If you plan to sell your product or service outside India whether it’s SaaS, design work, or physical goods the Export Oriented Unit (EOU) scheme can make you more competitive globally. It is a government initiative that allows eligible businesses to produce goods or deliver services mainly for export, with several tax and customs benefits.
This guide will help you understand what an EOU is, who can apply, the benefits, and the process for setting it up. You’ll also learn about the payment and compliance challenges that typically arise once an EOU starts operating.
Key Takeaways
- The EOU scheme is designed to help export-focused businesses operate with tax benefits, duty exemptions, and simplified approvals.
- A structured application process and compliance readiness are essential to qualify and operate as an EOU.
- EOUs gain cost advantages and better access to global markets by operating under a dedicated export framework.
- Once exports begin, managing international payments becomes crucial. Razorpay helps exporters get paid faster, save on forex fees, and stay compliant with digital FIRC and multi-currency support.
What Is EOU, and What Is Its Core Meaning?
EOU stands for Export Oriented Unit. It is a special type of business approved by the Indian government to support exports.
An EOU is set up with one clear intention to produce goods or deliver services entirely for export. The idea is simple: the more India exports, the more foreign currency the country earns. To encourage this, the government offers EOUs various benefits, such as duty waivers and simplified compliance requirements, so they can compete more effectively in global markets.
The Process of Setting Up an Export Oriented Unit
1. Submit the Application
The process begins with Form ANF 6A, which must be submitted in triplicate to the Development Commissioner (DC) of the relevant SEZ. An application fee of ₹5,000, paid via demand draft, must be attached. This is the official request to set up an EOU.
2. Attach the Necessary Documents
To support the application, a set of business documents is required. These help establish your business identity and financial readiness:
Documents commonly required:
- Certificate of Incorporation
- Articles of Association (AOA) or Partnership Deed
- Existing and proposed capital structure
- Any other details requested by the DC
These documents allow the authorities to verify that the business is legally registered and capable of operating an export unit.
3. Approval by the Unit Approval Committee (UAC)
After submission, the application is evaluated by the Unit Approval Committee. The committee is required to approve or reject the application within 15 days, following the conditions listed in Appendix 6A. In certain cases, the Development Commissioner may refer the proposal to the Board of Approval (BOA) if further review is needed.
4. Industrial Licence (If Applicable)
Certain sectors require an industrial licence. In such cases, approval is granted only after clearance from the BOA and the Department of Industrial Policy and Promotion (DIPP). This may take up to 45 days, depending on the proposal.
5. Issuance of the Letter of Permission
If the application is approved, the DC issues a Letter of Permission (LoP) or Letter of Intent (LoI). This document acts as the official authorisation to set up and operate as an EOU. Once issued, it is considered valid for imports, construction, machinery installation, and preparation for production no separate approvals are required.
6. Validity and Extensions
The LoP has an initial validity of two years, during which the unit must start production. If production cannot begin within this period:
| Situation | Granting Authority | Possible Extension |
| Valid reasons submitted | Development Commissioner | +1 year |
| Two-thirds of the setup is complete, and a Chartered Engineer’s certificate is submitted | Unit Approval Committee | +1 additional year |
Once production begins, the LoP becomes valid for five years, and it can be renewed by the DC in five-year intervals.
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Eligibility Criteria for Export Oriented Unit
Not every export business can register as an Export Oriented Unit. The government has set clear eligibility rules to ensure only serious, export-focused businesses apply. To qualify for EOU status, your unit must meet the following conditions:
- The business must export 100% of its production of goods or services.
- Trading units are not eligible; only manufacturing or service-based units can apply.
- A minimum investment of ₹1 crore in plant and machinery is required.
- This investment rule does not apply to the Software Technology Parks (STP), Electronics Hardware Technology Parks (EHTP) and Biotechnology Parks.
- Existing units in sectors such as handicrafts, agriculture, floriculture, aquaculture, animal husbandry, IT services, brass hardware, and handmade jewellery are exempt from the ₹1 crore requirement.
- BOA may allow approval with a lower investment limit if the project shows strong export potential.
Practical Tips to Improve Your Chances
- Prepare a clear export strategy that explains your target markets, expected demand, and how your business plans to serve international clients.
- Maintain a clean financial structure with proper documentation of capital sources and projected cash flow.
- Gather proof wherever possible letters of interest, client enquiries, or market research can strengthen your application.
- Ensure your proposed location has reliable basic infrastructure, as this will be checked during inspection.
Common Mistakes to Avoid
- Trading activities are not allowed under the EOU scheme, so these applications are rejected immediately.
- Not all EOUs need to invest ₹1 crore assuming this is mandatory may cause unnecessary financial stress.
- Each business category has specific guidelines, so applying under the wrong category can lead to delays or rejection.
- Export projections must be backed by data or evidence without proof of demand, authorities may not accept the proposal.
