Units undertaking to export their entire production of goods and services, except permissible sales in the DTA, as per this Policy, may be set up under the Export Oriented Unit (EOU) Scheme, Electronic Hardware Technology Park (EHTP) Scheme or Software Technology Park (STP) Scheme for manufacture of goods, including repair, re-making, reconditioning, re-engineering, and rendering of services. No trading units shall, however, be permitted.


Export and Import of Goods 6.2  (a) An EOU/EHTP/STP unit may export all goods and services except items that are prohibited in ITC (HS). Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be subject to fulfillment of the conditions indicated in the ITC (HS).
     (b) An EOU/EHTP/STP unit may import without payment of duty all types of goods, including capital goods, as defined in the Policy, required by it for its activities as mentioned in paragraph 6.1 above or in connection therewith, provided they are not prohibited items of imports in the ITC (HS). The units shall also be permitted to import goods required for the approved activity, including capital goods, free of cost or on loan from clients.
     (c) Deleted
    (d) STP/EHTP/EOU may import/procure from DTA without payment of duty specified goods for creating a central facility for use by software development units in STP/EHTP/EOU. The central facility for software development can also be accessed by units in the DTA for export of software.
     (e) An EOU engaged in agriculture, animal husbandry, aquaculture, floriculture, horticulture, pisciculture, viticulture, poultry or sericulture may import/procure all types of goods, without payment of duty, required by it for its activities or in connection therewith as available to other EOUs. However, such units may be permitted to take only specified goods for use outside the bonded area.
     (f) Deleted
     (g) EOU gem and jewellery units may also source gold/silver/platinum through the nominated agencies.
     (h) EOU/EHTP/STP unit, other than service units, may also export to Russian Federation in Indian Rupees against repayment of State Credit/Escrow Rupee Account of the buyer subject to RBI clearance, if any.
Second Hand Capital Goods 6.3 Second hand capital goods may also be imported duty free without any age limit.
Leasing of



6.4 An EOU/EHTP/STP unit may, on the basis of a firm contract between the parties, source the capital goods from a domestic/foreign leasing company. In such a case, the EOU/EHTP/STP unit and the domestic/foreign leasing company shall jointly file the documents to enable import/procurement of the capital goods without payment of duty.
Net Foreign Exchange Eearnings


6.5 EOU/EHTP/STP unit shall be a positive net foreign exchange earner. Net Foreign Exchange Earnings (NFE) shall be calculated cumulatively for a period of five years from the commencement of production.
Letter of Permission/

Letter of Intent and Legal Undertaking

6.6 (a) On approval, a Letter of Permission (LOP)/Letter of Intent (LOI) shall be issued by the Development Commissioner to EOU/EHTP/STP unit. The LOP shall have an initial validity of 3 years for commencement of production. Its validity may be extended by another 3 years, beyond initial validity, by the competent authority. However proposals approved prior to 1.4.2002 shall be considered on case to case basis by the BOA.
    (b) LOP/LOI issued to EOU/EHTP/STP units by the concerned authority would be construed as a licence for all purposes.
    (c) The unit shall execute a legal undertaking with the Development Commissioner concerned. Failure to ensure positive NFE or to abide by any of the terms and conditions of the LOP/LOI/IL/LUT shall render the unit liable to penal action under the provisions of the Foreign Trade (Development & Regulation) Act, 1992 and the Rules and Orders made there under without prejudice to action under any other law/rules and cancellation or revocation of LOP/LOP/IL.
Application and Approvals 6.7 (a) Only project having a minimum investment of Rs.1 crore and above in building, plant and machinery shall be considered for establishment under EOU scheme. Minimum investment should take place on coming into production of the unit. (This shall, however, not apply to existing units and units in EHTP/STP/ handicrafts/ agriculture/ floriculture/ acqua-culture/ animal husbandry/ information technology, services and such other sectors as may be decided by the BOA).

