corporate law

Published on 8 May 2025

Understanding SEZ, EOU, and DTA Units: Key Tax Compliance Differences

Key Differences Between SEZ, EOU, and DTA Units on Indirect Tax Compliance

This article aims to elucidate the primary distinctions among Special Economic Zone (SEZ) units, Export Oriented Units (EOU), and Domestic Tariff Area (DTA) units in the context of their respective benefits and compliance requirements from an indirect tax perspective.

Overview of Units

SubjectSEZ UnitEOU UnitDTA Unit
Area of Operations / Setting UpEstablished only in designated sites notified as SEZ.Can be established anywhere in India.Can be established anywhere in India.
Authority / Approval for Setting UpRequires approval under SEZ laws, granted by the Development Commissioner of the respective SEZ.Requires approval under the Foreign Trade Policy (FTP), granted by the jurisdictional Development Commissioner.No approval required.

Import Regulations

  • Imports:
    • SEZ Units: Exempt from all types of customs duties, including Basic Customs Duty (BCD), Safeguard Duty (SWS), Integrated Goods and Services Tax (IGST), Cess, etc.
    • EOU Units: Also exempt from all types of customs duties.
    • DTA Units: Allow imports subject to payment of applicable customs duties but can utilize advance authorization and Export Promotion Capital Goods (EPCG) scheme benefits.

Procurement and Clearances

  • Procurement from DTA:

    • SEZ Units: Permitted to procure necessary items without GST payment (under LUT) or upon GST payment (with refund eligibility).
    • EOU Units: Subject to applicable GST, from which Input Tax Credit (ITC) can be claimed.
    • DTA Units: Same as EOU; pay applicable GST and can claim ITC.

  • DTA Clearances:

    • SEZ Units: Clearances on payment of relevant customs duties. Bill of entry required from either the importer or SEZ unit.
    • EOU Units: Clearances allowed upon GST payment, with the requirement to surrender BCD exemption on imported inputs used for DTA product manufacturing. Only a tax invoice is issued.
    • DTA Units: Applicable GST payable with tax invoice issuance.

Tax Benefits and Incentives

  • Income Tax Benefit:

    • SEZ Units: Benefits withdrawn for units set up after July 2020; deductions available for older units.
    • EOU Units: Benefits withdrawn for units established after April 2012; older units retain deductions.
    • DTA Units: No tax benefits available.

  • Erstwhile MEIS Benefit:

    • Available for all unit types.

  • Existing RoDTEP Benefit:

    • SEZ and EOU Units: Not available pending documentation.
    • DTA Units: Available.

  • Existing SEIS Benefit:

    • SEZ and DTA Units: Available.
    • EOU Units: Not available.

  • Duty Drawback Benefit:

    • Available only for DTA Units.

Export Dynamics

  • Export on Payment of IGST:
    • SEZ and DTA Units: Have the option to pay IGST and later claim a refund.
    • EOU Units: Must supply without payment of GST under LUT; no refund option for IGST.

Compliance Requirements

  • SEZ Units: Subject to numerous compliances, including setting up, extensions, Annual Performance Reports (APRs), Quarterly Performance Reports (QPRs), Monthly Performance Reports (MPRs), and employee ID card regulations, along with GST return filing.
  • EOU Units: Subject to various compliance measures, including customs laws record-keeping, and GST return filing.
  • DTA Units: Only GST-related compliance requirements.

Authorities and Applicable Laws

  • Authorities:

    • SEZ Units: Interaction with NSEZ authorities, GST authorities, and customs authorities.
    • EOU Units: Liaison mainly with NSEZ and GST authorities.
    • DTA Units: Interaction primarily with GST authorities.

  • Applicable Indirect Tax Laws:

    • SEZ Units: Governed by the SEZ Act, Customs Act, and GST Act.
    • EOU Units: Governed by FTP & HBP, Customs Act, and GST Act.
    • DTA Units: Governed by Customs Act and GST Act.

  • Excise Duty Benefit:

    • SEZ and EOU Units: Eligible for procurement of fuels like HSD and natural gas without excise duty for authorized operations.
    • DTA Units: No such benefits available.

This comparison clarifies the different regulatory conditions and advantages associated with SEZ, EOU, and DTA units, enabling stakeholders to make informed decisions based on their operational needs.

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