Budget 2025 | SEZs lost sheen after removal of direct tax breaks, govt mulls amendments to attract cos: Govt sources

The government has shelved the DESH (Development of Enterprise and Services Hub) Bill, with most of its proposed amendments now integrated into the SEZ (Special Economic Zones) Amendment Bill, government sources told CNBC-TV18.  According to sources, the SEZ Amendment Bill is currently awaiting Cabinet approval before being introduced in Parliament.

Sources highlighted that the government plans to introduce changes to Rules and Subordinate Legislation under the SEZ Act to address immediate concerns, as passing the Bill may take time.

Noting that investor interest in SEZs has declined following the removal of direct tax breaks, the sources said that the government aims to include sops for companies investing in SEZs to make the prospect alluring for them.

Discussions on the DESH Bill, held two years ago, involved the Ministry of Commerce & Industry and the Revenue Department attempting to resolve taxation-related differences. The discussions also included demands to drop corporate tax concession in the proposed bill.

Earlier, the Union Ministry for Finance had expressed its objections to the proposed extension of the 15% corporate tax rate till 2032. While both the ministries considered changes to the DESH bill to give a greater push to exports, the Commerce Ministry was keen on exempting SEZs from the Net Foreign Exchange evaluation criteria despite objections raised by the Union Finance Ministry and the NITI Aayog.

On 8 December 2022, Centre amended the existing SEZ Rules to allow WFH (work-from-home) for IT, ITeS, travelling employees and those working offsite until December 31, 2023.

While acknowledging the need to utilise built-up SEZ infrastructure, the government stated that hybrid working had become the norm in the IT sector and that companies should decide on WFH policies based on business needs, rather than government mandates. The order waived the requirement for companies to submit lists of employees working from home yet asked them to maintain a database to be submitted to Development Commissioner for verification whenever required.

These steps, aimed at balancing flexibility with accountability, are part of broader efforts to ensure SEZs remain relevant in the changing business landscape. The SEZ Amendment Bill, along with accompanying rules, is expected to address these challenges and attract fresh investments ahead of Budget 2025.