SETTING UP OF A EOU

[Nash Industries I Pvt Ltd]

A manufacturer supplying his entire production to 100 % EOU/EHTP. Can such manufacturer convert the unit into an EOU and reap the export benefit as per Chapter 6 of FTP. Or is it mandatory that the unit to have at least 50% physical exports to convert into a EOU.

Thanks .

Regards,

S.Ramaswamy

[YAGAY andSUN]

In Mid term review of FTP 50% Condition has been deleted. Now NFE is the condition. Procedure prescribed in FTP.

[Nash Industries I Pvt Ltd]

Thank you for the reply.

Let me reframe the question.

Para 6.00 - EOU is an unit that exports out of country the entire production.

When a unit does not have any physical export but the entire production is supplied only to EOU and EOU only, whether such unit can be converted into an EOU for the sole reason that is supplying to 100% EOU.

In other words, the unit proposes to convert itself into an EOU for the sole reason that EOU to EOU (Called as Inter Unit Transfer) in terms of para 6.13.

In simple words whether a unit having only deemed export be converted into an EOU.

Thanks and Regards

S.Ramaswamy

[Kishan Barai]

In cases where a unit is initially established as DTA unit with machines procured from abroad after payment of applicable import duty, or from domestic market after payment of GST, and unit is subsequently converted to EOU, in such cases removal of such capital goods to DTA after exit would be without payment of duty. Similarly, in cases where a DTA unit imported capital goods under EPCG Scheme and after completely fulfilling export obligation gets converted into EOU, unit would not be charged customs duty on capital goods at the time of removal of such capital goods in DTA when exit.

AI Summary

EOU conversion: units supplying exclusively to EOUs governed by NFE criterion permitting conversion under FTP with duty rules. Conversion to an EOU depends on the FTP's NFE requirement (the mid term review removed the 50% physical export test) and prescribed conversion procedures; supplies made exclusively to EOUs (deemed exports or inter unit transfers under para 6.13) must be evaluated against the NFE and procedural criteria. Capital goods procured in DTA after duty payment or imported under schemes such as EPCG (with export obligations met) are not chargeable to customs duty on removal to DTA on exit, subject to FTP and scheme conditions.