All About Software Technology Park of India (“STPI”)
By K. Sanga
Introduction on STPI:
· Software Technology Parks of India (STPI) was set up in 1991 as an autonomous society under the Ministry of Electronics and Information Technology (MeitY).
· STPI’s main objective has been the promotion of software exports from the country. STPI acts as ‘single-window in providing services to the software exporters.
· The services rendered by STPI for the software exporting community have been statutory services, data communications services, incubation facilities, training and value-added services.
· STPI has played a key developmental role in the promotion of software exports with a special focus on SMEs and start-up units.
Applicability of STPI:
Every company which is in the business of exporting the services need to register under STPI, to submit the SOFTEX forms as per RBI guidelines. There is no exemption given to any company not to register under STPI.
Services of STPI
Main services of STPI includes Statutory services, Incubation and Data communication services to IT/ITES/ESDM sector.
Statutory services
STPI has been implementing the Software Technology Park (STP) scheme and the Electronics Hardware Technology Park (EHTP) scheme for the promotion of IT/ITES industry. STP Scheme is a unique scheme, designed to promote the software industry and growth of start-ups and SMEs without any locational constraints.
Incubation services
STPI is offering ultra-modern office facilities to small units and entrepreneurs. Plug-n-Play facilities for start-ups enable short gestation period. This has encouraged many entrepreneurs to start their own operations and grow in a competitive environment.
Types of incubation services of STPI:
a. Ready to work-office space with reliable internet connectivity at attractive tariffs.
b. Associated services (e.g., phone, VC/conference rooms, back office etc.) on usage basis.
c. Opportunities for participation in events and promotion through STPI websites.
d. Access to tools, labs, mentoring, marketing etc.
Datacom services
One of the STPI’s remarkable contributions to the software-exporting sector is provision of High-Speed Data Communication (HSDC) services.
STPI has two units; Non-STP units and STP units;
Non-STP requirement;
When physical goods are exported, they pass through the Customs Office. Whereas when the Software is exported, it goes through media or internet (data communication links). So, in order to track the export of software, Reserve Bank of India (RBI) announced the issue and submission of SOFTEX forms. STPI is the administrative authority for software export valuation and certification of SOFTEX form, in place of Customs. As per RBI circular dated 13th September 2013, the exporters of software will have to declare all the export transactions in SOFTEX, including those less than US$ 25000. This means, all companies exporting software, irrespective of the value, have to register as Non STPI unit, file SOFTEX forms.
Who can become STP:
1. An Indian company.
2. A Subsidiary of a Foreign Company.
3. A branch office of Foreign Company.
Procedure:
· An application in the prescribed format for registering and establishing a STP unit is to be submitted to Software Technology Parks of India.
· The application should be along with the details of the Software Project in terms of strengths, area of expertise, marketing arrangement, business plans, means of finance.
Who can become Non-STP;
Any company/partnership firm/proprietorship which is into the development of Export oriented Computer Software/IT Enabled Services can register itself as NON-STP unit under STPI to avail SOFTEX certification. In order to become a NON-STP unit under STPI, the company has to register itself with STPI.
STP requirement;
The Software Technology Park (STP) scheme is a 100% export-oriented scheme for the development and export of computer software using data communication links or in the form of physical media including the export of professional services. The major attraction of this scheme is a single point contact service to the STP units. All the imports of Hardware & Software in the STP units are completely duty free. Import of second-hand capital goods is also permitted.
Advantages of STP:
1. Simplified Minimum Export Performance norms i.e., “Positive Net Foreign Exchange Earnings”.
2. The sales in the Domestic Tariff Area (DTA) shall be permissible up to 50% of the export in value terms.
Obligation to register;
As per the prevailing RBI Master Circular No. RBI/2013–14/14 dated 1st July 2013 any company who does IT/ITES exports through Data communication links needs to submit the SOFTEX Form for certification. For getting the SOFTEX certification by STPI (which is the Designated Authority), the companies have to become STP members by either registering under STP scheme or as Non-STP unit with STPI.
