Debonding of STPI Unit

De-bonding of an STPI unit is the formal process of exiting the Software Technology Park scheme. The Letter of Permission (LoP) is surrendered, debts owed are paid for bonded stock and the unit returns to normal domestic trading.

The exit process is governed by paragraph 6.17 of the Foreign Trade Policy 2023 and the applicable provisions of Chapter 6 of the Handbook of Procedures. The unit intimates the designated officer and Customs in writing, assesses its exit-related duty liability and submits the assessment to Customs for confirmation. After payment of applicable duties and clearance of dues, Customs issues a No Dues Certificate; the unit then applies to the designated officer for final exit.

FTP 2023 provides that a simplified procedure may be made available to fast-track de-bonding or exit for an STP/EHTP unit that has not availed duty benefits on the procurement of raw materials, capital goods and other goods. Early planning allows the unit to understand their duty exposure and compliance requirements. SKMC Global offers advice to IT and ITES businesses on exit strategies, duty exposure analysis, clearance and post exit compliance.

De-bonding an STPI Unit: Key Facts at a Glance

Legal Framework and Responsible Authorities

The STP scheme’s exit involves STPI and Customs. STPI processes the unit’s exit application and related filings, including the applicable declarations and LoP cancellation requirements. Customs handles the unit’s exit-related duty assessment and bond-discharge formalities under the applicable procedure. The unit must notify the designated officer and Customs in writing, submit its duty-liability assessment to Customs for confirmation, pay confirmed liabilities and obtain a Customs No Dues Certificate. It then applies to the designated officer for final exit. Where there is no ongoing proceedings under the FT(D&R) Act, the final exit order will be issued by the designated officer within seven working days. During the period between receipt of No Dues Certificate and issue of final exit order, exemptions under procurement of capital goods and inputs will not be claimed by the Unit. However, exemptions under Advance Authorisation/DFIA/Duty Drawback can be claimed if eligible.

Exit Routes and Variants

• Straight exit and closure (descriptive): the unit winds down STP operations, settles applicable liabilities on bonded goods and completes the LoP exit formalities.
• Continuing operations after exit (descriptive): the entity may continue operating from the same premises, subject to approval, applicable exit formalities and settlement of any liability on bonded assets.
• Partial de-bonding: STPI publishes procedures for partial de-bonding of premises and for removal/de-bonding of goods. The applicable permission and duty treatment depend on the goods and the relevant procedure.
• EPCG-based exit: the designated authority may permit exit under the prevailing EPCG scheme for DTA units, subject to positive NFE, EPCG eligibility and the applicable HBP conditions.
• Other options: exit under Advance Authorisation may be permitted as a one-time option subject to positive NFE. FTP also says a simplified fast-track procedure may be provided to eligible STP/EHTP units that have not availed duty benefits on raw materials, capital goods, etc.

Eligibility and Pre-Exit Requirements

• An STP/EHTP unit may seek exit with approval of the designated officer, subject to applicable duties, taxes, penalties and scheme conditions.
• Export performance and compliance must be current: pending quarterly and annual reports, Softex filings and realisation evidence should be closed first.
• The unit’s NFE position should be assessed under the applicable rules. An NFE shortfall may lead to proceedings or penalties; the outcome and timeline depend on the unit’s facts and applicable provisions.
• The unit needs to analyse exit liabilities and obtain confirmation from customs. This will depend on the type of goods, benefits taken advantage of, depreciation, NFE status and other applicable provisions.
• STPI dues, service charges and premises-related liabilities should be cleared as required by STPI before final exit.
• Sectoral liabilities are not cleared on exit. Labour, environment and corporate registrations will continue or be transferred under respective regulations.

Documents for the Exit Process

The assets are identified in the Asset Register. Duty charged depends on whether they were imported into the country, how old they are and which Depreciation Band they fall into.

Exit Process: Step by Step

1. Plan your exit: Review the inventory, applicable depreciation, possible duty and tax liability and NFE position.
2. Inform the authorities: Inform the relevant officer and customs of the plan to exit using the forms and documentation required by them.
3. Assess and pay duty: Submit the assessment of exit-related duty liability to Customs for confirmation.
4. Obtain the No Dues Certificate: After payment of confirmed liabilities and clearance of dues, obtain the No Dues Certificate from Customs.
5. Obtain the final exit order: After receiving the Customs No Dues Certificate, the unit applies to the designated officer for final exit. If no proceeding under the FT(D&R) Act is pending, the designated officer issues the final exit order within seven working days.
6. Transition registrations: Review and complete any GST, tax or other registration changes required for the entity’s post-exit operations.

Benefits and Limitations

• Commercial freedom: The outgoing entity can do business within its domestic market without being subject to scheme reporting, NFE benchmarking or restrictions on bonded goods.
• Retained assets: Machinery and Equipment may be retained for use in the domestic tariff area after applicable duty and exit/removal formalities are completed.
• Predictable sequencing: The Handbook's No Dues Certificate to final-order chain, with a seven-working-day target, gives the exit a defined end point.
• Duty and tax liability depends on the asset’s history, benefits availed, applicable depreciation and relevant exit provisions.
• Between Customs’ No Dues Certificate and the final exit order, the unit cannot claim exemptions for procuring capital goods or inputs. Eligible Advance Authorisation, DFIA and Duty Drawback claims may still be made.
• The requirements for continuing operations in the DTA after scheme exit depend on the unit’s circumstances and the applicable procedures.

Exit Routes Compared

Post-Exit Compliance and Tax Position

Once final exit has been approved, the obligations of the unit under the STP scheme are no longer applicable. The entity should ensure it is aware of the requirements under the GST, Income Tax, corporate, labour and environment laws relating to their post-exit activities. They should also ensure records are kept for the scheme year. Whether there will be any issues regarding the transition of input tax credits or customs valuations (including related overseas suppliers) will depend on the facts and circumstances and relevant legislation. Exporter status and preferential tariff status will need to be considered separately and will depend on the relevant rules. Where imported capital goods came from related overseas suppliers, valuation questions can resurface during the duty assessment, a matter governed by the Special Valuation Branch discipline.

Risks and Common Mistakes

• Initiating the exit process without considering a duty impact model. Often the calculation of the depreciated value is higher than expected for newer machinery.
• Assuming indigenous capital goods attract no exit duty — items procured against duty-exemption documents can still be caught.
• Leaving quarterly reports, Softex filings or realisation evidence open, stalling STPI's no-dues confirmation.
• Ignoring the NFE block position: an NFE shortfall may lead to proceedings or penalties under the applicable provisions; the outcome and any consequences depend on the unit’s facts and applicable provisions.
• Moving or disposing of bonded assets before customs assessment and permission, voiding the bonded position.
• Missing the no-exemption window between the No Dues Certificate and the final de-bonding order when timing procurement.

How SKMC Global Can Assist

• Advising on exit versus continued STP operation, including the EPCG, Advance Authorisation and fast-track alternatives
• Building the duty-impact model across depreciated capital goods, unused inputs and GST effects
• Preparing the exit intimation, self-assessment of duty liability and annexure filings to STPI and customs
• Coordinating the No Dues Certificate, bond cancellation and final de-bonding order sequence
• Planning asset retention, write-offs and post-exit registration transitions
• Representing the entity where duty assessments or NFE demands are contested

Exit permissions, duty assessments and de-bonding orders rest solely with STPI and customs authorities; SKMC provides advisory, documentation and coordination support.