Are you planning to develop and export computer software from India? If yes, then you should know about the software technology parks in India (STPI) and the Non-STPI registration process. The STP scheme is a 100% export-oriented scheme for the development and export of computer software. It offers numerous benefits such as no import duty or customs duty, 100% FDI through the automatic route, income tax benefits, and government incentives. But before you can avail of these benefits, you need to register your company under the STPI or Non-STPI unit. In this blog post, we will guide you through the registration process and eligibility criteria for both STPI and Non-STPI units, along with the necessary documents and service charges payable by Non-STPI units.
A. Definition of STPI License in India
STPI License in India refers to the registration of an entity as a Software Technology Park (STP) unit or as a Non-STP unit with the Software Technology Parks of India. 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. Whereas, Non-STP entities also engaged in the export of software need to obtain registration as a Non-STP unit to avail Softex certification. This certification is mandatory for any company that does IT/ITES exports through data communication links. STPI is administered by the Ministry of Electronics and Information Technology, and its objectives include promoting the development and export of software and software services, providing statutory and promotional services to the exporters, and providing data communication services to IT/ITES related industries. The STPI registration offers advantages such as no import duty or customs duty, secure 100% FDI, income tax and other government schemes benefits. The Non-STPI registration enables claiming benefits of software exports and availing government incentives relating to software exports.
B. Purpose of STPI License
The of obtaining the STPI License in India can be manifold. To begin with, the license offers a host of benefits including exemption from import duty or customs duty, 100% FDI through an automatic route, and income tax benefits, among other government schemes. The license can be obtained by an Indian company, a subsidiary of a foreign company, or a branch office of a foreign company.
Another significant advantage of obtaining the STPI License is that it enables the claiming of benefits of software exports, which includes availing benefits of government incentives relating to software exports. STPI also offers statutory services, incubation facilities, data communication services, and value-added services to startups and SMEs.
To obtain the STPI Registration, an application form along with the details of the software project needs to be submitted. Companies involved in the development of export-oriented computer software/IT-enabled services can register themselves as a Non-STP unit under STPI to avail the SOFTEX certification. The 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. With its comprehensive services and tax benefits, STPI License is indeed a lucrative option for companies involved in software exports in India.
II. Benefits of STPI License
A. No import duty or customs duty
Under the STPI license scheme in India, registered entities stand to reap several benefits. One of the main advantages of obtaining an STPI license is that it allows for operations without any import duty or customs duty. This translates to reduced costs and improved profitability for the unit. Non-STPI units engaged in software exports may also benefit from registration as Non-STPI units to avail Softex certification. Non-STPI units can successfully claim benefits from software exports and avail themselves of government incentives in this area. This scheme enables businesses to operate without any hindrances, making it easier to export goods and services in the field of software technology. As a result, STPI registration is a popular choice for Indian companies, subsidiaries of foreign companies, and branch offices of foreign companies that deal in software technology. Overall, the STPI license scheme is aimed at promoting the development and export of software technology in India, making it easier for businesses to operate in this area.
B. 100% FDI through automatic route
One the major advantages of obtaining an STPI license in India is the 100% FDI through automatic route. The automatic route allows foreign investors to invest in certain sectors without prior approval from the government or RBI. This has made India an attractive destination for foreign investors, as it offers minimal compliance requirements and liberal investment norms. Under the automatic route, non-scheduled air transport services, mining of coal and lignite for captive consumption, teleports, and wholesale trading, among others, are permitted for 100% FDI. Furthermore, foreign institutional investors (FIIs) can invest in initial public offerings (IPOs) of real estate companies without any FDI stipulations. This has opened up numerous opportunities for foreign investors to invest in India’s growing economy and has been instrumental in promoting economic growth. Obtaining an STPI license enables entities involved in software exports to claim benefits and avail government incentives relating to exports. The application process for STPI registration involves filling out an application form and complying with certain important points, including paying service charges and meeting necessary criteria.
C. Income tax and other government schemes benefits
The STPI License in India offers various benefits regarding income tax and government schemes. Here are some of the advantages that entities can obtain through this license:
– The STPI License enables Indian companies, subsidiaries of foreign companies, and branch offices of foreign companies to avail themselves of income tax benefits and government-sponsored schemes.
