EOU explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
An Export Oriented Unit (EOU) is a unit that undertakes to export its entire production of goods and services, in exchange for duty-free import and domestic procurement of inputs and capital goods. It operates under Chapter 6 of the Foreign Trade Policy 2023 with a positive Net Foreign Exchange obligation.
Overview
The EOU scheme was introduced in 1981 to boost exports by creating units that export their entire output. Unlike an SEZ, an EOU can be located anywhere in India (it is a bonded premises, not a demarcated enclave). It is governed by Chapter 6 of the Foreign Trade Policy (FTP) 2023 and the Handbook of Procedures, administered by the Development Commissioner, with Customs control under the Customs Act 1962.
Legal Basis
The scheme flows from Chapter 6 of FTP 2023. Duty-free import is granted through customs exemption notifications; the unit executes a B-17 bond with Customs. DTA procurement without duty is enabled by treating such supply as a "deemed export" under Chapter 7 of the FTP.
Eligibility and Approval
- Any manufacturer or service provider exporting the entire output can apply.
- General minimum investment of ₹1 crore in plant and machinery before commercial production (relaxed for handicrafts, IT, agriculture, biotechnology — verify current sectoral norms).
- Application in the prescribed form to the Development Commissioner; the Unit Approval Committee issues a Letter of Permission (LoP).
- The LoP is valid two years to commence production and five years for operations, extendable.
Step-by-Step Setup
- File the application and project report with the Development Commissioner.
- Obtain the LoP from the Unit Approval Committee.
- Execute a B-17 bond with the jurisdictional Customs authority and get the premises customs-bonded.
- Obtain IEC from DGFT and GST registration.
- Commence production and file periodic reports.
Benefits
- Duty-free import of capital goods, raw materials, consumables and spares (BCD exemption; IGST/cess exemption on imports has been time-limited and extended periodically — verify the current notification).
- Duty-free domestic procurement treated as deemed exports for the DTA supplier.
- DTA sale entitlement up to 50% of FOB value of exports on payment of applicable duties.
- Fast-track clearance and self-certification of goods.
Net Foreign Exchange Calculation
An EOU must be a positive net foreign exchange earner over a block of five years. Suppose an EOU exports ₹30 crore over the block and imports inputs and capital goods worth ₹20 crore (CIF). Its NFE is a positive ₹10 crore, satisfying the obligation. If exports had been only ₹18 crore against ₹20 crore imports, NFE would be negative and the unit would face penal action under the Foreign Trade (Development & Regulation) Act 1992.
EOU vs MOOWR
| Feature | EOU (FTP Ch.6) | MOOWR (2019) |
|---|---|---|
| Export obligation | Yes — export entire output | No |
| NFE requirement | Positive NFE over 5 years | None |
| Customs benefit | Duty exemption on inputs | Duty deferment till clearance |
| DTA sale | On payment of duty, capped | On payment of deferred duty |
Because MOOWR offers similar duty relief with no NFE/export commitment, many new projects prefer it; the EOU scheme continues for units wanting deemed-export and specific sectoral advantages.
Common Pitfalls
- Assuming ongoing IGST exemption on imports — confirm the current time-bound notification.
- Exceeding permitted DTA sale limits and breaching NFE.
- Not renewing the LoP or B-17 bond, halting duty-free procurement.