and if not, the reasons therefor?

## ANSWER

वाणिज्् य एवं उद्योग राज्् य मंत्री ( सीतारमि निममला श्रीमती ) ( स्वतंत्र प्रभार )

THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE AND INDUSTRY

(INDEPENDENT CHARGE)

(SMT. NIRMALA SITHARAMAN)

- (a)  :  The  details  of  Export  Oriented  Units  (EOUs)  presently  functional  in  the  country State/UT-wise as on 15.12.2015 are as under:

| State/UTs         |   Units | State/UTs        |   Units | State/UTs   |   Units | State/UTs     |   Units |
|-------------------|---------|------------------|---------|-------------|---------|---------------|---------|
| A & N Island      |       3 | Goa, Daman & Diu |      37 | Maharashtra |     224 | Sikkim        |       0 |
| Andhra Pradesh    |      83 | Gujarat          |     196 | Manipur     |       0 | Tamil Nadu    |     410 |
| Arunachal Pradesh |       0 | Haryana          |      65 | Meghalaya   |       1 | Telangana     |     171 |
| Assam             |       0 | Himachal Pradesh |       5 | Mizoram     |       1 | Tripura       |       0 |
| Bihar             |       1 | Jammu & Kashmir  |       2 | Nagaland    |       0 | Uttar Pradesh |      57 |

| Chandigarh           |   3 | Jharkhand      |   2 | Orissa      |   10 | Uttrakhand   |    2 |
|----------------------|-----|----------------|-----|-------------|------|--------------|------|
| Chhattisgarh         |   1 | Karnataka      | 446 | Pondicherry |   13 | West Bengal  |   55 |
| Dadra & Nagar Haveli |  20 | Kerala         |  77 | Punjab      |   10 | Yanam        |    0 |
| Delhi                |  17 | Madhya Pradesh |   8 | Rajasthan   |   57 | Total        | 1977 |

(b) : The number of EOUs has reduced during the last three years and current year. The details are as below:

| Year    |   Number of Functional EOUs |
|---------|-----------------------------|
| 2012-13 |                        2193 |
| 2013-14 |                        2141 |
| 2014-15 |                        2096 |
| 2015-16 |                        1977 |

The  main  reason  for  exit  of  EOUs  is  due  to  discontinuation  of  Income  Tax  benefits under Section 10B of Income Tax Act w.e.f. 1.4.2011.

(c) : There was an issue of reimbursement of Central Sales Tax (CST) paid by EOUs on purchases  made from another EOU. The issue has been resolved by amending the Appendix 6H of FTP 2015-20  which now allows reimbursement of CST on purchases made by an EOU from another EOU.

(d) : A Review and Revamp Committee for EOU was set up under the chairmanship of Shri S. C. Panda, the then Development Commissioner, Noida SEZ in December 2010 to review and revamp the EOU Scheme with a mandate to suggest suitable steps to make the scheme more vibrant and attractive for investors, develop a synergy between EOU Scheme  and  SEZ  Scheme  and  aligning  the  EOUs  to  make  them  more  globally competitive. The Committee, in the July 2011, gave 32 recommendations to revamp the EOU  Scheme  which  were  examined  and  8  recommendations  were  accepted  by Department of Commerce in January 2014.

Details of the recommendations made by the Committee and recommendations accepted are furnished in Annexure.

(e) : No, Madam. The benefits provided to SEZ units, EOUs and DTA units cannot be compared.  Therefore,  the  Government  has  not  conducted  any  financial  study  or comparative  study  between  Special  Economic  Zone,  Export  Oriented  Units  and Domestic Tariff Area Units.

