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DESH Bill: Finance Ministry Denies Tax Benefits To SEZ

The finance ministry has also expressed its reservation on a proposal to integrate the hubs with the domestic market, wherein SEZ, the obligations on export have been mentioned

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The Ministry of Finance has denied the proposal of the commerce ministry about providing tax incentives to units set up in special economic zones (SEZ) as part of the Development of Enterprise and Service Hub (DESH) bill.

The ministry has also expressed its reservation on a proposal to integrate the hubs with the domestic market, wherein SEZ, the obligations on export have been mentioned, according to the media reports.

The finance ministry may delay the introduction of the DESH bill. However, the commerce ministry is trying to finalise and introduce the draft in the winter session.

The ministry also had internal discussions in the past where similar concerns were raised over granting SEZ tax incentives, in sync with its proposal to stop fiscal wasting and its vision to indicate an exemption-free and simplified tax regime. 

It also defied allowing the SEZ units to sell goods in the domestic market at zero or nominal tax instead of the customs duty.

The issue of freezing the concessional tax for greenfield and specific brownfield DESH units in both manufacturing and service sectors for a decade was expected to ease because it had already snipped such a tax to 15 per cent for new manufacturing units that will begin by March 2024.

The commerce ministry had put these provisions in the draft Bill to make it more inviting for investors to set up units in these specially delineated zones. SEZs have been fast losing their appeal due to the withdrawal of several incentives. 

To settle the issues, the commerce and finance ministry will probably hold talks in a week or two and others who have raised queries on the draft Bill or concerns over specific provisions.

The draft DESH Bill proposes to approve units in hubs to sell goods in the domestic tariff area (DTA) by paying essential customs duty on just inputs instead of finished products. It also proposes customs duty suspension for imports of inputs and capital goods by units with no interest liability.


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desh bill DESH finance ministry commerce ministry