Govt asked to further extend tax sops under EOU scheme in Budget

The Hindu Business Line,

Industry body EPCES has asked the Government to extend the tax benefits offered under the Export-Oriented Unit (EOU) scheme for another five years in the forthcoming Budget to give a boost to the manufacturing sector.

Under the EOU scheme that was introduced in 1980, firms enjoy tax exemptions on profits under Section 10B of the Income Tax Act. This benefit was extended by one year, till March 2011, in the previous Budget.

The scheme has contributed immensely to the creation of manufacturing capabilities in the country over the last 30 years, increasing exports and generating employment, the Export Promotion Council for SEZs and EOUs (EPCES) said in a statement here.

“The EOU scheme needs further extension of the sunset clause under Section 10B of Income Tax Act in the forthcoming Budget 2011-12 and needs to be nurtured,” the EPCES Deputy Director-General, Mr O.P. Kapoor, said, adding that exports from EOUs stood at Rs 83,700 crore in 2009-10.

The sector has provided employment to 3,00,830 persons and investments worth Rs 77,284 crore have been made by EOUs.

“EOU scheme needs to be nurtured further for encouraging the creation of further dedicated manufacturing activities for exports,” he said, adding, “The sunset clause should be further extended for a period of five years.”

The 100 per cent EOU scheme allows only manufacturing activities and no trading activities are permitted.

Mr Kapoor also said EOUs should be exempted from payment of service tax, VAT and CST, instead of the present practice of giving a refund, as it would reduce the procedural work.

In another statement, a small and medium enterprises (SMEs) web portal,, has asked the Government to simplify the taxation process to encourage the growth of the sector.

“We would suggest simplification of taxation for SMEs. Currently, there are multiple taxes and complex filing processes, which limit SME growth,” the CEO, Mr Dinesh Agarwal, said.

He said the Budget should increase fund allocation to the SME sector, which contributes 45 per cent of India’s manufacturing output and 40 per cent of total exports. The sector employs over 60 million people.

“There is also a need for more collateral free financing,” he added.