Connect with us +91 966 777 9615
Emerging technologies such as DeepTech, AI, and open-source products are influencing the software product landscape to a massive extent. The Indian software product industry, which is a part of the IT/ITeS sector, presents a promising and vibrant future with active participation from both indigenous firms and global players, who, in fact, are the predominant consumers of Indian software products. The Indian software industry is 30 years young, being driven by the coupled forces of cloud computing and escalating software trends.
To stimulate further industry growth, it was absolutely essential to establish structured rules and regulations that would ensure a fair playing field for each participant. That is where Software Technology Parks of India (‘STPI’) comes into the picture; currently, 6068 entities are registered under STPI, and it is just the beginning.
Software Technology Parks of India is a premier organization under the Ministry of Electronics and Information Technology (MeitY) engaged in promoting IT/ITES Industry, innovation, R&D, start-ups, product/IP creation in the field of emerging technologies like IoT, Blockchain, Artificial Intelligence (AI), Machine Learning (ML), Computer Vision, Robotics, Robotics Process Automation (RPA), Augmented & Virtual Reality, Animation & Visual effect, Data Science & Analytics for various domains like Gaming, FinTech, Agritech, MedTech, Autonomous Connected Electric & Shared(ACES) Mobility, ESDM, Cyber Security, Industry 4.0, Drone, Efficiency Augmentation, etc.
Talking about exports: There can be either export of goods or of services.
In the context of goods, the Customs authority is responsible for the valuation of goods being exported, for validation purposes, for recording the invoices and supporting documents, and much more, all that before the goods have been exported out of India, that is, at the physical ports.
Now, in relation to services, specifically software, tracking their export and valuation becomes a tedious task as these are intangible assets. To solve this problem, the Reserve Bank of India (RBI) brought up the concept of SOFTEX forms.
As per the prevailing RBI Master Circular No., RBI/2013-14/14 dated 1 July 2013 (Para B 15), RBI Circular No.80 dated 15 February 2012, and RBI Circular No.43 dated 13 September 2013, any company that does IT/ITeS exports through Data Communication links needs to submit the SOFTEX Form for certification.
To get the SOFTEX certification by STPI (the Designated Authority), the companies have to become STPI members by either registering under the STP scheme or as a Non-STP unit with STPI.
It is an intelligent process being developed to ensure overall compliance with rules and regulations for the export of software. It keeps the Reserve Bank of India, the STPI, the exporter, and the authorized dealer (the bank receiving the foreign exchange and directly dealing with service exporters) in the loop.
Every element in this loop knows the rules and is aware of each process in the specified software export transaction.
The Basic Points which are required to be fulfilled by the software service exporter are as follows:
A simplified explanation of the whole process of SOFTEX certification is as follows:
Basically, think of the bank (Authorised Dealer) as the element that plays an elementary role and a common source that collects foreign exchange of the export money and also the respective SOFTEX approval from the STPI. The Export Data Processing and Monitoring System (EDPMS) is a platform used by banks in India to report export transactions. The bank then reconciles both these information on EDPMS, and if any discrepancies on either part are observed, it records such data in a summary file and keeps it in its record for 3 years.
After the completion of 3 years, if the exporter is not able to provide sufficient reasons for the occurrence of such discrepancies, the bank reports such summary file to the RBI.
The RBI then initiates penalty provisions for the exporter after scrutinizing the summary file sent to it by the STPI.
In the absence of certified SOFTEX forms, banks treat inbound foreign exchange remittances as proceeds realized for service exports rather than software exports. This can create hurdles for businesses in claiming previous export performance for participation in software project tenders.
The STPI framework, with its meticulous regulatory oversight for emerging technologies, serves as a catalyst for the sustained and incremental growth of India’s Software Technology. Streamlining the SOFTEX certification process not only ensures robust compliance but also fosters an environment where innovation and export excellence can thrive.
The SOFTEX certification process, intricately designed to monitor and validate software exports, plays a critical role in maintaining the integrity and accuracy of India’s software export records. By ensuring that all transactions are transparent and well-documented, the SOFTEX mechanism protects software exporters from massive legal repercussions and simultaneously enhances their credibility on a global platform.
Here are the most frequently asked questions on Software, STPI, and SOFTEX, which can help you gain a clear understanding and stay ahead of your compliance.
Q1. What comes under the definition of “Software”?
‘Software’ as defined under Regulation 2(viii) of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015. The term includes computer programs, databases, drawings, designs, audio/video signals, or any other information shared in a non-physical form. It encompasses all types of software that can be transmitted through digital platforms.
Q2. What are the definitions of IT and ITeS?
Information Technology (IT): This generally refers to the use of computers, software, networks, and other electronic devices to manage and process data. It includes all technologies associated with creating, storing, exchanging, and using information in various forms. It also consists of all aspects of computer hardware and software, along with data management and telecommunications.
Information Technology Enabled Services (ITeS): These refer to services that are possible or enhanced by the use of information technology. It includes services such as Business Process Outsourcing (BPO), Knowledge Process Outsourcing (KPO), customer support services, and data processing, amongst others. Using IT tools enables better efficiency and accessibility.
Q3. What are STP units and non-STP units?
Exporters registered under the STP Scheme are called ‘STPI units’, whereas the exporters not registered under the STPI scheme but registered with STPI for SOFTEX approval are known as ‘non-STPI units’.
Q4. What is the STP Scheme?
The STP Scheme is a 100% export-oriented scheme for the development and export of computer software, including the export of professional services using communication links or physical media. As a unique scheme, it focuses on one sector: computer software.
The unique feature of the STP scheme is the provisioning of single-point contact services for member units, enabling them to conduct export operations at a pace commensurate with international practices.
Q5. What are the benefits of the STP Scheme?
And many more.
Q6. How can non-STP units file SOFTEX forms?
These units can register themselves with STPI by submitting an application form along with supporting documents and the applicable processing fee. By becoming a non-STPI unit under STPI, exporters can fulfill their obligation to file the SOFTEX Form.
Q7. What information is required to be filled out in a SOFTEX form?
Q8. What is the fee for filing SOFTEX forms?
No legal fee is applicable or required to be deposited along with the filing of the SOFTEX Form. However, Both STPI and non-STPI exporters are required to pay some service charges for the certification of the forms. The service charges are determined based on the year’s export turnover.
Q9. Who is obligated to file SOFTEX forms?
Q10. Is there any Exemption limit for filing SOFTEX forms?
To ensure proper monitoring and tracking of exports, all software exporters need to file the SOFTEX form, which is valid from 1 October 2013, regardless of the value of the export.
Q11. What is the due date for filing the SOFTEX form?
SOFTEX forms are to be filed monthly. The due date is the 30th day from the date of the software export invoice. In the case of exporters opting for the bulk generation facility, the due date for filing the SOFTEX form for that particular month is the 30th day from the date of the last software export invoice issued for that month.
Q12. What are the penalties for non-filing of SOFTEX forms?
Q13. Is there any option for bulk filing of SOFTEX forms?
Exporters have the option to either file one SOFTEX form for each export in a month or to avail of the bulk filing option for a month, which is a single form for multiple software export invoices.
The Way Forward
Out of all the information available, we have curated the information that can help you understand the STPI and SOFTEX forms. At Mercurius and Associates LLP, we have a strong track record of meeting our clients’ various STPI compliance and related needs. We specialize in providing comprehensive assistance in STPI compliance, including acquiring or renewing your STPI status, tailored to meet the unique needs of software and IT-related service exporters. To learn more, please get in touch with us.
