In India, the Software Technology Parks of India (STPI) scheme has played a significant role in establishing and fostering the IT and software export industry of the country. It has assisted thousands of software exporters in taking advantage of fiscal incentives, world-class infrastructure, and regulatory compliance ease during the last three decades. But most of the companies—new or small IT companies—do not even know the difference between an STPI Unit and a Non-STPI Unit, and which model would suit their business requirements.
Everything you need to know about STPI Units, Non-STPI Units, STPI registration, and STPI compliance requirements under the STPI scheme is presented here in this blog.
Understanding Software Technology Parks of India (STPI)
STPI is a self-governing society, set up in 1991 under the Ministry of Electronics and Information Technology (MeitY), Government of India. Software Technology Parks of India was set up with the vision of encouraging, creating, and exporting computer software and professional IT services from India.
The STPI programme was launched to provide world-class facilities, fiscal incentives, and policy support to attract IT start-ups and software houses to export their products and services to the international world.
Today, the Software Technology Parks of India (STPI) has its operations spread across different centers in the country, offering plug-and-play office space, incubation facilities, data communication facilities, and compliance facilities to IT and ITeS establishments.
What is an STPI Unit?
An STPI Unit is a company or organization under the STPI scheme and involved in software development or export, IT-enabled services, or electronic hardware. These units are under the cover of the Software Technology Parks of India (STPI) and are eligible for various facilities such as exemption from taxation, streamlined import procedures, and access to international infrastructure.
STPI Unit may be established as 100% Export-Oriented Unit (EOU) under the STPI scheme. i.e., the entire production or service of the unit is export-oriented, though some permissions provide for limited sale in the domestic market.
Key Features of an STPI Unit
1. 100% Export-Oriented Unit (EOU):
The main idea of an STPI Unit is to export IT-enabled services, IT, or software. Yet, the government can authorize up to 50% of the export value to sell within the domestic market.
2. Exemption from Customs Duty:
Capital goods, software, and hardware imported to be utilized for export are exempted from customs duty under the STPI scheme.
3. Single Window Clearance:
The Software Technology Parks of India (STPI) also offers a one-window clearance facility for registration, customs bonding, and allied operations.
4. Simplified Import and Export Procedures:
The STPI registration enables simple import of hardware and export of software by making provision for simplified documentation.
5. Tax and Fiscal Benefits (Earlier under Section 10A/10B):
Earlier, STPI Units were granted tax holidays under Sections 10A and 10B of the Income Tax Act. Though phased out presently, STPI registration still lends credibility and operational benefits to exporters.
6. Infrastructure Support:
STPI centers offer reliable internet connectivity, incubation area, and data communication facilities to STPI Units, making it possible for startups and small IT companies to save on operation costs.
7. Compliance Management:
All STPI Units are to comply with compliance procedures on a periodic basis like quarterly, annual, and SOFTEX reporting to the STPI authority.
STPI Registration Process
Formulation of an STPI Unit entails issuing an STPI registration by the concerned regional office. The process includes:
1. Preparation of Application:
The company shall prepare detailed project report comprising business goals, expected exports, investment proposals, and infrastructure requirements.
2. Submission of Application:
The registration request to STPI comes with supporting documents like incorporation certificate, PAN, Memorandum of Association (MOA), list of directors, and board resolution.
3. STPI Authorities' Scrutiny:
The Software Technology Parks of India (STPI) scrutinizes the export potential of the project, its viability, and its capacity to adapt.
4.Letter of Permission (LoP):
Upon approval, a Letter of Permission (LoP) is issued to the unit to enable it to function as an STPI registered unit.
5. Legal Formalities and Customs Bonding:
The STPI Unit premises are bonded with customs authorities for facilitating duty-free import of capital goods.
6. Start of Operations:
After the unit is bonded and installed, it is free to start operations, export software, and submit compliance reports from time to time.
STPI Registration Compliance Requirements
After an entity is registered as an STPI Unit, they must undergo regular STPI registration compliance to keep it active. These are:
1. Quarterly and Annual Performance Reports (QPR/APR):
Export performance of all STPI Units is to be reported to STPI periodically.
2. SOFTEX Forms:
Software and IT services exports are reported through SOFTEX forms, which are to be attested by STPI authorities.
