A committee has recommended a host of Tax incentives like exemption from customs duty, central excise and service tax to revamp the 30-year-old Export Oriented Unit (EOU) scheme.
After expiry of tax benefits for the EOUs, the government in February has set up a committee under the chairmanship of Development Commissioner, Noida SEZ, to revamp the scheme in sync with the changing business environment and gel with the special economic zones.
"The committee has suggested fiscal measures, policy initiatives, procedural simplifications and steps to reduce transaction cost in order to arrest the declining trend in setting up of EOUs and their exports," Export Promotion Council for EOUs and SEZ (EPCES), a statement said.
The EOU scheme, introduced in December 1980, had allowed manufacturing units in the Export Processing Zones to enjoy 100% income-tax exemption on profits from overseas sale and also duty free import of raw material. As the scheme had a sunset clause, the tax benefits were stopped from March 2010.
This scheme was immensely used by SMEs sector for setting up their units for export purpose.
The objective was to encourage additional production capacity in manufacturing sector by attracting foreign investment and create employment in the country.
The recommendations include "extension of investment linked income tax benefits, exemption from customs and central excise duty for manufacture of finished goods/services and for setting up and maintenance of infrastructure, exemption from service tax and CST," it said.
Besides, it has also suggested rationalisation of administrative mechanism for setting up an EOU, setting up warehousing facilities outside the unit premises, expansion of deemed exports supplies at par with SEZ unit and domestic market supplier, sharing of facilities among EOU/STP/EHTP/SEZ unit, allow job work for DTA purpose, it said.
The EOU scheme includes export oriented units (EOUs), Electronics Hardware Technology Parks (EHTPS) and Software Technology Parks (STPS).
The committee has recommended that EOUs should be allowed to transfer inter unit inputs among group companies, duty free procurement of 2% spares and components for after sales service for domestic tariff area, dispense with cost recovery charges for services of customs and central excise officers, empowering Board of Approval as policy relaxation and grievance redressal body for EOUs, it said.
Till 2009-10, 2,586 EOUs, 8,121 STPs and 144 EHTPs were operating in the country.
EOUs have made export of goods and services worth Rs 84,135 crore besides exports from STPs and EHTPs of Rs 2,05,505 crore and Rs 8,028 crore, respectively in 2009-10.
The above recommendations would yield fruitful results to the scheme and fresh investments will be made in scheme, EPCES said.
Commerce Secretary Rahul Khullar released the report on review and revamp of EOU Scheme.