Benefits of Operating as an Export Oriented Unit
Major Tax & Duty Concessions
EOUs receive multiple financial benefits that improve profitability and reduce cash flow pressure. They are allowed to import raw materials, capital goods, and consumables without paying customs duty, provided export obligations are met. GST is exempt on imports, and refunds can be claimed on eligible domestic purchases.
Simplified Procedures & Approvals
The approval process for EOUs is designed to be faster than regular industrial setups. A single-point clearance from the DC speeds up onboarding. Online documentation under FTP guidelines has reduced manual paperwork. Customs procedures for imports and exports are simplified, and once issued, the Letter of Permission serves as authorisation for multiple activities, including machinery imports.
Flexibility in Operations
The scheme gives businesses room to operate and scale as per market demand. EOUs are permitted to sell a limited portion of goods or services in the Domestic Tariff Area (DTA). This helps businesses manage cash flow and test demand locally. Units can also scale operations gradually, which makes the scheme suitable for startups, MSMEs, and established exporters in both manufacturing and service sectors.
Did You Know?
An EOU can be set up anywhere in India, unlike certain export schemes that require specific zones. This allows you to choose a location based on logistics, access to labour, raw materials, or network connectivity.
EOU vs. SEZ vs. EPZ: Which Scheme is Right for Your Business?
India initially used Export Processing Zones (EPZs) to promote exports, but they were later phased out. Most EPZs have now been converted into Special Economic Zones (SEZs), so the choice today mainly lies between EOUs and SEZs. Both schemes support export-led growth, but they work differently in terms of setup conditions, administration, and operational flexibility.
Understanding these differences can help you choose the model that fits your business strategy.
EOU vs. SEZ vs. EPZ: A Head-to-Head Comparison
| Parameter | EOU | SEZ |
| Location | Can be set up anywhere in India | Must be within a notified SEZ zone |
| Minimum Area Requirement | No specific minimum area requirement | Specific minimum land area required (varies by sector) |
| DTA Sales Rules | Limited sales allowed with applicable duties | All goods and services supplied are treated as imports into India and must follow import procedures and duties. |
| Customs Control | Controlled under the jurisdictional customs authority | Customs regulations are relaxed and handled within SEZ |
| Administration | • Unit Approval Committee – evaluates and approves proposals
• Development Commissioner – issues LoP and oversees operations • Board of Approval – involved where further clearance is required |
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Navigating Global Payments & High Forex Fees
Once exports begin, many EOUs face a new challenge receiving international payments smoothly. High forex fees, delayed settlements, multiple currencies, and manual compliance processes often affect cash flow and create operational stress. This is where Razorpay helps it offer solutions that directly tackle these pain points. With Razorpay, you can:
Make International Payments Easier to Collect
Razorpay lets you accept bank transfers, cards, or wallets like Apple Pay and Google Wallet with a checkout experience built for international buyers. It also uses intelligent routing and AI-based fraud protection, helping businesses achieve up to 90%+ success rates on global transactions.
Bill and Receive in 130+ Currencies
Clients can pay in their local currency while exporters receive the money in INR, without forcing conversion at their end. This helps prevent drop-offs and makes billing easier.
Save on Forex Charges with Better Rates
Traditional bank transfers often include hidden forex markup fees. Razorpay offers transparent pricing and competitive rates, helping businesses save up to 75% in forex charges meaning higher profit per transaction.
Stay Compliant with Instant Digital FIRC
Manual FIRC processes through banks can take several weeks. Razorpay provides automated digital FIRC at the click of a button, reducing delays in GST refunds, export documentation, and bank audits.
Get Paid Faster
With quicker settlement timelines, exporters receive funds faster and avoid cash flow gaps. This supports scaling, especially when multiple invoices are active at the same time.
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FAQs
1. Is GST applicable to sales from an EOU?
An EOU is treated just like any regular supplier under GST, which means all provisions of the GST law apply.
2. Who can apply to become an Export Oriented Unit?
Any manufacturing or service-based business that is focused on exporting 100% of its output can apply to become an EOU. This includes sectors such as IT services, SaaS products, biotechnology, R&D, agriculture, handicrafts, and electronics.
3. How long does it take to set up an EOU?
If documents are complete, the Unit Approval Committee must approve or reject the application within 15 days of submission as per FTP guidelines.
4. What is the minimum investment required to set up an EOU?
A minimum investment of ₹1 crore in plant and machinery is required. However, this rule does not apply to STP, EHTP, BTP units and several existing sectors such as IT services, handicrafts, agriculture, and aquaculture.
5. Can freelancers benefit from setting up an EOU?
Freelancers alone may not qualify, but small agencies, IT service providers, and SaaS-based exporters can apply if they show a dedicated export plan and a valid business structure.
6. What are the benefits of registering as an EOU?
EOUs receive tax and duty concessions, faster approvals, simplified customs procedures, and flexibility in operations, including limited sales in the Domestic Tariff Area.
7. Can second-hand goods be imported by EOUs?
Yes, second-hand capital goods may be imported by EOUs subject to approval and compliance with customs regulations.
