India is putting up a plan to expand its limited special economic zones (SEZs), which are currently only focused on exports, into all-encompassing economic hubs in order to draw in more foreign investment.
According to a draft that was released for consultation, industrial units situated in these hubs, which will be known as Development of Enterprise and Service Hubs (DESH), may be permitted to sell in the domestic market and contract manufacture for those outside of these zones as well.
The package to convert SEZs into comprehensive economic zones is likely to include some financial incentives and measures to make conducting business easier.
These hubs may be established by the Centre or a state or jointly by them, or any person for the manufacture of goods or rendering services or for both.
An ‘equalisation levy’ may be imposed on goods or services supplied to the domestic tariff area to bring taxes on them at par with those provided by units outside the zones. Currently, units in SEZs are export focussed and face certain restrictions on sales to domestic market.
Appropriate legislation is likely to be introduced in the upcoming monsoon session of parliament once the draft is finalised after stakeholder consultations, said people aware of the deliberations.
Finance minister Nirmala Sitharaman said in her February budget speech that the SEZ Act will be replaced with new legislation that would enable states to become partners in development.
States looking to set up such zones will be able to set up boards that will be responsible for oversight. It is also proposed to relax the mandatory foreign exchange payment for domestic tariff area supplies and permit subcontracting both for goods and services for DTA units. “The plan is to make the new SEZ scheme compliant with the WTO rules and doing away with the Net Foreign Exchange clause is the first step in that direction,” said one official.
