SEZ ( Special Economic Zones ) is a specifically delineated duty-free enclave , deemed to be foreign territory for trade operations, duties, and tariffs . Hence, Statement 1 is correct. They were introduced via India’s Special Economic Zone Act of 2005. The SEZ act came into effect in 2006. They are constituted by the Ministry of Commerce and Industry. SEZ units may be set up for the manufacture of goods and rendering of services. Goods and services going into the SEZ area from Domestic Tariff Area (whole India except SEZ ) shall be treated as exports and goods coming from the SEZ area into DTA shall be treated as imports . Hence, Statement 2 is incorrect. The setting up of an SEZ opens up new avenues to attract private investment.