Development of Enterprises and Services Hub (DESH) Bill 2022

Commerce Ministry organises Workshop on Development of Enterprises and Services Hub (DESH) Bill 2022 with stakeholders.

The government had planned to introduce the Development of Enterprise and Service Hubs (DESH) Bill in the Monsoon session of Parliament.
Through this, the government is trying to focus on broader fundamentals such as increasing additional economic activity beyond export-oriented manufacturing, creating employment opportunities and consolidating various industrial hubs.

The bill seeks to overhaul the existing Special Economic Zone law of 2005, aiming to revive interest in SEZs and develop more inclusive economic hubs.

Special Economic Zone:

An SEZ is a part of a country that is usually duty-free (Fiscal Concession) and has its own set of business and commercial rules to attract investment and create jobs.
SEZs are also formed to improve the administration of these areas, making doing business easier.

The Special Economic Zone (SEZ) Rules, 2006 came into effect on February 2006.
Till mid-June this year, 378 SEZs were notified. And of them, till March this year, 268 SEZs were operational. Rest were de-notified.
Reasons listed by the government for such a de-notification were poor market response, lack of demand for space and change in the fiscal incentive regime.
Issues with SEZ
- Exports from these SEZs have fallen to $102.3 billion in FY21, from $112.3 billion in FY20. They account for less than 20% of exports now.
- Set up to fulfil India’s plan of becoming a manufacturing powerhouse, these special zones fell short of expectations as the competitive advantage waned and several direct tax benefits were withdrawn.

A WTO panel in 2019 said that incentives given to SEZ entities violated the agreement on subsidies.
So now, the government has decided to overhaul the SEZ rules.

Unlike in the SEZ ecosystem, the government has proposed to create developmental hubs whose focus is not limited to and not to cater to the domestic markets.
The customs duty would only be paid on the inputs used and not on the expensive final goods.
The Bill also seeks to integrate existing industrial estates such as textiles and food parks by converting them into developmental hubs.
The DESH Bill classifies two types of developmental hubs — Enterprise and services.
1. The enterprise hubs will have land-based area requirements and be allowed for manufacturing and services activities
2. Services hubs will have built-up area requirements and be allowed for only services-related activities.

One of the key aspects of the new DESH Bill is also to promote the expansion of the gambit of service sector units. Only specified services such as IT and ITeS (Information Technology Enabled Services) are currently allowed in special economic zones.
The Bill also proposes to offer tax benefits and other sops.
- According to reports, the draft bill proposes to freeze the corporation tax at a concessional 15% for greenfield and brownfield units in the developmental hubs.

India’s goal of becoming a $5 trillion economy by FY 2026 will require accelerated investment to contribute $3 trillion and $1 trillion from the services and manufacturing sectors, respectively.
- Enables India to become an attractive global destination for manufacturing and services.

The new SEZ Act will be WTO-compliant and have a single window (clearance system). High-class infrastructure will be there, and more benefits will be there.
They are boosting economic activity and the domestic market, integrating the various models, facilitating ease of business and generating employment.

Pic Courtesy: freepik

Content Source: The Hindu