1. What is the registration for ?
For establishing a 100% Export Oriented Unit (EOU) developing computer software for export. The following activities are covered under the scheme.
- Manufacture/Development of software in India for exports.
- Onsite Consultancy Services for development of software at the client's site abroad.
- IT enabled products or services such as Back Office Operations, Call Centres, Content Development or Animation, Data Processing,
Engineering and Design, Geographic Information System Services, Human Resource Services, Insurance Claim Processing, Legal Databases, Medical Transcription, Payroll, Remote Maintenance,
Revenue Accounting Support Centres and Website services “provided payments for such services are received in free foreign exchange”.
- Sales in the Domestic market are also permitted to extent of 50% on FOB value of exports with prior permission
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2. Who can register ?
- A Sole Proprietory Concern.
- A Partnership Firm.
- An Indian Company.
- An Indian Subsidiary of a Foreign Company.
- A Branch office of the foreign company.
- An existing Software Company operationg in India.
- Conversion of an existing DTA unit to STP unit is also permissible.
- If an industrial unit is operating both as a domestic unit as well as an STP unit, it shall have two distinct identities with
separate accounts. But all the transactions of the imports and exports or supplies effected relating to the 100% EOU
activity of the STP unit shall be kept distinctly separate from those made by the other domestic unit of the company.
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3. Why ?
The features:
- Single Window clearance and approval.
- Income Tax holiday as per Sec. 10A of the IT Act.
- Customs Duty Exemption in full on imports.
- Central Excise Duty Exemption in full on indgenous procurement.
- Central Sales Tax Reimbursement on indegenous purchase.
- All relevant equipment / goods including second hand equipment can be imported (except prohibited items).
- Equipment can also be imported on loan basis / lease.
- High Speed Data Communication Link provided for the export of software.
- No separate Import/Export licence required.
- Green Card enabling priority treatment for Government clearances/other services.
- 100% foreign equity investment in the companies permissible.
- Sales in the DTA upto 50% of the FOB value of exports permissible.
- Use of computer imported for training permissible subject to certain conditions.
- Depreciation on computers at accelerated rates upto 100% over 5 years is permissible.
- Computers can be donated after two years of use to recognised non-commercial Educational Institutions/Hospitals without payment of duty.
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4. How to register ?
Submit the following documents to Director STPI, Hyderabad.
- Application in the prescribed form duly signed by the authorized signatory setting
the official seal (5 copies need to be submitted.)
- Copy of Boards resolution nominating the authorized signatory.
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Project report : Justifying the ability of the enterprise as to the potential in manpower expertise, technology
segment marketing and customer support arrangements, business plan, type of software development envisaged,
profile of Balance Sheet, Profit and Loss a/c, Cash Flow Statement, Profitability Statement, etc.
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Document evidencing Sole Proprietory concern /Partnership Firm / Company Registration Certificate, Memo of Association, Memo of Articles,
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Copy of Agreement/MOU/Purchase Order/Letter of Intent with the overseas customer (if any) in support of the business potential.
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Lease deed/sale deed of the premises.
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In case of an existing unit : Product line to be specified, copy of the Audited Annual Accounts for the last 2 years to be furnished.
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D.D for Rs.2500 drawn in favour of STPI.
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5. Approval by whom and How soon ?
All applications for registration under the STP Scheme (excepting those involving foreign investment not covered under the Automatic Route of RBI) meeting the eligibility criteria will be cleared and approval accorded by the Director, STPI within 2 weeks.
Foreign Investment under Automatic Route:
Foreign investment upto 100% subject to a maximum limit of Rs.600.00 crores in the IT industry is permissible under the Automatic Route of RBI. Such investment should be by actual remittance of money in foreign exchange.
Other cases of Foreign investment:
The application for registration under the STP Scheme, involving foreign investment as under will be processed and approval issued by the Secretariat for Industrial Approvals, EOU Section of the Ministry of Industry & Commerce.
- Investments exceeding Rs.600.00 crores
- Acquisition of shares in an existing company by foreign/NRI/OCBs.
- Where the investment proposed is otherwise than by actual remittance of funds in foreign exchange.
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6. Term of operation
The period of opration under the scheme is initially for a period of 5 years from the date
of commercial production. This period may be extenedable further 5 years at a time.
After complection of the initial period of 5 years, it is open to the unit eitther to opt out of the sheme or to continue for another
period of 5 years and request made accordingly to STPI.
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7. Fee Slab As Per Projected Export:
| Sr. No. | Export turn over the year | Fee (INR) |
1 | Less than 25 lacs | 7,500.00 |
2 | 25-50 lacs | 15,000.00 |
3 | 50-300 lacs | 50,000.00 |
4 | 300 lacs – 10 Crore | 100,000.00 |
5 | 10 Crore - 50 Crore | 200,000.00 |
6 | 50 Crore -100 Crore | 300,000.00 |
7 | 100 Crore and above | 500,000.00 |
Following is the example how to calculate the fee :
Total Value of exports declared for First 3 years / 3
The above will give us the average value of the exports. This will be taken as the base for determining the scale of service charges. 3 times the value of the scale the unit is falling in, will be the advance service charges to be paid by the customer.
