Development of Enterprise and Service Hubs Bill (DESH), 2022
Key Provisions:
- Special economic zones will be renamed Development of the Enterprise and Service Hubs.
- Hubs no longer need to have net foreign exchange positive cumulatively in 5 years as in SEZ act.
- Hubs can easily sell in the domestic market, and duty only needs to pay on the imported inputs and raw materials, not on the final product.
- Equal levy for goods and services supplied to the domestic market to bring tax at a level to the outside unit.
- Hubs will not be benefited from direct tax incentives, and hubs will now comply with the WTO rule.
- It ends the duration of holding goods which was one year according to SEZ rule.
- Bill’s decision is taken by the Department of Commerce, allowing the state to participate and send recommendations for development hubs.
Development of Enterprise and Service Hubs Bill (DESH), 2022
Development Of Enterprise and service Hubs (DESH) bill is introduced by the government to replace the Current Special Economic Zone Act, 2005. It was done after the World trade organization review regarding India’s special economic zone. WTO has ruled that India’s export-related schemes, including SEZ schemes, are not according to WTO rules. The current rule directly links the tax benefits to exports, and the country couldn’t subsidize export. SEZ will be renamed as a Development hub and will be free from several laws. Hub will facilitate both export-oriented and domestic investment.
Special Economic Zone:
- The region in the country has different economic regulations than other regions of the same country.
- It is the region targeting foreign direct investments.
- It facilitates rapid economic growth, and tax incentives are leveraged to attract foreign investment and technological development.
- SEZ is governed by a three-tier administrative setup.
Objectives of Special Economic Zone:
- Generation of economic activities.
- Promotion of exports of goods and services.
- Promotion of investment from domestic and foreign resources.
- To generate employment.
- To develop infrastructure activities.
Types of the Special Economic Zone:
- Free trade zones.
- Export processing zones.
- Free zones/ Free economic zone.
- Industrial parks.
- Free ports.
- Bonded logistics parks.
- Urban Enterprise zones.
Special Economic Zone Act, 2005
- SEZ act was launched in 2000 and passed by parliament in 2005.
- No license for import.
- Manufacturing and service activities are not permitted.
- The unit will be receiving positive net foreign exchange, which will be calculated cumulatively for five years.
- Domestic sales will be under full customs duty and import policy.
- SEZ is allowed for sub-contract and will be free from the routine examination by the customs authority.
Challenges faced by industries due to SEZ Act, 2005:
- Existence of multiple models of economic zones- The country is divided into different zones like coastal economic zone, Delhi Mumbai industrial corridor, National investment, Food park, and textile market. It makes coordination challenging.
- Underutilization of the existing capacity- SEZs are not allowed to do work for the domestic areas. The area outside SEZ is known as DTA, and goods and services exchanged between SEZ and DTA are treated as imports.
- Minimum alternate rate- IT was imposed on April 1, 2012, and then the imposition of income tax on the new SEZ in April 2020 introduced a new challenge for the industry.
- Due to the significantly less role of the state government, there was very little support from the state government for forming a single window system.
Contact Us