Export Promotion Zone/Special Economic Zone (Epz/Sez) & Export Oriented Units (EOU)

EXPORT PROMOTION
ZONE/SPECIAL ECONOMIC
ZONE (EPZ/SEZ)
&
EXPORT ORIENTED UNITS
(EOU)
EPZ
The concept of Export Processing Zones (EPZ) was
introduced to enhance exports in India with the help
of tax holidays and lucrative incentive packages to
India’s exporters.
The concept of Export Processing Zones in India has
gone through four significant stages of development.
The initial stage witnessed the establishment of the
Kandla Free Trade Zone in the State of Gujarat in the
year 1965 and the subsequent establishment of the
Santacruz Electronics Export Processing Zone.
EPZ
The second stage witnessed during 1985-90, and
it led to the establishment of a number of
Export Processing Zones to boost the export
sector. Thus, Export Processing Zones were set
up in West Bengal, Tamil Nadu, Kerala, Uttar
Pradesh and in Andhra Pradesh
EPZ
The third stage was witnessed post 1991, during
economic reforms period. The objective being to
broad base and encourage India’s exports.
Following measures were undertaken: -
• Fiscal Incentives
• Simplification of Policy Provisions
• Incorporation of more industries like horticulture,
re-engineering, agriculture, aqua culture
SEZ
• The fourth stage witnessed the introduction of the
concept of Special Economic Zones (SEZs) in the EXIM
policy of 1997-2002. Presently, most of the export-
processing zones have been transformed into SEZs.
• SEZs were permitted to be set up by both government
and private parties;
• Special Economic Zones (SEZs) Policy was announced
in April 2000.
SEZ
• This policy intended to make SEZs an engine
for economic growth supported by quality
infrastructure complemented by an attractive
fiscal package, both at the Centre and the State
level, with the minimum possible regulations.
• Further the Government of India passed the SEZ

Act, 2005 to strengthen the concept of SEZ.
OBJECTIVES OF SEZ IN INDIA
– generation of additional economic activity
– promotion of exports of goods and services
– promotion of investment from domestic and
foreign sources
– creation of employment opportunities
– development of infrastructure facilities
Major incentives offered to firms under SEZ:
1. Duty free import / domestic procurement of
goods for development, operation and
maintenance of SEZ units
2. 100% Income Tax exemption on export
income for SEZ units under Section 10AA of
the Income Tax Act for first 5 years, 50% for
next 5 years.
Major incentives offered to firms under SEZ
3. Exemption from various taxes

4. Single window clearance for Central and
State level approvals
5. Bonded warehouse facilities temporarily for
lease
EOU
By EOU we mean Export Oriented Units, i.e.
those units which are established mainly/solely
for the purpose of exporting their output.
The government of India, for the purpose of
encouraging India’s exports brought out Export
Oriented Units (EOUs) scheme in 1981. This
scheme is complementary to the SEZ scheme. It
accords same incentives to EOUs as those
granted to export units located in SEZs.
EOU
• The main objectives of the EOU scheme is to increase
exports, earn foreign exchange for the country, transfer
latest technology to the country, stimulate direct foreign
investment and to generate additional employment.
• EOUs Obligations: The EOUs are required to achieve
minimum EP (Export Performance) as per the
provisions of EXIM Policy which vary from time to
time, and sector to sector.
STATUS HOLDERS/TRADING HOUSES
The classification of status holders among exporters in India is as
follows: -
 Export house
 Star export house
 Trading house
 Star trading house
 Premier trading house
Such status is granted on achieving aggregate exports of Rs.20
crore, Rs.100 crore, Rs.500 crore, Rs.2500 crore and Rs.10000
crore respectively over a period of four years. Status holders are
entitled to privileges such as, fast track clearances, consideration
under various schemes under FTP (Foreign Trade Policy) etc.
EPZ Vs. EOU
• A SEZ unit can only be set up in the
demarcated custom bonded areas notified
under Section 76A of the Custom’s Act, 1962
where documentation & assessment can be
done in the zone itself.
• However a 100 percent EOU Scheme specially
offers flexibility in location as unit can be
established in any industrial or Commercial
areas
• In SEZ conversion of existing unit is not
allowed.
• Conversion of existing unit into 100% EOU is
permissible with Income Tax Exemption under
section 10- B of Income Tax Act
• No investment criterion is prescribed under
the SEZ scheme.
• Minimum investment of Rs. 1 crore in plant
and machinery is prescribed. However this
condition shall not applicable to existing unit
and units in STP, agriculture, handicrafts and
handmade jewellery etc
• Cent per cent FDI investment is permitted
through automatic route without approval for
SEZ manufacturing unit.
• Formal FIPB (Foreign Investment Promotion
Board) approval as per sectoral guidelines is
required.

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EXPORT PROMOTION

• Further the Government of India passed the SEZ

3. Exemption from various taxes

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