Renewal of Letter of Permission (LOP);
Letter of permission for Non-STP registration is issued for a period of 3 years. During the last three months prior to the expiry of LOP, NON STP registered unit should approach Director STPI for renewal of LOP. There shall be no charges for renewal of LOP.
Frequency of SOFTEX submission Non-STP;
A common monthly SOFTEX in the form of an Excel summary sheet as prescribed by RBI can be filed for all invoices raised in a month. The SOFTEX is required to be filed within 30 days from the date of last invoice raised in that month. In case of delay, the units should approach the regional RBI office and get the delay condoned before submitting the SOFTEX Forms to STPI.
Who allots SOFTEX numbers;
SOFTEX numbers are allotted by RBI. Both STP and NON-STP units based on their requirement can generate SOFTEX numbers online from RBI official website.
STP unit compliance;
1. Reporting Compliance
a. Monthly Progress Reports (MPR) & Quarterly Progress Reports (QPR): All units are required to submit Monthly Progress Reports & Quarterly Progress Reports by 7th of the month on completion of the previous month and by 10th of the month on completion of the previous quarter respectively, in the prescribed format. It is a mandatory requirement. Units that are irregular in submitting MPRs & QPRs can be denied benefits of STPI.
b. Annual Performance Reports (APR): Annual Performance Report should be submitted as per the prescribed format before 30th June every year.
2. Other Compliance:
Distinct Identity: If an industrial enterprise is operating both as a Domestic unit as well as the STP unit, it shall have two distinct identities with separate accounts, including separate bank accounts. It is, however, not necessary for it to be a separate legal entity, provided the company maintains separate records for Domestic Sales and Export Sales effected by the EHTP/STP units.
DTA (Domestic Tariff Area) Units:
As stated earlier, the units located in SEZs and undertaking software exports can declare their value of exports in SOFTEX forms before the designated authority of SEZs. The units registered under STPI scheme of Foreign Trade Policy can also declare the value of exports in SOFTEX forms before the designated authority of STPIs and accordingly obtain the required certification. The declarations and compliances prescribed under SEZ and STPI scheme are sufficient and they will take care of the requirements related to SOFTEX forms also.
With respect to units operating otherwise than as STPI or SEZ units that is DTA units, RBI has notified STPI as the authority to receive declarations in SOFTEX forms and to certify the value of exports. In order to accept SOFTEX forms and to certify the values from these units, STPI has required these units to register with them and undertake the necessary compliances as notified from time to time.
Consequences of Non-Filing of SOFTEX:
In case where the DTA units engaged in export of software services, has failed to declare their software exports and get them certified in SOFTEX forms, the same amounts to violation of Foreign Exchange Management (Export of Goods and Services) Regulations, 2015. This will attract penal proceedings under Section 13(1) FEMA and accordingly, penalty up to thrice the sum involved in the contravention can be imposed. Further, the DTA Unit may also be subjected to continuous penalty which may extend to INR 5,000 for every day after the first day during which the contravention continues.
Further, entities engaged in exports are entitled to claim refund of the input GST paid on inputs and input services received for undertaking exports. In order to process these refund claims, the concerned tax authorities insist the business entities engaged in software exports to submit SOFTEX forms for the purpose of processing of such refund claims. Non-submission of said forms may lead to rejection of the refund claims.
Further, in the absence of certified SOFTEX forms, the banks will process the inward foreign exchange remittances as proceeds realized towards exports of services and accordingly BRC’s will be issued certifying that the proceeds are received against export of services but not towards export of software. This will act as deterrent to the business entities in claiming that they have previous export performance for participation in tenders related to software projects.
Going out of the scheme
The period of operation for STP units would normally be 5 years. The Director, STP would permit debonding of the STP unit if it has met the export obligation and other conditions of the letter of approval.
In case the unit has not fulfilled the export obligation and other conditions of the letter of approval, the case would be forwarded to the DGFT for taking penal action for non-fulfilment of the conditions of letter of approval, The units would also be required to pay the customs duties, Central Excise duties and it will also be liable for levy of liquidated damages.
Information in this blog is intended to provide only a general outline of the subjects covered It should not be regarded as comprehensive or sufficient for making decisions, nor should it be used in place of professional advice.
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