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Units under Export Oriented Unit (EOU) Scheme, Electronics Hardware Technology Park (EHTP) Scheme, Software Technology Park (STP) Scheme or Bio-Technology Park (BTP) Scheme export their entire production of goods and services (except permissible sales in DTA). They can import inputs and capital goods without payment of customs duty.

STP/EHTP/BTP schemes are similar to EOU schemes and provisions are more/ less identical. EOU scheme is administered by Ministry of Commerce and Industry, while STP/EHTP/BTP schemes are administered by their respective administrative ministries.

Software Technology Park (STP) is set up for development of software exports. Electronic Hardware Technology Park (EHTP) are for export of electronics hardware and software. STP/EHTP Scheme is administered by Ministry of Information Technology. Bio Technology Park (BTP) is established on the recommendation of Department of Biotechnology.


  •  Such units may be set up for manufacture of goods, including repair, re-making, reconditioning, re-engineering, rendering of services, development of software, agriculture.
  •  Trading units are not covered under these schemes.
  •  Only projects having a minimum investment of ` 1 crore in plant & machinery shall be considered for establishment as EOUs. However, this shall not apply to units in EHTP/ STP/ BTP, Handicrafts/ Agriculture/ Floriculture/ Aquaculture/ Animal Husbandry/ Information Technology Services, Brass Hardware and Handmade jewellery sectors. Board of Approvals may also allow establishment of EOUs with a lower investment criteria.


(a) Approval for setting up of units under EOU scheme shall be granted by the Units Approval Committee within 15 days as per prescribed criteria. In other cases, approval may be granted by Board of Approval set up for this purpose.

(b) On approval, concerned authority will issue a Letter of Permission (LoP)/ Letter of Intent (LoI) which will have initial validity of 2 years (extendable by 2 years and further extension, if necessary, by BoA), by which time unit should have commenced production.


  •  EOU/ EHTP/ STP/ BTP unit must be a positive net foreign exchange earner. However, a higher value addition is specified for some sectors.
  •  How to compute NFE earnings?: NFE Earnings shall be calculated cumulatively in blocks of 5 years, starting from commencement of production.

In case unit is not able to achieve NFE due to:

(i) prohibition/ restriction imposed on export of any product, 5 years block period may be extended suitably by BoA.

(ii) adverse market condition or any grounds of genuine hardship having adverse impact on functioning of the unit, 5 year block is extendable upto 1 year.

Who monitors NFE?: Performance of EOU/ EHTP/ STP/ BTP units shall be monitored by Units Approval Committee as per prescribed guidelines.

Which supplies to DTA can be counted for positive NFE?: Following supplies effected from EOU/ EHTP/ STP/ BTP units to DTA (Domestic Tariff Area) will be counted for fulfillment of positive NFE:

(a) Supplies in DTA to holders of Advance Authorisation/ Advance Authorisation for annual requirement/ DFIA under duty exemption/ remission scheme/ EPCG scheme subject to certain exceptions.

(b) Supplies affected in DTA 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 relevant provisions of FTP.

(d) Supplies made to bonded warehouses set up under FTP and/ or under section 65 of Customs Act and free trade and warehousing zones, where payment is received in foreign exchange.

(e) 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 MoF.

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

(g) Supplies of items like tags, labels, printed bags, stickers, belts, buttons or hangers to DTA unit for export.


(a) Entitlements for supplies from DTA

  •  Supplies from DTA to EOU/ EHTP/ STP/ BTP units will be regarded as “deemed exports” and DTA supplier shall be eligible for relevant entitlements for deemed exports, 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 DTA supplier, be eligible for obtaining entitlements specified under the provisions relating to deemed exports in FTP. For claiming deemed export duty drawback, they shall get brand rates fixed by DC wherever All Industry Rates of Drawback are not available.

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

  •  Reimbursement of Central Sales Tax (CST) on goods manufactured in India. Interest @ 6% p.a. will be payable on delay refund of CST, if the case is not settled within 30 days of receipt of complete application.
  •  Exemption from payment of Central Excise Duty on goods procured from DTA on goods manufactured in India.
  •  Reimbursement of duty paid on fuel procured from domestic oil companies/ Depots of domestic oil Public Sector Undertakings as per drawback rate notified by DGFT from time to time. Reimbursement of additional duty of excise levied on fuel under the Finance Acts would also be admissible.
  •  CENVAT credit on service tax paid.

(b) Other Entitlements

  •  Exemption from industrial licensing for manufacture of items reserved for SSI sector.
  •  Export proceeds will be realized within 9 months.
  •  Units will be allowed to retain 100% of its export earnings in the EEFC account.
  •  Unit will not be required to furnish bank guarantee at the time of import or going for job work in DTA, subject to fulfillment of required conditions.
  •  100% FDI investment permitted through automatic route similar to SEZ units.
  •  Units shall pay duty on the goods produced or manufactured and cleared into DTA on monthly basis in the manner prescribed in the Central Excise Rules.


Export : Following exports are permitted:

  •  all kinds of goods and services except items that are prohibited in ITC(HS) ,
  •  Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) subject to fulfillment of the conditions indicated in ITC (HS).

Import : Following imports are permitted:

* Export promotion material upto a maximum value limit of 1.5% of FOB value of previous years exports.

* All types of goods, including capital goods, required for its activities, from DTA/ bonded warehouses in DTA/ International exhibition held in India, without payment of duty subject to “Actual User‟ condition, provided such goods are not prohibited items of import.

* Goods including capital goods (on a self certification basis) required for approved activity, free of cost or on loan/ lease from clients, subject to “Actual User‟ condition.

