Centre may junk DESH Bill, amend SEZ Act

The government could junk the proposed Development of Enterprise and Service Hubs (DESH) bill as it evaluates the need for a new legislation to overhaul the country's special economic zones (SEZ).

Officials said discussions are on to amend the extant SEZ Act instead of putting in place a new legislation, and a decision on the issue is likely before the winter session of Parliament.

The commerce and industry ministry is keen to allow units in these zones to sell in areas outside SEZs, called domestic tariff area (DTA) without the payment of customs duties.

'Modalities being discussed'
"We are still evaluating and everything is on the table. Whether it will be DESH bill or amending the SEZ Act or some new format, the modalities are being discussed," said an official.

The ministries of finance and commerce & industry have been in discussions on the DESH bill for more than a year. Partial de-notification of zones, sales to DTA, concessional corporate tax for them and removal of net foreign exchange earning requirement have been some of the sticky issues between the two ministries.

Another person in the know said that the commerce department is working on a cabinet note on the proposed amendments to the SEZ Act.

Addressing concerns
The amendment would address the concerns and long-standing demand for SEZs to be allowed to sell in the domestic market and that all duties foregone on raw materials should be paid back and must also be accommodated.

"There is a thinking that the DESH bill should be scrapped and the SEZ Act should be amended," said a person familiar with the deliberations.

The finance minister had, during the Budget speech on February 1, 2022, announced that the SEZ Act will be replaced with a new legislation that will enable the states to become partners in DESH.

The existing SEZ Act was implemented in 2006 with an aim to create export hubs and boost manufacturing in the country. However, these enclaves started losing their sheen after imposition of minimum alternate tax and introduction of sunset clause for the withdrawal of tax incentives.