Why in news
- A draft government note has recommended allowing Indian Rupee payments for services provided by Special Economic Zone (SEZ) units to the Domestic Tariff Area (DTA).
Key terms
Domestic Tariff Area (DTA)
Area within India outside Special Economic Zones where normal customs and tax laws apply.
Special Economic Zone (SEZ)
Designated duty-free enclave treated as foreign territory for trade operations and tariff purposes.
What is the Special Economic Zones Act, 2005?
- Central legislation designed to establish duty-free enclaves considered foreign territory for trade operations, duties, and tariffs.
- Section 2(z) defines 'supplies' and governs the financial settlement terms for goods and services rendered by SEZ units to DTA entities.
Key changes proposed
- Before: Section 2(z) mandated that proceeds from SEZ-to-DTA service supplies must be realised strictly in foreign exchange, despite goods being exempt from this rule.
- After: The draft note permits domestic service transactions from SEZ units to DTA entities to be settled directly in Indian Rupees (INR).
Why it matters
- Removes procedural friction and foreign exchange hedging costs for domestic firms sourcing IT and business services from SEZs.
- Promotes local currency settlement in line with broader rupee internationalisation and domestic economic integration goals.
Prelims facts
- Supply of goods from SEZ to DTA did not require mandatory forex realization, unlike service supplies under Section 2(z).
Mains discussion
- Easing rupee realization for domestic SEZ service supplies improves service sector competitiveness and reduces transaction overheads.
Source: Economic Times
Same topic · past papers
UPSC has asked this before
These previous-year questions sit on the same topic. Open one to practise the earlier ask.
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2015 · Q10 · GS III · 12 marks
There is a clear acknowledgement that Special Economic Zones (SEZs) are a tool of industrial development, manufacturing and exports. Recognising this potential, the whole instrumentality of SEZs require augmentation. Discuss the issue plaguing the success of SEZs with respect to taxation, governing laws and administration. -
2022 · Q85 · General Studies · 2 marks
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2026 · Q99 · General Studies · 2 marks
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2025 · Q20 · General Studies · 2 marks
Consider the following statements in respect of the Non-Cooperation Movement: I. The Congress declared the attainment of 'Swaraj' by all legitimate and peaceful means to be its objective. II. It was to be implemented in stages with civil disobedience and non-payment of taxes for the next stage only if 'Swaraj' did not come within a year and the Government resorted to repression. Which of the statements given above is/are correct? -
2024 · Q51 · General Studies · 2 marks
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