## Annexure to Lok Sabha Unstarred Question No. 3479 for 21 st  December, 2015

## Recommendation of Revamp Committee:

|   S.No. | Recommendation of Revamp Committee                                            |
|---------|-------------------------------------------------------------------------------|
|       1 | To extend Investment linked Income Tax benefit                                |
|       2 | To allow exemption from Customs & Central Excise duty to all goods & services |
|       3 | To exempt Service Tax on services consumed wholly within EOUs                 |
|       4 | To exempt CST on goods supplied to EOUs                                       |
|       5 | To exempt State levies on the goods supplied to EOUs                          |

| 6.      | To rationalize administrative mechanism for setting up EOU and for efficient coordination   |
|---------|---------------------------------------------------------------------------------------------|
| 7.      | To rationalize power for approval of the proposals for setting up EOUs                      |
| 8.      | To dispense with the minimum investment criteria for setting up EOU                         |
| 9.      | To align validity of the period of the LOP issued to EOU                                    |
| 10.     | To align duration of goods and services in EOU with the term of LOP                         |
| 11      | To allow broad banding of operations and activities in the EOU                              |
| 12.     | To expand scope of reconditioning / repair under para 6.16 of FTP                           |
| 13.     | Allowing warehousing facilities outside EOU premises and jurisdiction of DC                 |
| 14 I    | To define 'similar goods' for DTA sale by EOUs                                              |
| 14 II.  | To allow DTA sale by EOU on payment on full duty without any rider of NFE                   |
| 14 III  | To allow DTA sale of by products / waste & scrap within DTA entitlement                     |
| 14 IV   | To exclude wholly exempted goods from computation in DTA entitlement                        |
| 15      | To align deemed exports supplies for EOUs at par with SEZ unit & DTA supplier               |
| 16.     | To rationalize fixation/amendment of SION for EOU                                           |
| 17.     | To allow sharing of facilities among EOUs                                                   |
| 18. I   | To simplify job work procedure                                                              |
| 18. II  | To allow EOU to undertake job work for DTA purpose                                          |
| 18. III | To allow direct delivery of raw material to sub-contractor                                  |
| 19. I   | To allow transfer of services from one to another EOU without payment of service tax        |
| 19. II  | To allow inter unit transfer (IUT) of inputs among the group companies                      |
| 19. III | To allow return of goods/services to unit, in case of rejection, without payment of duty    |
| 19 IV   | To lay down uniform procedures for Inter-Unit Transfer (IUT) of finished goods              |
| 20.     | To allow procurement of spares & components for after sales-service in DTA                  |
| 21.     | To dispense with the Procurement Certificate and CT-3 prior to procurement of goods         |
| 22      | To reduce ceiling for self warehousing and self certification of goods by EOUs              |
| 23.     | To dispense with Cost Recovery charge for services of Customs & C.Ex. officers              |
| 24.     | To rationalize criteria for unblemished trade record                                        |
| 25.     | To allow transfer of goods for repair / replacement, testing or calibration                 |
| 26.     | To rationalize report/return to be filed by EOUs                                            |
| 27.     | To extend time for submitting shipping bill for export under self sealing/ certification    |
| 28.     | To allow credit facility against EEFC balances                                              |
| 29.     | To allow retention of 100% export earning in EEFC account                                   |
| 30.     | Power & functions of BOA and UAC under the IDR Act and FTDR Act                             |
| 31.     | To empower BOA as policy relaxation and Grievance redressal body for EOUs                   |
| 32. I   | Increase duty free procurement of spares to 15% from 5% for EOUs in granite sector          |
| 32. II  | To allow removal of duty free spares to granite quarry site                                 |

Following recommendations have been accepted by the Department:

Validity of the period of Letter of Permission (LOP) issued to EOU: LoP issued to an  EOU  will  have  an  initial  validity  for  a  period  of  2  years  to  enable  the  Unit  to construct the plant and install the machinery. The next extension of one year may be given by the DC for valid reasons to be recorded in writing. Subsequent extension of one  year  may  be  given  by  the  UAC  subject  to  condition  that  two-thirds  of  activities including  construction,  relating  to  the  setting  up  of  the  Unit  are  complete  and  a

Chartered  Engineer's  certificate  to  this  effect  is  submitted  by  the  Unit.  Subsequent extension, if necessary, will be granted by the Board of Approval.