– STPI Registration under the Software Technology Parks of India provides exemptions on income tax. It allows the entities to avail an exemption from income tax under Section 10A for the first five years and 100% exemption under Section 10B for the next five years.
– The entities can set off their export profits against the brought forward losses and depreciation under the Income Tax Act, 1961.
– The licensing allows availing of other government-sponsored incentives such as the exemption from the payment of GST, customs duty, and excise duty on procurement of goods and services needed for the business.
Thus, the STPI License in India offers entities, involved in software exports, a multitude of benefits related to income tax and government schemes. These benefits are crucial for growing businesses, and availing which, entities can save a significant amount of money.
III. STPI Registration Eligibility Criteria
A. Indian company
An Indian company can benefit greatly from obtaining an STPI license in India. With this license, the company can establish a technology park for other companies and enjoy multiple advantages like no import or customs duty, 100% FDI through automatic route, and income tax and government scheme benefits. An STPI registration can enable the company to claim benefits of software exports and avail government incentives relating to software exports. The registration process involves liaising with STPI authorities, registering on the portal, providing all mandatory information, and submitting the application to the Director of Software Technology Parks of India Pune. Non-STPI units can also obtain registration and benefit from Softex certification. The eligibility criteria for both STPI and Non-STPI registration vary, and different procedures are followed for registration. Indian companies should consider obtaining an STPI license to enjoy the multitude of benefits it offers and establish a technology park for other companies to benefit as well.
B. Subsidiary of a foreign company
If foreign company wishes to establish a presence in India and take advantage of the benefits provided by STPI, it can do so by setting up a subsidiary or branch office in the country. Under the STP/EHTP scheme, a subsidiary of a foreign company or a branch office of a foreign company can become an STP unit and enjoy benefits such as duty-free imports of hardware and software, exemption from corporate income tax until 2011, and a single point contact service for STP units.
To become a certified STP unit, the company must apply in the prescribed format to the Software Technology Parks of India with details of the software project, strengths, area of expertise, marketing arrangement, business plans, and means of finance. The approved unit will then sign a legal agreement with a list of capital goods and indigenous purchases to obtain a private bonded warehouse license from the Customs Department. With STP registration, the subsidiary or branch office can claim benefits of software exports and government incentives related to software exports.
C. Branch office of a foreign company
A branch office of a foreign company can also register under the STPI scheme in India. This means that such companies can enjoy the benefits provided by STPI registration, including customs and import duty exemptions, simplified minimum export performance norms, and access to government schemes.
To register as a branch office under the STPI scheme, the company must submit the application in the prescribed format, along with details of the software project, including strengths, area of expertise, marketing arrangement, business plans, and means of finance. The application must also indicate the type of undertaking, such as a private or public limited company.
Once registered, the branch office can avail of STPI’s statutory services, data communication services, and incubation facilities. These facilities include ultra-modern office spaces with reliable internet connectivity, access to tools, mentoring, marketing, and opportunities for participation in events.
In addition, branch offices can claim benefits of software exports and government incentives relating to software exports. This presents a lucrative opportunity for foreign companies to expand their software export operations in India while enjoying various benefits provided by the STPI scheme.
IV. Non-STPI Registration Benefits
A. Enables claiming of benefits of software exports
Apart from STP entities, Non-STP entities engaged in the export of software are required to obtain registration as a Non-STP unit to avail of Softex certification. Non-STP registration enables the claiming of benefits of software exports and availing of government incentives relating to software exports. Any form of entity can obtain Non-STPI registration, provided they have some form of software that can be exported outside India. The procedure for obtaining STPI/Non-STPI Registration involves registration as a new unit, followed by logging in with the login ID and password provided via email. The Non-STP unit will have to pay INR 1000 + GST as application fees, and quarterly and annual returns in their particular formats will have to be submitted before obtaining registration. The certificate of registration will be valid for three years, and STPI will collect specific service charge from Non-STP units based on the value of contracts registered. Non-STP registration opens up opportunities to claim incentives and demonstrate export capability, which may encourage entities to scale up their export efforts.
