Export Oriented Units (EOUs) are businesses in India set up with the primary objective of exporting their entire (or nearly entire) production of goods or services outside India.
What is an EOU?
An Export Oriented Unit is a unit recognized under India’s Foreign Trade Policy that commits to exporting most of its output (typically 100%). In return, it receives various incentives and duty benefits.
Scheme Introduced in 2017
Key Features
- Export-focused: Must export almost all production (some domestic sales allowed under conditions)
- Customs-bonded unit: Operates under customs control
- Can be set up anywhere in India (unlike SEZs which are location-specific)
- Covers:
- Manufacturing units
- Service providers (like IT, BPO, etc.)
Benefits of EOUs
- Duty-free imports
- Raw materials, capital goods, and inputs can be imported without customs duties
- GST advantages
- Supplies for export are zero-rated
- Can procure goods/services under LUT (without paying GST) or claim refunds
- No industrial licensing (in most cases)
- Full foreign investment allowed
- 100% FDI is permitted in many sectors
Domestic Tariff Area (DTA) Sales
EOUs are allowed to sell a portion of goods in India (called DTA sales), but:
- Subject to duties/taxes
- Limited to a percentage of export value
- Requires permission
Compliance Requirements
- Maintain positive Net Foreign Exchange (NFE)
- Follow customs and GST procedures
- Submit regular reports to authorities
