Export oriented units (EOU)

Export oriented unit (EOU) scheme was introduced by government of India in 1980 to promote export of the country. This is a complementary to SEZ.

Initially this scheme was implemented to manufacturing sector, later on it covered other sectors like software, IT/ITES, electronics etc.
EOUs give undertaking that they will export their products but as per guidelines they can sell their products in Domestic Tarif area (DTA) up to 10 lacs value.

Objectives of EOU
Main objectives of Export oriented units are listed below:

1) To promote export of the country.
2) To earn foreign currency.
3) To promote FDI.
4) To generate employments.
5) To improve supply chain
6) Advancement of Technology & Skills
Major sectors in EOU:
1) Pharmaceutical
2) Textile/ yarn / garments
3) Food processing
4) Engineering goods
5) Rubber & plastics products
6) Software
7) IT & ITES
8) Electricals & Electronics hardware

Location of an EOU
In big cities EOU unit can be set up 25 KM away from city but for the products which are pollution are exempted from this restriction, apart from big cities EOU can be set at any place.

Minimum investment
No minimum investment criteria for these sectors - EHTP / STP / BTP, Handicrafts / Agriculture / Floriculture / Aquaculture/ Animal Husbandry / Information Technology, Services, Brass Hardware and Handmade jewellery sectors.

For remaining sectors 1 Crore minimum investment required in plant & machinery.

Application procedure
Application and other documents needs to be submitted to Unit Approval Committee headed by Development Commissioner(DC). List of documents are mentioned below:

1. Application form signed by promoter or partners.
2. Memorandum & articles of association
3. Project report
4. 5000 rupees demand draft in favor of drawn in favor of the pay & accounts, officers, Ministry of Commerce & Industry, Department of Commerce, payable at the Central Bank of India, Udhyog Bhawan, New Delhi.
5. Promoter's identity proof
6. Promoter's IT returns 
Proposals for setting up EOU other than service sector units (except R&D, software and IT enabled services, or any other service activity as may be delegated by BoA) shall be rejected or approved by Unit Approval Committee within 15 days.
BoA and DIPP may clear the proposals for setting up EOU which requires industrial licence, after that Development commissioner may approve it within 45 days.

Benefits of EOU
1. EOUs can claim GST reimbursement.
2. Import Duty on imported capital goods are exempted.
3. Excise duty on procured capital goods from domestic markets are exempted.
4. Duty can be claimed by EOUs which is paid on purchase of fuel from domestic oil companies.
5. Input tax credit can be claimed by EOUs.
6. Priority clearance facilities(Fast track clearance) are given to EOUs.
7. Industrial licenses (required for manufacturing items that are reserved for the SSI sector) are not required for EOUs.