Discovery is performed on all natives in UTC. Processing uses the timezone as defined in the processing set settings to convert metadata dates and times into the selected timezone. For Daylight Savings, there is a table called dbo.TimeZone in the Invariant database that is used to account for Daylight Savings Time on a year-by-year basis. This way, we always use the accurate DST rule for the given year.
For example, a change to how we observe DST went into effect in 1996, and we have this stored. The TimeZone table also keeps track of all of the half-hour time zones, i.e. parts of India.