TaxTMI 
TaxTMI 
TaxTMI 
Introduction
The Export Oriented Unit (EOU) scheme under Foreign Trade Policy (FTP 2023, Chapter 6) is designed to help Indian exporters access global markets while enjoying major tax and duty benefits.
EOUs allow businesses to import capital goods and raw materials duty-free, provided they focus on exports and maintain positive Net Foreign Exchange (NFE) over five years. Unlike SEZs, EOUs can be set up anywhere in India, making them highly flexible.
Important Note: Trading businesses are not eligible for EOU registration. The scheme applies only to manufacturing and service-oriented exporters.
Step 1: Check Eligibility
- Activity must be export-driven.
- Positive NFE over a 5-year block is mandatory.
- ?1 crore minimum investment in plant & machinery, except exempted sectors (IT/ITES, handicrafts, agriculture).
- Only manufacturing and service sectors are eligible. Trading units are not permitted.
- Promoters should have a clean compliance record.
Step 2: Incorporate the Entity
Register your business as a Company, LLP, partnership, or proprietorship.
- Add export activities to your objects clause.
- Secure PAN, Import Export Code (IEC), and GST registration.
- Keep financials or a net worth certificate ready.
Step 3: Choose Location & Premises
- EOUs can be set up anywhere in India.
- Premises must be customs bonded and secure.
- Lease agreement valid for minimum 5 years.
- Layout plan required for customs inspection.
Step 4: Apply for EOU Registration
Submit Form ANF-6A to the Development Commissioner (DC) with:
- Incorporation documents
- Promoter details & financials
- Project report (exports, imports, employment)
- Bank & IEC details
- Lease consent
The Unit Approval Committee (UAC) reviews applications under a single-window clearance.
Step 5: Get Letter of Permission (LoP)
- Issued by the DC upon approval.
- 2 years given to commence operations.
- Valid for 5 years, renewable in 5-year blocks.
- Lists approved products, activities, and NFE obligations.
Step 6: Customs Bonding & Registrations
Before starting:
- Execute Legal Undertaking (LUT) with the DC.
- Sign a B-17 Bond with Customs (covers duty-free imports & obligations).
- Customs inspects and bonds the premises.
- Register on ICEGATE/EDI for import-export filing.
- Apply for a new GSTIN if in a different state.
Step 7: Start Operations
- Import goods and machinery duty-free.
- Begin export production or services.
- Notify the DC about the commencement date (starts your NFE block).
Step 8: Ensure Ongoing Compliance
- Maintain positive NFE over 5 years.
- File monthly, quarterly, and annual returns.
- Keep detailed stock & export records.
- Seek DC approval for any amendments or expansions.
- Renew LoP every 5 years.
Step 9: Domestic Tariff Area (DTA) Sales
EOUs can sell in the domestic market with conditions:
- Goods: Allowed on payment of duties; certain items restricted.
- Advance DTA sales: Up to 50% of projected exports in year one (two years for pharma).
- Services/software: Allowed up to 50% of export earnings, with GST.
Benefits of an EOU
- Duty-free imports of capital goods & raw materials
- GST zero-rating on exports
- Location flexibility (anywhere in India, unlike SEZs)
- Structured DTA sales framework
- Single-window oversight from DC
- Sub-contracting flexibility to optimise operations
Quick Checklist
?Verify eligibility (no trading businesses)? Incorporate business & secure IEC/GST ? Lease premises for customs bonding ? File ANF-6A with required documents ? Obtain LoP (2 years to start, 5 years validity) ? Execute LUT & B-17 Bond, register on ICEGATE ? Commence exports & notify DC ? Maintain NFE, file reports, renew LoP every 5 years
Conclusion
The Export Oriented Unit scheme under FTP 2023 is one of India’s most effective export promotion tools. With duty-free imports, GST benefits, and flexible setup locations, EOUs help exporters reduce costs and boost competitiveness.
But remember: trading companies are not eligible. The scheme is exclusively for manufacturing and service exporters who are ready to commit to compliance and long-term growth.
With the right planning, setting up an EOU can be a game-changer for your export business in India.
Frequently Asked Questions (FAQs) – Export Oriented Unit (EOU) in India
Q1. What is an Export Oriented Unit (EOU) in India? An EOU is a business registered under FTP 2023 that imports raw materials and capital goods duty-free, provided it exports most of its production and maintains positive Net Foreign Exchange (NFE).
Q2. Can trading companies apply for EOU registration? No. Trading businesses are not eligible. The scheme is meant only for manufacturing and service exporters.
Q3. What is the minimum investment for an EOU in India? Generally Rs. 1 crore in plant & machinery. However, IT/ITES, handicrafts, agriculture, and some other sectors are exempt.
Q4. What is the validity of the EOU’s Letter of Permission (LoP)? The LoP is valid for 5 years from the commencement of operations and can be renewed in 5-year blocks.
Q5. Can an EOU sell products in the domestic market? Yes, EOUs can sell in the Domestic Tariff Area (DTA) by paying duties. New EOUs can sell up to 50% of projected exports in the first year.
Q6. What are the main benefits of registering as an EOU? Key benefits include duty-free imports, GST benefits, location flexibility, and the ability to sell part of the output in the domestic market.