The revamp of Special Economic Zones (SEZs) through the Development of Enterprise and Service Hubs (DESH) Bill will come with a fiscal package. These packages include a possible freeze on direct taxes at 15% for units and hubs until 2032.


About Special Economic Zones

  • A special economic zone (SEZ) is an area in a country that is subject to different economic regulations than other regions within the same country.
  • The SEZ economic regulations tend to be conducive to—and attract—foreign direct investment (FDI).
    • FDI refers to any investment made by a firm or individual in one country into business interests located in another country.
  • Objective — To facilitate rapid economic growth by leveraging tax incentives to attract foreign investment and spark technological advancement.
  • The first SEZs appeared in the late 1950s in industrialised countries.
    • They were designed to attract foreign investment from multinational corporations.


Special Economic Zones in India

  • India was among the first countries in Asia to recognise the effectiveness of the SEZ model in promoting export.
  • The first EPZ was established in Kandla, Gujarat in 1965.
  • Currently, 262 SEZs are operational in India, employing as many as 2.36 million people.
  • To tackle the challenges of absence of world-class infrastructure and to attract larger foreign investments, the Special Economic Zone Policy was announced in April 2000.
  • The SEZ Act 2005 and SEZ Rules came into effect from February 2006.


Key provisions of the DESH Bill

  • Tax Benefits – The 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 (Net Foreign Exchange) obligation.
  • Development Hubs – 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.
  • Shifting the focus from exports to domestic investments —
    • The bill is expected to bring about a paradigm shift by moving the focus from exports to domestic investments, eliminating compliance and procedural challenges.
    • The bill proposes to integrate multiple models of economic zones such as SEZs, coastal economic zones, and food and textile parks.
    • In transforming the existing SEZs into enterprises and service hubs, the focus will be on boosting economic activity and the domestic market, integrating the various models, facilitating ease of doing business and generating employment.
  • States to play a larger role — DESH Bill is also expected to enable states to play a greater role in the integration of all existing industrial parks within states with existing SEZs across the country.