Applications for setting up of units under EOU scheme other than proposals for setting up of unit in the services sector (except software and IT enabled services, or any other service activity as may be delegated by the BOA), shall be approved or rejected by the Units Approval Committee within 15 days as per the criteria indicated in Appendix 14-I of Handbook (Vol-I)

    (b) In other cases, approval may be granted by the Board of Approval (BOA) set up for this purpose as indicated in Appendix 14-I of Handbook (Vol-I)
    (c) Proposals for setting up EOU requiring industrial licence may be granted approval by the Development Commissioner after clearance of the proposal by the Board of Approval and Department of Industrial Policy and Promotion within 45 days on merits.
DTA Sale of Finished Products/ Rejects Waste/ Scrap/ Remnants and By-products 6.8 The entire production of EOU/EHTP/STP units shall be exported subject to the following:
  (a) Unless specifically prohibited in the LOP, rejects may be sold in the Domestic Tariff Area (DTA) on payment of duties as applicable to sale under paragraph 6.8(b) on prior intimation to the Customs authorities. Such sales shall be counted against DTA sale entitlement under paragraph 6.8(b). Sale of rejects upto 5% of FOB value of exports shall not be subject to achievement of NFE.
    (b) Units, other than gems and jewellery units, may sell goods/ services upto 50 % of FOB value of exports, subject to fulfillment of positive NFE on payment of applicable duties. Sales made to a private bonded warehouse set up under the policy shall also be taken into account for the purpose of arriving at FOB value of exports by EOUs provided payment for such sales are made from EEFC account. No DTA sale shall be permissible in respect of motor cars, alcoholic liquors, tea (except instant tea) and books or by a packaging/ labeling /segregation/ refrigeration unit and such other items as may be notified from time to time.
    (c) Gems and jewellery units may sell upto 10% of FOB value of exports of the preceding year in DTA subject to fulfillment of positive NFE as prescribed in the Policy. In respect of sales of plain jewellery, the recipient shall pay concessional rate of duty to the Customs in Indian rupees as applicable to sale from nominated agencies. In respect of studded jewellery, duty shall be payable in Indian rupees as notified by Customs.
    (d) Scrap/ waste/ remnants arising out of production process or in connection therewith may be sold in the DTA as per the Standard Input-Output norms notified under the Duty Exemption Scheme on payment of duties as applicable under paragraph 6.8 (b) within the overall ceiling of 50% of FOB value of exports. Such sales shall not, however, be subject to achievement of positive NFE. Sale of waste/scrap/remnants by units not entitled to DTA sale or sales beyond the DTA sale entitlement, shall be on payment of full duties.
    (e) There shall be no duties/taxes on such scrap/waste/ remnants in case the same are destroyed with the permission of Customs authorities.
    (f) EOU/ EHTP/ STP units may be permitted to sell finished products which are freely importable under the Policy in the DTA against payment of full duties provided they have achieved the positive NFE as per the Policy.
      Such sales may also be permitted in exceptional cases without achievement of positive NFE.
    (g) For services, including software units, sale in the DTA in any mode, including on-line data communication, shall be permissible up to 50% of FOB value of exports and/or 50% of foreign exchange earned, where payment for such services is received in free foreign exchange.


