Tax holiday for EoUs doubled to 10 years

NEW DELHI, MAR 11: The corporate tax holiday for 100 per cent export-oriented units and units set up in export processing zones (EPZs) ha...

NEW DELHI, MAR 11: The corporate tax holiday for 100 per cent export-oriented units and units set up in export processing zones (EPZs) has been doubled to 10 years. Earlier, the units were permitted a tax holiday for a period of five years over a block period of 8 years. A gazette notification has now dispensed with the block period stipulation.

The units, however, had been demanding that the government allow them tax holiday for as a long a period as they remain customs-bonded under the EOU scheme.

The raise in the corporate holiday period comes close on the heels of the government’s recent decision to slash the excise duty on sale by EOUs of finished products in the domestic market. Now, EOUs will pay 8 per cent excise duty, the same level applicable to domestic units.

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Earlier, EOUs were paying 30 per cent customs or excise duty on such DTA sale while no such duty was payable by domestic units. This anomaly has now been rectified in the 1999-2000 budget.

The Confederation of Export Units (CEU), which has been spearheading the cause of EOUs, has pleaded with the government to grant them Central sales tax exemption instead of refunding such tax, which is time-consuming.

Besides, the benefit of drawback may be conceded to supplies made by DTA units to the EOUs, the Confederation said.

Under the EOU scheme, the EOUs have to remain customs-bonded for a period of five years only. The period will be 10 years in cases where heavy capital investment is involved.

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CEU has also urged the government to exempt EOUs from payment of duty on debonding of capital goods when they have achieved full value addition/net foreign exchange as a percentage of exports (NEEP) and have fulfilled their export obligation. A similar dispensation may also be shown to obsolete capital goods.

Textile EOUs are using a small portion of imported consumables and raw materials in the course of their manufacture. These consumables and materials are essential to give a quality finish to the final product and are not indigenously available.

While the Central Board of Excise and Customs (CBEC) has clarified that the benefit of Central excise exemption will be available to the units using imported consumables, no notification has been issued on use of a small portion of imported raw materials, the confederation said.

The setting up of EOUs is of considerable advantage to the states where they are located by way of industrialisation, employment generation, utilisation of local resources, human skill development among locals etc.