Special Economic Zones are to be transformed into centers of enterprise and service development. The Ministry of Commerce has presented its proposal in the Bill for this purpose. Accordingly, the corporate tax rate will be increased to 15% for newly established manufacturing units in enterprise and service development centers. Currently the corporate tax rate is 22%.
They plan to bring the Development of Enterprise and Service Hubs (DESH) Bill in the current monsoon session of Parliament. This is a bill to amend the Special Economic Zones. In 2006, the Special Economic Zones Act was introduced in India to boost exports and manufacturing. According to it, the industrial companies located in those centers got 100% income tax exemption on export income for the first 5 years. 50% income tax exemption for the next 5 years. There were many more offers.
In October 2019, the World Trade Organization ruled that subsidies to companies in special economic zones were a treaty violation. Hence India is forced to comply with WTO norms. Thus the government transforms the Special Economic Zones into centers of enterprise and service development. The Department of Commerce plans to implement the bill by October.
Apart from promoting exports, the bill also plans to increase domestic production and employment generation through development hubs. And companies will eliminate cumbersome rules for starting up. As part of this bill, they are going to announce concessions on corporate tax. Accordingly, for the next 10 years, only 15% corporate tax will be levied on newly set up manufacturing units in these development centers.
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In 2019, Finance Minister Nirmala Sitharaman reduced corporate tax from 30 percent to 22 percent for all companies. He reduced it to 15 percent for new manufacturing units starting production before March 2023. The deadline has been extended to 2024 due to the disruption of industries due to the Covid-19 pandemic. After that there was no tax relief. In this case, industrial companies may get encouragement through the new bill.
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