* Certain specified goods from DTA, without payment of duty, for creating a central facility.

* Second hand capital goods, without any age limit, duty free.

Procurement and export of spares/ components, upto 5% of FOB value of exports, may be allowed to same consignee/ buyer of the export article, subject to the condition that it shall not count for NFE and direct tax benefits.


An EOU/ EHTP/ STP/ BTP unit may:

  • source capital goods from a domestic/ foreign leasing company without payment of excise/ customs duty, on the basis of a firm contract between parties.
  • sell capital goods and lease back the same from a Non Banking Financial Company (NBFC) subject to fulfillment of specified conditions.


  •  Transfer of manufactured goods from one EOU/ EHTP/ STP/ BTP unit to another EOU/ EHTP/ STP/ BTP unit is allowed with prior intimation to concerned DC and Customs authorities, following procedure of in-bond movement of goods.
  •  Transfer of manufactured goods shall also be allowed from EOU/ EHTP/ STP/ BTP unit to a SEZ developer or unit following procedure prescribed in SEZ Rules, 2006.
  •  Capital goods may be transferred or given on loan to other EOU/ EHTP/ STP/ BTP/ SEZ units, with prior intimation to concerned DC and Customs authorities.
Note: Goods supplied by one unit of EOU/ EHTP/ STP/ BTP to another unit shall be treated as imported goods for second unit for payment of duty, on DTA sale by second unit.


In case an EOU/ EHTP/ STP/ BTP unit is unable to utilize goods (including capital goods) and services, imported or procured from DTA, it may be

  • transferred to another EOU/ EHTP/ STP/ BTP/ SEZ unit; or
  • disposed off in DTA with approval of Customs authorities on payment of applicable duties and submission of import authorization; or
  •  exported.

Such transfer from EOU/ EHTP/ STP/ BTP unit to another such unit would be treated as import for receiving unit.

  • In case of capital goods, benefit of depreciation, as applicable, will be available in case of disposal in DTA only when the unit has achieved positive NFE taking into consideration the depreciation allowed.
  • 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 unit after intimation to Customs authorities or destroyed outside unit with permission of Customs authorities.
  • Disposal of used packing material will be allowed on payment of duty on transaction value.


Entire production of EOU/ EHTP/ STP/ BTP units must be exported. However, following DTA sales are permissible:

(1) Sale of goods in DTA: Units* may sell goods in DTA

  •  upto 50% of FOB value of exports (including sales made to SEZ unit from Foreign Exchange Account of such unit),
  •  subject to fulfilment of positive NFE,
  •  on payment of concessional duties.

*other than gems and jewellery units

However, sale at concessional duty is not permitted:

(i) in respect of motor cars, alcoholic liquors, books, tea (except instant tea), pepper & pepper products, marble and other notified items or

(ii) to units engaged in activities of packaging/ labeling/ segregation/ refrigeration/ compacting/ micronisation/ pulverization/ granulation/ conversion of monohydrate form of chemical to anhydrous form or vice-versa.

An amount equal to Anti Dumping duty under section 9A of the Customs Tariff Act, 1975 leviable at the time of import, shall be payable on the goods used for the purpose of manufacture or processing of the goods cleared into DTA from the unit.

In case of units manufacturing and exporting more than one product, sale of any of these products into DTA, upto 90% of FOB value of export of the specific products is permitted, provided total DTA sales does not exceed the overall entitlement of 50% of FOB value of exports for the unit.

(2) Services provided in DTA: For services, sale in DTA 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.

(3) Sale of rejects in DTA: Rejects within an overall limit of 50% may be sold in DTA on payment of applicable duties (concessional or otherwise), on prior intimation to 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.

(4) Sale of scrap/ waste/ remnants, arising out of production, in DTA: Scrap/ waste/ remnants arising out of production process or in connection therewith may be sold in DTA, as per SION notified under Duty Exemption Scheme, on payment of concessional duties as applicable, within overall ceiling of 50% of FOB value of exports. Such sales of scrap/ waste/ remnants shall not be subject to achievement of positive NFE. Sale of waste/scraps/remnants by units not entitled to DTA sale or sales beyond DTA sales entitlement, shall be on payment of full duties. Scrap/waste/remnants may also be exported.

In case scrap/ waste/ remnants are destroyed with permission of Customs authorities, no duties/ taxes payable on same.

(5) Sale of by-products in DTA: By-products may also be sold in DTA subject to achievement of positive NFE, on payment of applicable duties, within the overall entitlement of 50% of FOB value of exports. Sale of by-products by units not entitled to DTA sales, or beyond entitlements shall also be permissible on payment of full duties.

(6) Procurement of spares / components, up to 2% of the value of manufactured articles, cleared into DTA, during the preceding year, may be allowed for supply to the same consignee / buyer for the purpose of after-sale-service.


1. 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 payment of duty.

2. In case of new EOUs, advance DTA sale will be allowed not exceeding 50% of its estimated exports for first year (2 years for pharmaceutical units).


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 specified conditions


With approval of DC, an EOU may opt out of scheme. Such exit shall be subject to payment of excise and customs duties and industrial policy in force. If unit has not achieved obligations, it shall also be liable to penalty at the time of exit.


Existing DTA units may also apply for conversion into an EOU/ EHTP/ STP/ BTP unit. Existing EHTP/ STP units may also apply for conversion/ merger to EOU unit and vice -versa. In such cases, units will remain in bond and avail exemptions in duties and taxes as applicable.

Mohit Sharma
Mohit Sharma

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