B. Availing benefits of government incentives relating to software exports
Availing benefits of government incentives relating to software exports is one of the advantages of obtaining an STPI license in India. The STPI scheme is a 100% export-oriented scheme for the development and export of computer software via data communication link or physical media. The scheme encourages and enables the software industry to reach global markets and improve the economy of the country. STPI registration benefits include no import duty or customs duty, 100% FDI through automatic route, and income tax and other government schemes benefits. Meanwhile, non-STPI registration benefits enable claiming of benefits of software exports and availing of government incentives relating to software exports. These benefits are essential to entities that engage in the export of software and technology. To obtain these benefits, companies need to comply with the regulatory requirements of the STPI and Non-STPI registration. Whether you are an Indian company or a subsidiary of a foreign company or a branch office of a foreign company, the STPI registration process can assist you to benefit from government incentives and grow your business.
V. STPI/Non-STPI Registration Procedure
A. Application form details
Applying for an STPI license in India requires a detailed application form. The application form should include the location name and address of the entity or undertaking, along with the activities carried out by them. Other mandatory information includes an IEC (Import Export Code) number, PAN number, GSTIN number, income tax number, and bank details such as account number and IFSC code. Promoter information should be added if they are undertaking registration of another STP. Moreover, the type of undertaking must be specified to identify if it’s a private limited company, public limited company, or another type of entity. The application must also include a brief background on the activities carried out by the applicant, the type of projects undertaken, expected exports for a period of 5 years, and the value or requirement of capital goods. Partnership or collaborations (foreign) entered into by the applicants must be declared, along with respective technology agreements entered between the applicant and the foreign collaborator. Information on areas of software development is mandatory to identify areas such as IT, R&D, ITES, or some form of new machine learning programming. Such information is essential for opening an STP unit under Software Technology Parks of India.
B. Important points for obtaining registration as Non-STP unit
For businesses engaged in software exports, it is necessary to obtain Non-STP registration to avail benefits of government incentives. Here are some important points to keep in mind while obtaining Non-STP registration:
1. Eligibility: Any entity that has software that can be exported outside India is eligible to obtain Non-STP registration.
2. Application Process: To apply for Non-STP registration, businesses need to fill out an application form available online. The form requires information related to the organization type, STPI center, organization name, contact person, and contact details.
3. Fees: The applicant must pay an application fee of INR 1000 plus GST.
4. Certificate Validity: The certificate of registration is valid for a period of three years.
5. Service Charge: Non-STP units need to pay a specific service charge to STPI. The charge varies depending on the value of contracts registered by the Non-STP units.
Obtaining Non-STP registration provides benefits such as claiming the benefits of software exports and government incentives. Hence, it is important for businesses involved in software exports to obtain Non-STP registration.
C. Service charge payable by Non-STPI units
When as a Non-STPI unit in India, it is necessary to consider the service charge payable. The annual service charge (ASC) must be paid for the first three years in advance, including GST. The ASC is charged based on the projected export turnover, typically at a rate of 0.25%. It is important to note that failure to submit monthly and quarterly progress reports on time may result in denial of STPI benefits, including exemption from import and customs duty. Therefore, it is crucial to maintain accurate records of all financial transactions related to software exports. Additionally, Non-STPI units are required to file SOFTEX forms for all software exports, regardless of the value. This ensures that the Reserve Bank of India can track all software exports and restrict the possibility of illegal transactions. Overall, the benefits of STPI registration are well worth the service charge payable, as they enable entities involved in software exports to claim various benefits and incentives offered by the Indian government.
VI. STPI Registration Procedure and Services
A. Steps and procedures for STPI registration
If you want to register your company as a Software Technology Parks of India (STPI) unit, you need to follow some specific steps and procedures. First, liaise with the STPI authorities for the registration process. Then, register on the STPI portal by providing your email address and creating a password. Once logged in, click on the “I want to register as New Unit” tab to provide all necessary information, including your company’s address, activities, IEC number, PAN number, GSTIN number, bank details, and income tax number. You must also indicate the type of undertaking and provide a brief background on the activities you’ll carry out. Afterward, provide an undertaking for export of software and submit your application to the Director at Software Technology Parks of India Pune, along with its office seal and required fees. Finally, quarterly reports must be submitted to comply with STPI requirements. Following these steps will help you register as an STPI unit and reap the benefits of software exports.