3. Records of Customs and Excise:
Accounts of imports and exports should be kept in detail for audit.
4. Renewal of Letter of Permission (LoP):
The LoP also has a validity of five years and needs to be renewed prior to its expiry so as to be capable of operating as an STPI Unit.
Adherence to STPI registration ensures uninterrupted business operations and perpetual benefits under the STPI scheme.
What is a Non-STPI Unit?
A Non-STPI Unit is an information technology or software services firm providing such a service but not getting itself registered under the Scheme of Software Technology Parks of India (STPI). In other words, it is similar to a regular domestic or export-processing company under general laws, without availing special concessions enjoyed by STPI Units.
Major Characteristics of a Non-STPI Unit
1. No Compulsory Registration:
No non-STPI registration is required for requesting firms who do not want to use duty-free import or some incentives under STPI.
2. Suitable for Domestic as Well as Export Services:
Non-STPI units have the freedom to export or offer IT services or software development to domestic as well as overseas clients.
3. Regular Taxation Structure:
A Non-STPI Unit is governed by the general provisions under the Income Tax Act and GST environment without any concessions.
4. Simple Operations:
As Non-STPI Units are not bonded under customs, reporting as well as compliance requirements are comparatively less for Non-STPI Units than STPI Units.
5. SOFTEX Certification Still Required:
Computer software exports by Non-STPI Units also have to be reported through SOFTEX forms certified by STPI or SEZ authorities.
6. Flexibility:
A Non-STPI Unit enjoys more business freedom of operation because it has no export commitments or foreign exchange performance targets.
Difference Between STPI Unit and Non-STPI Unit
|
Criteria |
STPI Unit |
Non-STPI Unit |
|
Registration |
Needs STPI registration under the STPI scheme |
No STPI registration is required |
|
Export Obligation |
100% export-oriented (with restricted domestic sales allowed) |
No specific export obligation |
|
Duty Benefits |
Duty exemption on Import of capital goods |
No duty exemptions |
|
Compliance |
Must follow STPI registration compliance (QPR, APR, SOFTEX) |
Only general accounting and SOFTEX reporting |
|
Tax Benefits |
Earlier available under Sections 10A/10B (now phased out) |
Regular tax structure |
|
Infrastructure Support |
Access to Software Technology Parks of India (STPI) facilities |
Independent setup required |
|
Flexibility |
Operates under STPI guidelines |
Greater flexibility in operations |
Who Should Register as an STPI Unit?
Companies involved extensively in software exports, IT-enabled services, or product development need to bear in mind registering as an STPI unit.
It is particularly useful for:
- Start-ups who wish to enter global markets.
- Software companies selling intellectual property (IP) overseas.
- IT/ITeS organizations needing customs benefits.
- Companies needing infrastructure support and government support.
But if your company has most of its buyers in India or does not intend to import hardware duty-free, it is less complicated and less expensive to be a Non-STPI Unit.
How SKMC Global Can Help?
We at SKMC Global are experts in helping companies with every step of STPI registration, Non-STPI registration, and STPI registration compliance at regular intervals.
Our experienced professionals provide:
- End-to-end registration assistance for new STPI Unit.
- Compliance management, quarterly and annual performance reports.
- SOFTEX certification assistance for STPI and Non-STPI units.
- Consultancy services to determine if an STPI establishment or Non-STPI establishment is appropriate for your business model.
- LoP renewal and exit process after registration.
With our on-ground experience in managing Software Technology Parks of India (STPI) centers and export controls, SKMC Global ensures your company remains compliant and takes maximum advantage of incentive schemes available.
Conclusion
Software Technology Parks of India (STPI) has contributed significantly towards making India a global IT export leader. Whether to choose an STPI Unit or Non-STPI Unit depends on your company profile, export focus, and operational needs.
While STPI Units enjoy structured compliance, duty-free imports, and infrastructure support, Non-STPI Units have flexibility and lower regulatory requirements.
Whether or not you are starting a new export-oriented IT venture or redesigning your business plan, sensitivity to these distinctions is key to maximize compliance and cost-benefits.
At SKMC Global, we assist enterprises in making informed decisions, getting STPI registration, determining STPI registration compliance, or functioning properly as Non-STPI Units — secure in their business and all types of regulatory compliance.