DESH Bill

DESH Bill

News: The government plans to table the Development of Enterprise and Service Hubs (DESH) Bill to overhaul the special economic zones (SEZ) legislation.

What has called for the need to replace existing SEZ Act?
• WTO’s dispute settlement panel has ruled that India’s export-related schemes, including the SEZ Scheme, were inconsistent with WTO rules since they directly linked tax benefits to exports.
• Countries aren’t allowed to directly subsidize exports as it can distort market prices.

How is DESH Bill different?
• The DESH legislation goes beyond promoting exports and has a much wider objective of boosting domestic manufacturing and job creation through ‘development hubs’.
• These hubs will no longer be required to be net foreign exchange positive cumulatively in five years (i.e, export more than they import) as mandated in the SEZ regime, and will be allowed to sell in the domestic area more easily.
• The hubs will, therefore, be WTO-compliant.
• DESH Bill also provides for an online single-window portal for the grant of time-bound approvals for establishing and operating the hubs.

Shades of Co-operative Federalism:
• Larger role for states - In the SEZ regime, most decisions were made by the commerce department at the Centre. Now, states will be able to participate and even directly send recommendations for development hubs to a central board for approval.
• State boards – Such boards would be set up to oversee the functioning of the hubs. They would have the powers to approve imports or procurement of goods and monitor the utilization of goods or services, warehousing, and trading in the development hub.

Steps taken to ease selling in Domestic market:
• Companies can sell in the domestic market with duties only to be paid on the imported inputs and raw materials instead of the final product.
• In the current SEZ regime, duty is paid on the final product when a product is sold in the domestic market.
• Alternatively, there is no mandatory payment requirement in forex, unlike in the case of SEZs.
• As per the bill, the government may impose an equalization levy on goods or services supplied to the domestic market to bring taxes at par with those provided by units outside.