B. The need for STPI registration for entities involved in software exports
In order to export software from India, it is mandatory for companies to register themselves under the Software Technology Parks of India (STPI). The STPI was set up in 1991 with the primary objective of promoting software exports from the country. Being registered with STPI offers multiple benefits and advantages for entities involved in software exports. Firstly, it allows companies to claim benefits of software exports, including exemption from payment of corporate income tax till 2011. Secondly, STPI registration enables entities to avail various incentives provided by the government for software exports. Additionally, companies registered with STPI can enjoy a waiver on import duty and customs duty, making it easier to import hardware and software. STPI registration also allows for 100% foreign direct investment through the automatic route. The process for obtaining STPI registration involves submitting an application in the prescribed format and includes providing details of the software project, marketing arrangements, and means of finance. Therefore, STPI registration is vital for entities involved in software exports, as it provides numerous benefits that can ultimately aid in the growth and development of their business.
VII. Documents required for STPI License in India
1. Application form in the prescribed format
2. Copy of the Certificate of incorporation of the company
3. Copy of the Memorandum and Articles of Association
4. Copy of the PAN Card of the company
5. Copy of the address proof of the registered office of the company
6. Copy of the Board resolution authorizing the submission of the application
7. Copy of the latest shareholding pattern of the company
8. Copy of the audited financial statements of the company for the previous year
9. Copy of the certificate of registration under the Companies Act
10. Copy of the proposed project report
11. Consent letter from the authorized representative of the company
VIII. Advantages of STPI License in India
1. Tax incentives: STPI units are eligible for tax incentives such as income tax exemptions and duty-free imports of capital goods and raw materials.
2. Easy and fast clearance: STPI units can receive easy and fast clearance for imports and exports of goods.
3. High-quality infrastructure: STPI provides high-quality infrastructure facilities such as fiber optic connectivity, reliable power supply, and advanced telecom services.
4. Skilled workforce: STPI units can access a pool of skilled workforce through the STPI incubation centers and training programs.
5. Access to capital: STPI units can access capital through the STPI Venture Capital Fund and other funding schemes.
XI. Disadvantages of STPI License in India
1. Limited lifespan: STPI licenses have a limited lifespan of 10 years and need to be renewed periodically.
2. Strict compliance: STPI units are subject to strict compliance requirements such as periodic audits and reporting to the STPI authorities.
3. Limited market access: STPI units are restricted to the domestic market and cannot do exports without permission from the STPI authorities.
4. Limited flexibility: STPI units cannot change their line of business or location without prior approval from the STPI authorities.
5. Limited benefits: STPI benefits are limited to IT and IT-enabled services industries and do not extend to other sectors.
X. Process of getting STPI License in India
The process of getting an STPI license in India involves the following steps:
1. Check eligibility: The applicant needs to check whether their business is eligible for an STPI license.
2. Submit application: The applicant needs to submit the application along with the required documents to the STPI authorities.
3. Site inspection: The STPI authorities will conduct a site inspection of the proposed location of the business.
4. Approval: Upon verification of the documents and site inspection, the STPI authorities will issue the STPI license.
5. Renewal: The license needs to be renewed after the expiry of the license period.
XI. Types of STPI License in India
1. Virtual STP: This license is meant for software development, product development, and IT-enabled services.
2. STP: This license is meant for exporting software and IT-enabled services.
3. EHTP: This license is meant for hardware manufacturing and exports.
XII. Frequently Asked Questions about STPI License in India
1. What is the eligibility criteria for getting an STPI license in India?
Ans: Companies engaged in software development, product development, IT-enabled services, and hardware manufacturing are eligible.
2. What are the tax incentives provided to STPI units in India?
Ans: Income tax exemptions and duty-free imports of capital goods and raw materials.
3. Can STPI units export their products and services without permission from the STPI authorities?
Ans: No, STPI units need permission from the STPI authorities to export their products and services.
4. Is it possible to change the line of business for STPI units?
Ans: No, STPI units cannot change their line of business without prior approval from the STPI authorities.
5. What is the lifespan of an STPI license in India?
Ans: The lifespan of an STPI license is 10 years and needs to be renewed periodically.