Home / Industry / Infrastructure /  Cos can auto-renew licence with DESH
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NEW DELHI : The revamped special economic zones, to be called development hubs, will be able to avail auto-renewal of licences under the Development of Enterprise and Service Hubs (DESH) legislation, subject to conditions.

Besides, the developers of the zones will get infrastructure status, which will allow them to get easier credit at competitive rates, according to the Bill to be tabled in the ongoing monsoon session. The commerce department plans to implement the law by October.

The new law aims to make the SEZ Act, enacted in 2006 to boost export and manufacturing, compliant with World Trade Organization (WTO) norms and boost manufacturing and job creation.

The new Bill also proposes a framework to include the existing industrial parks in the DESH framework—including those of other government departments like textile parks, food parks, pharma and power.

In what would make it attractive to set up units in the development hubs, the department of commerce has dropped the contentious “equalization levy" proposal, that was aimed at creating a level playing field for sales by units in the revamped special economic zones and those outside these enclaves.

Pratik Jain, partner, Price Waterhouse & Co LLP said, “There was some confusion on applicability of equalization levy on domestic clearances from the proposed hubs. If a decision is taken to do away with such a levy, it would further incentivize the businesses to consider moving to the hub."

Industry is now waiting for the draft rules which are expected to give clarity on several matters, including transition mechanism, conditions to be imposed for industry to move to the hub, guidelines for work from home, sub-contracting to domestic area, computation of duties and levies upon exit, he added.

Harpreet Singh, partner, KPMG said the concessional corporation tax rate, coupled with on-site clearances and auto renewal of licences are going to be the key attractions under the DESH framework.

“Policy makers may have taken a cue from SEZs, Export hubs which are WTO compliant and are working wonderfully in many countries like China, Indonesia and Malaysia," said Singh.

In a departure from provisions in the current law, units in the development hubs will be allowed to sell goods in the domestic market with customs duty to be paid only on the imported raw materials and not on the entire finished good. Under this, if raw materials are imported at zero duty from a free trade agreement partner country, no duty will have to be paid when the final product is sold in the domestic market.

This acted as a big deterrent in the current SEZ regime, as duty on the final product was levied on sale in the domestic market instead of only on the inputs that were imported duty-free for manufacturing.

M. S. Mani, partner, Deloitte India said that the new development hubs, and modifications in the existing SEZs in terms of the proposed DESH scheme, would significantly enhance the competitiveness of Indian business—both in the domestic and export markets besides leading to increased investments and employment generation.

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