Example is stated below:
| YEAR | PROJECTED EXPORT |
| 1 YEAR | 45.00 LAKHS |
| 2 YEAR | 60.00 LAKHS |
| 3 YEAR | 200.00 LAKHS |
| TOTAL | 305.00 LAKHS |
Average Exports value = 305.00 Lakhs / 3 = Rs.101.67 Lakhs
The service charges for the above exports are Rs.50000.00 p.a.
Hence, the advance service charges payable by the unit in the above case is Rs.1,50,000.00 [ Rs.50000.00 x 3]
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8. About the Premises
IT Software industry is exempted from zoning regulations for the purpose of establishing the industry. Therefore the STP unit can be established in any location.
The units can be established in the STPI Complex/Hitec City or in owned or leased accommodation anywhere within the jurisdictional area of the Director, STPI and the Customs Circle and the premises of the unit shall be amenable to customs bonding.
For information regarding availability of accommodation, please contact:
Software Technology Parks of India
6Q3, Cyber Towers, Hitec City
Madhapur, Hyderabad – 500 081.
Ph: 23100500
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9. Commencing Operations
- For allotment of the Importer/Exporter code, apply in the prescribed from to the Addl. D.G.F.T. Hyderabad.
- Furnish to STPI a list (in triplicate) of capital goods to be imported, procured indigeneously wich are relevant to the manufacture / development of the soft ware undertaken by the unit giving the details such as name of the items, quantity, rate for item, total volue, rate of duty, value of duty etc. Which are relevant to the manufacturing/development of soft ware.this list will be endorsed by the STPI and given to the unit for filing the same with customs & central Excise.
- Obtain clerance from STPI for custom bonding licence and then apply in the prescribed form to customs & central Excise dept. For private bonded ware house licence. Furnish documents evidencing the owned / leased premises where you propose to carry on the operation of software development together with floor plan of the premises. Licence is granted in 2 weeks.
- Furnish a copy of the above licence to STPI, Hyderabad.
- If STPI data communication Link is requred,
apply to STPI in the prescribed form along with deposit of money equivalent to
registration fee, installation charges and one quarter tariff. The link will be
given on priority basis to meet the customer requirement. For more details please
contact or visit one of our STPI locations.
- Imports: For import of capital goods which are relevant to the manufacturing /development of software, apply to STPI, Hyd. In the prescribed form duly enclosing the proforma invoice from the seller, for issue of import certificate.
- In case of items imported on loan basis, please furnish supporting document to show that they are on loan.
- Second hand capital goods may also be imported.
- Leasing of capital goods can be sourced from a Domestic/ foreign leasing company.
- Import / Indigineous procurement of office equipment permitted upto 20% of the total value of the capital goods installed.
Procurement of Indigenous capital Goods:
Based on the list of indigenous capital goods endorsed by STPI and submitted to central Excise department, the equipment can be procured free of Excise Duty after obtaining C. T. 3 certificate from central Exices department
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10. How to Export
Software developed can be exported through Data
communication Link / physical Media or software can be developed at customer site
abroad by deputing software professionals of the unit.
Export of software developed in India:
- Through Data Communication
Link:As soon as the software is exported using Satellite Data Communication link, a
software declaration in the prescribed form called SOFTEX form has to be submitted duly
filled in, in TRIPLICATE to the STPI for clearance within 30 days from the date of Invoice along with the following documents.
- Invoice (3 copies)
- Customer agreement /W.O / P.O
- Project Details in the from prescribed by STPI, Hyderabad
- Data transmission details in support of the export of software(in the prescribed fomr)
- In cases where data communication link is obtained from a service provider other than STPI, please furnish appropriate documents in support of such connectivity.
- Physical Media : Obtain GR Form from RBI and submit the same, duly filled in, Along with the customers agreement, invoices in
duplicate and shipping bills in triplicate to STPI, Hyd., for clearance.
After clearance by STPI, all the documents have to be submitted to Customs for their clearance
for export.
In case the export is to be made through Postal channel, the PP form, duly filled in and countersigned by the authorised
banker, along with the customers agreement and invoices have to be submitted to STPI, for clearance. After clearance,
the documents should be presented to the Post Office for despatch.
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11. Onsite Consultancy Projects
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In this category the unit provides services at the client’s site abroad by deputing the professionals i.e. onsite consultancy. The units are required to submit quarterly format which is available in downloads page ( http://www.hyd.stpi.in/downloads/onsite_format.doc )
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12. Sales in the Domestic market
- After the export of the software to the minimum extent (Know as Export Obligation) is achieved for the
Financial Year, the unit may obtain from STPI specific permission for sales in the Domestic Tariff Area to the extent of 50% of the value of exports made and money realised.