    (h) By-products included in the LOP may also be sold in the DTA subject to achievement of positive NFE on payment of applicable duties within the overall entitlement of paragraph 6.8(b). Sale of by-products by units not entitled to DTA sales or beyond the entitlements of paragraph 6.8 (b) shall also be permissible on payment of full duties.
  Note: In the case of units manufacturing electronics hardware and software, the NFE and DTA sale entitlement shall be reckoned separately for hardware and software.
Other Supplies in DTA 6.9 The following supplies effected from DTA to EOU/EHTP/STP units will be counted for the purpose of fulfilment of positive NFE: 
    (a) Supplies effected in DTA in terms of Chapter 8 of the Policy
    (b) Supplies effected in DTA against payment from the Exchange Earners Foreign Currency (EEFC) Account of the buyer in the DTA or against foreign exchange remittance received from overseas.
    (c) Supplies to other EOU/EHTP/STP/SEZ units provided that such goods are permissible for procurement in terms of paragraph 6.2 of the Policy.
    (d) Supplies made to private bonded warehouses set up under Chapter 2 of the Policy and/or under Section 65 of the Customs Act.
    (e) Supply of goods against special entitlement of duty free import of goods.
    (f) 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 the Ministry of Finance 
    (g) Supply of services (by services units) relating to exports paid for in free foreign exchange or for such services rendered in India Rupees which are otherwise considered as having been paid for in free foreign exchange by RBI.
    (h) Supplies of Information Technology Agreement (ITA-1) items and notified zero duty telecom/electronic items.
Export through status holder 6.10 An EOU/EHTP/STP unit may export goods manufactured/software developed by it through a merchant exporter/status holder recognized under this Policy or any other EOU/EHTP/STP/SEZ unit.
Samples 6.11 Procedure for export/supply of samples by EOU/EHTP/STP units is given in Appendix 14-I of Handbook Vol-I.
Entitlement for supplies from the DTA 6.12 (a) Supplies from the DTA to EOU/EHTP/STP units will be regarded as "deemed exports" and the DTA supplier shall be eligible for the relevant entitlements under chapter 8 of the Policy besides discharge of EP if any, on the supplier. Notwithstanding the above, EOU/ EHTP/ STP units shall, on production of a suitable disclaimer from the DTA supplier, be eligible for obtaining the entitlements specified in chapter 8 of the Policy. For the purpose of claiming deemed export duty drawback, they shall get Brand Rates fixed by the DGFT wherever All Industry Rates of Drawback are not available. In addition the EOU/EHTP/STP units shall be entitled to the following:-
      i. Reimbursement of Central Sales Tax.
      ii. Exemption from payment of Central Excise Duty on all goods as per entitlement under Paragraph 6.2 of the Policy.
      iii. Reimbursement of Central Excise Duty paid on bulk tea procured from licenced auction centres by Development Commissioner of concerned Zone so long as levy on bulk tea in this regard is in force.
      iv. Reimbursement of Duty paid on fuels procured from domestic oil companies, by the Development Commissioner of the concerned Zone as per the rate of Drawback notified by the Directorate General of Foreign Trade from time to time.
    (b) Supplier of precious and semi-precious stones, synthetic stones and processed pearls from DTA to EOU shall be eligible for grant of Replenishment Licenses at the rates and for the items mentioned in the Handbook (Vol.1).
    The entitlements under paragraph (a) (i) and (ii) above shall be available provided the goods supplied are manufactured in India.
Other Entitlements 6.13 Other entitlements of EOU/EHTP/STP units are indicated in the Appendix 14-I of Handbook (Vol-I).
Inter Unit Transfer 6.14 (a) Transfer of manufactured goods from one EOU EHTP/STP unit to another EOU/EHTP/STP/ SEZ unit will be allowed.
    (b) Deleted
    (c) Capital goods may be transferred or given on loan to other EOU/SEZ/EHTP/STP units with prior permission of the concerned Development Commissioner and Customs authorities.


Sub-Contracting 6.15 (a) EOU/EHTP/STP unit, including gem and jewellery units, may on the basis of annual permission from the Custom authorities, subcontract production process in DTA, which may also involve change of form or nature of goods, through job work by units in the DTA. These units may also subcontract upto 50% of the overall production of previous year in value terms for job work in DTA with the permission of the Customs authorities.


Subcontracting of both production and production process may also be undertaken without any limit through other EOU/EHTP/ STP/SEZ units on the basis of records maintained in the unit.


Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner. 

    (b) EOU may, on the basis of annual permission from the Customs authorities, undertake job work for export, on behalf of DTA exporter, provided the goods are exported directly from EOU and export document shall jointly in the name of DTA/EOU. For such exports, the DTA units will be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback.
    (c) Scrap/waste/remnants generated through job work may either be cleared from the job worker’s premises on payment of applicable duty or destroyed in the presence of Customs/ Excise authorities or returned to the unit. Destruction shall not apply to gold, silver, platinum, diamond, precious and semi precious stones.
    (d) Sub-contracting/exchange by gems and jewellery EOUs through other EOUs or SEZ units or units in DTA shall be as per procedure indicated in Appendix 14-I of Handbook (Vol-I).
Sale of Un-utilised Material 6.16 (a) In case an EOU/EHTP/STP unit is unable, for valid reasons, to utilize the goods and services, imported or procured from DTA, it may be transferred to other EOU/SEZ/EHTP/STP units or disposed off in the DTA on payment of applicable duties and submission of import licence by DTA unit, wherever applicable or exported. Such transfer from EOU/EHTP/STP unit to another such unit would be treated as import for the receiving unit.
    (b) Capital goods and spares that have become obsolete/surplus, may either be exported, transferred to another EOU/EHTP/STP/SEZ or disposed of in the DTA on payment of applicable duties. The benefit of depreciation, as applicable, will be available in case of disposal in DTA. 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 the Unit after intimation to the Custom authorities or destroyed outside the Unit with the permission of Custom authorities. Destruction as stated above shall not apply to gold, silver, platinum, diamond, precious and semi precious stones.
Reconditioning Repair and


6.17 EOU/EHTP/STP units may be set up with the approval of BOA to carry out reconditioning, repair, remaking, testing, calibration, quality improvement, up-gradation of technology and re-engineering activities for export in freely convertible foreign currency. Such units may import goods of any origin for the above activities. The provisions of paragraphs 6.8, 6.9,6.10,6.11, 6.12, 6.14 and 6.15 shall not, however, apply to such activities.

