Draft note favours rupee payments for SEZ services provided domestically
The current provision under Section 2(z) of the Act mandates that proceeds from SEZ-to-DTA supplies of services must be realised in foreign exchange, although there is no such requirement for the supply of goods to DTA entities.
The commerce and industry ministry has distributed a draft cabinet note proposing changes to the Special Economic Zone Act, 2005. The proposed amendment aims to permit services provided within Special Economic Zones (SEZs) to domestic entities to be paid in Indian rupees instead of foreign currency. This change would remove the existing requirement under Section 2(z) of the Act that SEZ-to-DTA service revenues must be realized in foreign exchange.
Industry representatives argue that the current SEZ conditions make it difficult to supply strategic services like aerospace, defence, and advanced engineering domestically due to the time and cost inefficiencies associated with converting foreign currency payments. The amendment seeks to align the definition of services with the Goods and Services Tax law.
Foreign companies take over a year to complete these service transactions, while Indian units typically finish the work in eight days, leading to increased transaction costs due to foreign currency commissions and conversions. Public sector undertakings, especially in defense and space sectors, currently face difficulties procuring services as they are mandated to pay in dollars, which is expensive.
Total SEZ exports fell to $133.45 billion in 2025-26 compared to $172.07 billion in 2024-25. India hosts 276 operational SEZs with 6,695 units.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
