Understanding STPI and Non-STPI Registration in India

[Pradeep Reddy]

Introduction

India has emerged as a global IT hub, with numerous companies exporting software services worldwide. To streamline and facilitate this export process, the Software Technology Parks of India (STPI) scheme was introduced. However, companies have the option to operate as STPI units or Non-STPI units, each with its own set of benefits and compliance requirements.

This article aims to break down the STPI and Non-STPI registration processes, compliance requirements, and their implications under Goods and Services Tax (GST) regulations.

What is STPI?

The Software Technology Park of India (STPI) is an autonomous society under the Ministry of Communication and Information Technology, established to promote IT and IT-enabled services (ITES) exports. It operates under the 100% Export Oriented Unit (EOU) scheme, providing incentives for companies engaged in software development and services.

Benefits of an STPI Unit

• Customs Duty Exemption: No duty on imported goods for export-oriented development.
• Deemed Export Benefit: Procurement of goods from the domestic market is GST-free.
• Foreign Exchange Earnings: Companies must achieve positive net foreign exchange earnings over five years.
• Ideal for Capital-Intensive Firms: STPI registration benefits companies that foresee significant capital expenditure on imports.

Understanding Non-STPI Registration

Not all IT and ITES companies choose STPI registration. Some prefer Non-STPI registration, which allows them to function as a Domestic Tariff Area (DTA) unit while still complying with export regulations.

Key Aspects of Non-STPI Registration

• Software Export Certification: Unlike STPI or SEZ units, DTA units face challenges in getting software exports certified, impacting forex transactions.
• Softex Filing Requirement: Under FEMA regulations, software exporters must file the Softex Form with the jurisdictional STPI office, ensuring compliance with foreign exchange norms.
• GST Refund Challenges: Lack of proper export certification may hinder Bank Realisation Certificate (BRC) issuance, impacting GST refunds.

Softex Filing for Software Exports

The Softex Form is crucial for software exporters as it validates foreign exchange earnings.

Filing and Certification Process

1. Submission Deadline: Must be filed within 30 days from the last invoice date of the month.
2. Approval Process: The jurisdictional STPI authorities verify and certify the export details.
3. Reconciliation with RBI: After forex receipt, the exporter submits details to the banker, who updates them in the EDPMS (Export Data Processing and Monitoring System).
4. Compliance with FEMA: Ensures that foreign exchange is realized within 9 months, per RBI regulations.

Consequences of Non-Filing

• Violation of FEMA: Non-compliance attracts penalties under FEMA Act.
• GST Refund Issues: Without Softex certification, obtaining BRC and GST refunds becomes difficult.

Non-STPI Registration Process

Companies that do not opt for STPI registration but still export software must register as Non-STP units with STPI authorities.

Steps for Registration

1. Online Application: Submit the application on the jurisdictional STPI portal.
2. Fee Payment: INR 1000 + GST.
3. Approval: STPI Director grants the Non-STPI unit registration, valid for three years (renewable).
4. Contract Registration: All software export contracts must be registered with STPI.
5. Annual Fees Based on Turnover:

Annual Turnover (INR)	Annual Service Charge (INR)
Up to 12.5 lakhs	4,000
12.5 - 25 lakhs	8,000
25 - 50 lakhs	16,000
50 lakhs - 3 Cr	55,000
3 - 10 Cr	1,10,000
10 - 25 Cr	2,25,000
25 - 50 Cr	2,50,000

GST Compliance for IT and ITES Exports

GST compliance is critical for IT service exporters, whether they operate under STPI or Non-STPI registration.

Key GST Considerations

• Zero-Rated Supply: Exports of software services qualify for zero-rated supply under GST.
• Input Tax Credit (ITC) Refunds: Companies can claim ITC refunds under LUT/Bond mechanism.
• Tax Invoice Requirements: Export invoices must mention GSTIN, LUT details, and foreign exchange receipt clauses.
• GST Compliance Reporting: Monthly/quarterly returns must be filed per GST Act provisions.

STPI Registration Checklist

To ensure smooth STPI registration, companies should have the following documents ready:

• Copy of Memorandum and Articles of Association
• Board Resolution for setting up the Non-STP Unit and authorized signatories
• Promoter/Director Profile
• Import Export Code (IEC) Certificate
• Permanent Account Number (PAN) of the company
• Company Profile / Project Report
• Lease or Rental Agreement (Legal Paper)
• Form 32/Dir. 12 (For Director Appointment)
• Form 18/INC 22 (Registered Office Address Proof)
• Bank Certificate with AD Code mentioned
• GST Registration Certificate
• Details of Business Activities & Export Plans
• IT Infrastructure and Development Plan
• Letter of Intent (LoI) for Exports
• Audited Financial Statements
• PAN Card and Aadhaar Card of Directors
• Utility Bills (Electricity/Water/Telephone) as Address Proof

Conclusion

Choosing between STPI and Non-STPI registration depends on a company's business model, capital investment plans, and tax compliance strategies. While STPI registration is ideal for companies planning large-scale exports with duty exemptions, Non-STPI registration suits firms looking for flexibility with export documentation compliance.

Proper GST and Softex compliance is crucial to avoiding penalties and ensuring smooth operations for IT and ITES exporters in India. Are you an IT exporter? Evaluate your registration needs and take proactive compliance measures today!