Repair of imported/ Indigenous Goods

6.18 (a) The general provisions of the Policy relating to export of replacement/repair of goods would also apply equally to EOU/EHTP/STP units, save that, cases not covered by these provisions shall be considered on merits by the Development Commissioner.
    (b) The goods sold in the DTA and found to be defective may be brought back for repair/ replacement, under intimation to the concerned jurisdictional Customs/Excise authorities.
    (c) Goods or parts thereof on being imported/ indigenously procured and found defective or otherwise unfit for use or which have been damaged or become defective after import/ procurement may be returned and replacement obtained or destroyed. In the event of replacement, the goods may be brought back from the foreign suppliers or their authorized agents in India or indigenous suppliers. However destruction shall not apply to precious and semi precious and precious metals.
Approval Period 6.19 LOP/LOI shall be valid for a period of 5 years from the date of commencement of production. This period may be extended further by the Development Commissioner concerned for period of 5 years at a time.
Exit from EOU Scheme 6.20 (a) Subject to the approval of the Development Commissioner, EOU/EHTP/STP units may opt out of the scheme. Such exit from the scheme shall be subject to payment of duties of Customs and Excise and the industrial policy in force at the time of exit.
    (b) If the unit has not achieved the obligations under the scheme, exit from the scheme, shall also be subject to penalty as may be imposed by the competent authority.
    (c) In the event of a gem and jewellery unit ceasing its operation, gold and other precious metals, alloys, gem and other materials available for manufacture of jewellery, shall be handed over to an agency nominated by the Ministry of Commerce and Industry (Department of Commerce) at the price to be determined by that agency.
    (d) An EOU//EHTP/STP unit may also be permitted by the Development Commissioner, as a one time option, to exit from the scheme on payment of duty on capital goods under the prevailing EPCG Scheme, subject to the unit satisfying the eligibility criteria under that Scheme and standard conditions indicated in Appendix 14-I of Handbook (Vol-I).
Conversion 6.21 (a) Existing DTA units, may also apply for conversion into an EOU/EHTP/STP unit, but no concession in duties and taxes would be available under the scheme for plant, machinery and equipment already installed.
    (b) The existing EHTP/STP units may also apply for conversion/merger to EOU unit and vice-versa. In such cases the units will continue to remain in bond and avail the permissible exemption in duties and taxes as applicable under the relevant scheme.


Monitoring of NFE 6.22

The performance of EOU/EHTP/STP units shall be monitored by the Units Approval Committee as per the guidelines given in Appendix 14-I of Handbook (Vol-I).

Export through Exhibitions/Export Promotion Tours /Export through show rooms abroad/Duty Free Shops. 6.23 EOUs/EHTP/STP may :

Export of goods for holding/ participating in exhibitions abroad with the permission of Development Commissioner.




Personal carriage of gold/ silver/ platinum jewellery, precious, semi-precious stones, beads and articles.


Export of goods is also permitted for display/sale in the permitted shops set up abroad.

    (iv) Display/sell in the permitted shops set up abroad or in the show rooms of their distributors/agents.

Set up show rooms/retail outlets at the International Airports.


Personal Carriage Of Import / Export Parcels Including Through Foreign bound Passengers 6.24

Import/ export through personal carriage of gem and jewellery items may be under-taken as per the procedure prescribed by Customs. The export proceeds shall, however, be realized through normal banking channel. Import/export through personal carriage for units, other than gem and jewellery units, shall be allowed provided the goods are not in commercial quantity.

Export /Import by Post /Courier 6.25

Goods including free samples, may be exported/imported by airfreight or through Foreign Post Office or through courier, subject to the procedure prescribed by Customs.

  6.26 Deleted
Administration of EOUs/Power of Development Commissioner 6.27

Details of administration of EOUs and Power of Development Commissioner are given in Appendix 14-I of Handbook (Vol.1).

Revival of Sick units 6.28

Subject to a unit being declared sick by the appropriate authority, proposals for revival of the unit or its take over may be considered by the Board of Approval.

Fast Track Clearance 6.29

A fast track clearance procedure for EOUs having status holder certificate under the Policy shall be notified separately.




In the case of units under EHTP/STP Schemes, necessary approval / permission under relevant paragraphs of this Chapter shall be granted by the officer designated by the Ministry of Communication and Information Technology, Department of Information Technology for the purpose instead of the Development Commissioner of SEZ and by the Inter-Ministerial Standing Committee (IMSC) instead of BOA.