Rule 53 of the Special Economic Zones Rules, 2006 (“SEZ Rules“) imposes the obligation on units established in a special economic zone to maintain a positive net exchange, calculated cumulatively over a five-year period using a prescribed formula. However, this requirement of achieving a positive net foreign exchange can be burdensome, particularly during times of anticipated economic slowdown.
In December 2019, the Government of India introduced an amendment to the SEZ Rules by incorporating Rule 53A, which provided exemptions to Alternative Investment Funds, Mutual Funds, and insurance office units situated in an International Financial Service Centre from complying with Rule 53.
Following a sandbox run and numerous representations made to the Ministry of Commerce and Industry, the Government of India, through a notification dated April 27, 2023, has further amended Rule 53A of the SEZ Rules. This amended rule grants an exemption to all units offering financial services, established in an International Financial Service Centre and regulated by the International Financial Services Centers Authority, from complying with Rule 53 of the SEZ Rules, specifically regarding the Net Foreign Exchange Earning requirements.
This amendment is a welcome change, especially at a time when concerns about non- compliance repercussions during an economic downturn are prevalent. The revision reinforces the commitment to provide enhanced operational freedom to units established in International Financial Service Centers like GIFT City, thereby delivering a truly international experience.
To receive regular updates click on
