Export Oriented Unit (EOU)

What is an Export Oriented Unit (EOU)?

An Export Oriented Unit (EOU) is a business set up with the objective of exporting its entire production of goods or services (with limited permissible sales in the Domestic Tariff Area – DTA). EOUs can operate across diverse sectors such as manufacturing, agriculture, aquaculture, floriculture, animal husbandry, biotechnology, information technology, and more.

The EOU scheme is designed to:

Promote exports and enhance India’s foreign exchange earnings

Attract foreign/domestic investment in export production

Generate employment and build global competitiveness

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Benefits & Incentives of Setting up an EOU

By establishing an EOU, businesses enjoy a wide range of fiscal and operational advantages:

Duty-free imports & procurement of raw materials, capital goods, spares, and consumables required for production

GST refunds & benefits on procurement from the Domestic Tariff Area (DTA)

Exemption from industrial licensing for items reserved for MSMEs

100% Foreign Direct Investment (FDI) allowed under the automatic route, similar to SEZ units

Retention of 100% export earnings in EEFC (Exchange Earners’ Foreign Currency) account

No requirement of bank guarantee for established units meeting turnover and compliance norms

Reimbursement of Central Sales Tax (CST) on goods manufactured in India

Flexibility in sub-contracting production within India and abroad under Customs permission

Permission to sell a limited portion of rejects, by-products, and waste in the domestic market on duty payment

EOU Application Process & Timelines

Step 1 : Application Submission

File three copies of Form ANF 6A to the Development Commissioner (DC).

Step 2 : Approval by UAC/BOA

The Unit Approval Committee (UAC) approves/rejects applications within 15 days (in normal cases). Proposals requiring an industrial license may take up to 45 days after BOA & DPIIT clearance.

Step 3 : Issuance of LoP/LoI

Once approved, the DC issues the Letter of Permission/Intent valid for 2 years to commence operations.

Step 4 : Commencement of Production

Units must begin production within 2 years (extendable by 1-2 years with valid reasons).

Step 5 : Validity Period

Once operational, LoP remains valid for 5 years and can be extended in blocks of 5 years thereafter.

CCC’s End-to-End Services for EOUs

At CCC, we provide complete assistance for businesses planning to establish and operate as EOUs. Our services include:

Advisory & Consultation

Feasibility analysis, eligibility check, and strategic planning for EOU registration.

Application & Approval Support

Drafting and filing of application (ANF 6A), coordination with the Development Commissioner (DC), and securing the Letter of Permission (LoP) / Letter of Intent (LoI)

Compliance Management

Assistance with executing the Legal Undertaking (LUT), maintaining mandatory records, and filing quarterly/annual reports with Customs and DGFT.

Import & Procurement Facilitation

Guidance on duty-free import/procurement of capital goods, raw materials, and consumables.

Operational Support

Advisory on DTA sales, inter-unit transfers, sub-contracting, and export through third parties

NFE (Net Foreign Exchange) Monitoring

Calculation and compliance with positive NFE requirements

Renewals & Extensions

Handling LoP renewals, validity extensions, and BOA/UAC approvals

Exit & De-bonding Assistance

Smooth closure, exit, or conversion of EOU into another scheme.

Frequently Asked Questions (FAQs) for EOUs

What is the minimum investment required to set up an EOU?

A minimum of ₹1 crore in plant & machinery is required, except for units in agriculture, floriculture, aquaculture, animal husbandry, handicrafts, handmade jewellery, IT & services sectors.

Can EOUs sell in the Indian market?

Yes, EOUs can sell a portion of rejects, by-products, scraps, and specified finished goods in the Domestic Tariff Area (DTA) on payment of applicable duties, subject to positive NFE.

What is Net Foreign Exchange (NFE) and why is it important?

EOUs must maintain a positive NFE over a block of 5 years, meaning the value of exports should exceed the value of imports and foreign exchange outgo.

How long does it take to get EOU approval?

In most cases, approvals are granted within 3-4 weeks.

Can an existing domestic unit be converted into an EOU?

Yes, domestic units can be converted into EOUs with DC/BOA approval.

Are second-hand capital goods allowed under the EOU scheme?

Yes, EOUs can import second-hand capital goods without any age restriction.

What happens if an EOU fails to maintain a positive NFE?

Failure to achieve NFE can attract penalties, cancellation of LoP, or withdrawal of EOU status.

Can EOU unit exit from EOU Scheme

With approval of DC/Designated officer EOU unit may opt out of scheme. Such exit shall be subject to payment of applicable Excise and Customs duties and on payment of applicable IGST/ CGST/ SGST/ UTGST and compensation cess, if any, and industrial policy in force.

What are the differences between Special Economic Zones (SEZs) and Export Oriented Units(EOUs)?

An EOU can be established at any location in India, provided it fulfills the eligibility criteria prescribed under the scheme. In contrast, an SEZ is a specifically notified area treated as a territory outside the Customs jurisdiction, and hence, regarded as a “foreign territory” for trade purposes. Consequently, any sale from an SEZ to a Domestic Tariff Area (DTA) unit is treated as an import for the DTA, while supplies from the DTA to an SEZ are treated as exports. However, supplies from the DTA to an EOU are categorized as deemed exports.

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