Aligning duration of goods and services in EOU with the term of LOP: At present, capital goods are required to be installed or otherwise used by the EOU, within a fixed period from the date of import or procurement thereof and other goods are to be used in connection with the production or packaging of goods within a period of three years. In case of failure to use within above stated period, extension is required. It has now been decided that the period of usage of goods should be co-terminus with the period of LOP. This would do away with the current practice of obtaining multiple extensions for goods and LOP separately.

Setting  up  warehousing  facilities  outside  EOU  premises  and  outside  the jurisdiction of DC: EOUs which intend to have their warehouses near to the port of export to reduce lead time for delivery of goods overseas and to address unpredictability  of  supply  orders  will  now  be  permitted  to  set  up  such  warehouses subject  to  the  provisions  related  to  export  warehousing  as  given  in  notification  No. 46/2001-Central Excise(N.T.) dated 26.6.2001 and the CBEC Circular No. 581/18/2001-CX dated 29.6.2001 as amended.

Sharing  of  facilities  among  EOU/STP/EHTP/SEZ  Unit: In  order  to  allow  optimal utilization of infrastructure facilities it has been decided that sharing of facilities among EOUs may be considered by the UAC on case-to-case basis and the recommendations  be  sent  to  the  BoA  for  final  approval.  While  accepting  such proposals, the NFE obligations of the Units shall not be altered. However, sharing of facilities between EOUs and SEZs Units should not be permitted.

Inter-Unit transfer (IUT) of goods & services : In order to facilitate a group of EoUs which sources inputs  centrally  to  obtain  bulk  discount,  reduce  cost  of  transportation and  other  logistics  cost  and  to  maintain  effective  supply  chain,  IUT  of  goods  and services will be permitted on a case to case basis by the UAC.

Further, the procedure for Inter-Unit Transfer (IUT) of finished goods will be clarified by CBEC in order to bring uniformity in the practices and procedure adopted by various field offices.

Self-warehousing  and  self-certification  of  goods  imported/procured  by  EOUs: The scheme of self-warehousing and self-certification was introduced vide Circular No. 19/2007- Cus. dated 3.5.2007 dispensing with the requirement for physical verification of  imported/indigenously  procured  duty-free  goods  before  issuing  re-warehousing certificate by the proper officer in respect of Units set up under EOU/EHTP/STP/BTP scheme having physical export turnover of Rs.15 Crore and above in the preceding financial  year  and  having  a  clean  track  record.    In  order  to  extend  self-warehousing and self-certification facility  to more  Units,  it  has  been  decided  to reduce the  limit  of physical turnover from Rs 15 Crore to Rs 10 Crore.

Rationalization  of  reports/  returns  to  be  filed  by  EOUs: EOUs  submit  Quarterly Performance Report (QPR) and Annual Performance Report (APR) to the Development Commissioners and monthly return ER-2 to Central Excise. In order to reduce multiplicity of these reports, a common return to DoC and DoR would reduce paperwork  for  the  EOUs.  It  has,  therefore,  been  decided  that  a  single  common report/return may be devised which may serve the purpose for DoC as well as DoR. A joint  group  of  DoC  and  DoR  including  Director  General  of  Systems,  CBEC  will  be formed to devise a proforma exhaustively capturing all the data and figures relating to export, import, DTA sale, deemed export sale, IUT, sale of goods as such, destruction, payment of duty etc. and devise simplified records to be maintained by EOUs.

Extension of time for submitting shipping bill for export made under self-sealing /  self-certification: It  has  been  decided  to  increase  the  mandatory  requirement  to submit  Shipping  Bill  within  24  hrs  to  48  hrs  as  it  is  sometimes  difficult  to  reach jurisdictional Central Excise office within 24 hrs from the port of export.

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