- Domestic sales made by the unit for which payment is realised in foreign currency is also treated as export income. Specific approval of STPI has to be obtained for this purpose.
- Sub-contracting : STP Units may sub-contract part of the work /process through job works on the DTA
units or to other EOU/EPZ/EHTP/STP units after obtaining necessary permission from the Assistant Commissioner of Customs.
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13. Use of Computer Systems for training
- STP units may also be allowed to use the computer systems for training purpose (including commercial training)
After obtaining necessary approval from the Assistant Commissioner of Customs & Central Excise subject to
fulfillment of export obligation and that no computer terminal shall be installed outside the bonded premises for the purpose.
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14. Debonding of Equipment
- If an STP unit is not able to utilise the imported equipment/ goods, it can re – export or dispose them in DTA on
payment of applicable duties.
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15. Obsolete Equipment
- May be disposed of in DTA subject to payment of Customs duties on the depreciated value thereto. If sush
equipment is destroyed with the permission of Asst. Commissioner of customs and central excise, no duty is payable.
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16. 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 fulfillment 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.
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17. What are the Unit's obligations - DO's and DONT's
DO's
- The development / production of the unit under the scheme shall be carried on in a customs bonded area.
- Commencement of production within
the gestation period allowed under the scheme and starting exports.
Intimate STPI of the date of commencement of commercial production within 30 days. If commercial production and exports are not commenced within a period of 3 years from the issue of the letter of approval (LOP) given for the establishment of the unit under the Scheme, the LOP LAPSES automatically after the expiry of the said 3 years.
- The unit shall be a net foreign exchange(NFE)
earner and NFE should be positive over the period of 5 years
- The unit shall realise the amounts due for the exports made within 180 days from the date of export, or the due date under the contract, whichever is earlier.
- If the unit fails to fulfil the export and other obligations under the scheme, it will be liable to pay the customs duty and excise duty on the goods procured and such other penalties and liquidated damages as may be decided by the Government.
- In case external commercial borrowings are resorted to, necessary permission from Ministry of finance to be obtained.
- In case of import of US controlled items, plase comply with the relevant provision vide S.No.9 of the standard condition attched to the letter of approval for 100% EOU.
- Maintain separate accounts for the operation under the scheme.
- Maintain prescribed records and document.
- Apply to STPI for clearance in the following cases:
- For any change of address, change of name or constitution of the unit.
- For extension of premises for carrying out the operation.
- For shifting of equipment from the bonded warehouse for repairs, temporary transfer, permanent transfer, inter unit transfer, disposal, etc.
- For exporting the imported equipment for repairs / replacement.
- For re-export of equipment imported on loan basis.
- For enhancing the limit of capital goods to be imported.
- For obtaining permission for sales in DTA.
- For debonding of the equipment / debonding of the unit.
- For reimbursement of CST.
- For sale of imported capital goods and materials.
- For disposal of obsolete equipment.
- For donation of obsolete equipment.
- Pay the dues to STPI on time.
- Submit the Quarterly / Annual performance reports in the prescribed form, on time.
DONT's
- Please do not utilise the equipment procured duty free for any activity not covered under the scheme.
- Please do not carry on any operation not covered under the scheme in the customs bonded warehouse premises.
- Data circuit is meant exclusively for the purpose of transmission of data between two designated locations and sub-lease to any company or re-engineering to any other location is strictly prohibited.
- Data circuit should not be used for voice purpose on PSTN, as per the Indian Telecommunications Act.
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18. Compliance with rules & regulations
The various steps / Procedures / requirement enumerated above are as per the relevant Provisions in the rules and regulations
mentioned below and the same have to be complied with by the units.
- The STP scheme and the terms and conditions given in the 100% EOU approval letter and the annexure
thereto and the legal agreement.
- Provision in the Import / Export policy and procedures, the Foreign Trade Regulation Act, Customs &
Central Excise Regulation and any other Government rules / instructions, Orders of STPI etc. As may be applicable.
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For various application formats for above mentioned approvals/permissions,
please click here
19. Incentives provided by the Andhra Pradesh State Government to the IT Industry
For more details regarding the Govt. orders, Policies, Incentives, Registration for cliam of Incentives, please browse through the
Govt. Websites http://apit.ap.gov.in/ & http://www.portal.ap.gov.in
for any clarification regading the above, please contact:
Joint Director (Promotions)
IT & C Department, A P Secretariat
Hyderabad,
Ph: 23450048
For information regading the STPI and STPI Scheme, Please contact STPI-Hyderabad
SO, GET, SET, AND GO…
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