A Government panel has recommended extension of investment-linked income tax benefits and a host of other fiscal sops to export oriented units (EOUs).
Many companies have exited the EOU scheme due to discontinuation of income tax benefits from April 1.
This, in turn, led to a fall in exports from such zones. The Government then set up a Committee chaired by Mr S.C. Panda, Development Commissioner, Noida Special Economic Zone, for revitalising the EOU Scheme and creating synergy between EOU and SEZ schemes.
The panel's report, released by the Commerce Secretary, Mr Rahul Khullar, on Wednesday, has suggested fiscal measures, policy initiatives, procedural simplifications and reduction of transaction costs for EOUs. These steps can reverse the declining trend in setting up of EOUs and their exports, Mr Panda said in a statement.
Other recommendations include exemption of service tax on the services consumed wholly within EOUs; exemption from Central Sales Tax and state levies on the goods supplied to EOUs; and rationalisation of administrative mechanism for setting up of EOUs.
The panel has also sought exemption from customs and central excise duty for all goods for manufacture of finished goods/services as well as for setting up and maintenance of the factory building and allied infrastructure for EOU operations.
It has mooted dispensing with the minimum investment criteria for setting up of EOUs; setting up warehousing facilities outside the EOU premises and outside the jurisdiction of the Development Commissioner; simplification of DTA sale (or sale of goods in the domestic tariff area, which is the area outside such zones where all taxes and duties apply) by defining “similar goods'; and removal of rider of positive net foreign exchange earning for DTA sale on payment on full duty.
Mr O.P. Kapoor, Deputy Director-General, Export Promotion Council for EOUs and SEZs, said the EOU Scheme was introduced in 1980 with an exceptional feature of locational freedom for setting up such a unit anywhere in India.
There were 2,586 EOUs, 8,121 Software Technology Parks and 144 Electronic Hardware Technology Parks — all of whom came under the EOU scheme — operating in the country by 2009-10. Exports (goods and services) from EOUs in 2009-10 were Rs 84,135 crore, while those from STPs and EHTPs were Rs 2,05,505 crore and Rs 8,028 crore respectively. Thus, the total exports in 2009-10 under the EOU Scheme were Rs 2,97,668 crore.
However, the share of EOUs in the country's total exports declined from 53.9 per cent in 2007-08 to 46.5 per cent in 2008?09 and further to 35.2 per cent in 2009-10 and 25.17 per cent in 2010?11 (upto December, 2010).
This was mainly because 354 units had exited the scheme in 2010-11 (up to December, 2010), while 393 units exited in 2009?10 in response to discontinuation of income tax benefits.