• Dated 18th August, 2022
Tax Alert

The Development of Enterprises and Services Hubs (DESH) Bill, 2022

The government is planning to table The Development of Enterprise and Service Hubs (DESH) Bill, 2022 , which will overhaul the special economic zones (SEZ) legislation. The Bill seeks to revise Special Economic Zones Act and to frame Rules.

Some Key features of the same bill has been discussed below:-

  1. The bill seeks to expand the ambit of the SEZs to make them WTO-compliant and perform roles;
  2. To set up 'development hubs' for promoting economic activity, generating employment. Such hub will also include existing SEZs;
  3. Seeks to emphasise on promoting not only manufacturing but trading and services too;
  4. In SEZs, only specified services such as IT, ITeS are allowed. But now all services in alignment with GST laws will be allowed;
  5. It does not seek to make it mandatory for the SEZs to have positive net foreign exchange earnings.
  6. There will also not be any requirement to have specific demarcation for trading and warehousing activities;
  7. They would be allowed to sell in the domestic market with duties to be paid;
  8. The scheme will also provide for an online single-window portal. Hence, it seeks to focus on single-window clearances;
  9. A key differentiator between new and the old law is that under DESH, hubs will allow units to make optimal use of their idle infrastructure by delivering services to customers in India instead of just focusing on exports, as was the case earlier.
  10. he new bill is expected to ensure tax rebates/refunds/financial subsidies to developers/companies in the hub, in a manner similar to the existing SEZs, but with no export compulsion NFE obligation. Existing ports, airports, inland container depots, land stations, etc., are proposed to be transformed into Development Hubs with a clear demarcation of processing and non-processing areas.

Some open Issues with the Bill:-

  1. The earlier SEZ Act did provide for enhanced Ease of Doing Business (EoDB) through single-window clearances through the office of the Development Commissioner, the implementation has been a mixed bag in some states which did not do away with their individual departmental approvals. How well this single window will be implemented under the DESH Act remains to be seen.
  2. Various tax breaks that the DESH bill proposes to bestow. Would the process of obtaining these breaks be smoother and dispute free.