The Hindu Business Line : Duty exemption restored to trading units under EOU

TRADING units having valid letter of permission to continue under the export-oriented undertaking (EOU) scheme have cause for cheer. Such units can now import goods without paying customs duty, or purchase goods from the domestic tariff area without forking out any excise duty.

The Finance Ministry has restored customs and excise duty exemption on the goods procured for trading by units that were in existence before March 31, 2002, and now having valid letter of permission to continue under the EOU scheme even after that date.

The Government had, in its five-year Exim Policy 2002-07, unveiled on March 31, 2002, ruled that new trading units would not be permitted in the country under the EOU scheme. The misuse of the scheme by certain trading units in Western India had prompted the Government to ban the setting up of new trading units under the EOU scheme, sources said.

While giving effect to the Exim Policy proposals, the Revenue Department had not specifically provided for either customs or excise duty exemption for trading units as the Policy barred the setting up of new trading units under the EOU scheme. This implied that the existing trading units also lost the duty exemption benefits on the goods imported or purchased by them.

The sources said the Revenue Department's latest move to restore duty exemption for trading units comes after the Commerce Ministry's efforts to push for such an exemption in respect of those trading units that were in existence prior to March 31, 2002, and to who a letter of permission to continue as a trading unit under the EOU scheme is being granted.

The latest exemptions would, however, come with riders. Such trading units would not be allowed to sell the goods (purchased or imported) in the domestic tariff area. The units cannot also export goods through merchant exporter or through any other exporter. Further, the goods imported or purchased cannot be transferred to other export-oriented undertaking or unit in electronic hardware technology park (EHTP) or Software Technology Park (STP) or Special Economic Zone. Such goods cannot also be removed outside the bonded premises for the purpose of jobwork.

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