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STPI Consultancy Services

STP Scheme in India

About STP

The Software Technology Park (STP) in India was introduced as a 100% export-oriented scheme in order to facilitate software export, both by means of data communication links and other physical methods such as export of professional services.

STP Benefits
The following are the benefits offered by the STP to an entrepreneur. All services/activities that are mentioned in the appendix 54 of the Handbook of Procedures (EXIM) can avail these benefits.

Foreign equity is allowed up to 100%
Single-window clearance approval scheme.
Permission to set up STP anywhere in India.
Power allotted to the Jurisdictional Directors to approve import of capital goods needed for the business, net of taxes, up to USD 20 million.
Import of software and hardware goods for the business is allowed completely duty-free.
Provision for import of second-hand capital goods.
Provision to re-export the capital goods.
Domestic purchases made by STP units get the benefit of deemed exports to the equipment suppliers.
Commercial training can be conducted with the help of computers, provided all such terminals are installed within the STP premises allowed.
The sale of the products or services in the Domestic Tariff Area (DTA) is allowed up to 50% of the export value.
Benefits such as levy of Excise Duty and reimbursement of Central Sales Tax for the capital goods bought from the DTA.
Exemption from paying corporate income tax for a block of 10 years (2009).
Various components, such as the Royalty, Know-How fees, Dividend, etc.,paid on the capital can be repatriated as soon as the foreign entrepreneur pays the applicable Income Tax on them.
Permission to start call centers.
The units are eligible for the title as International Service Export House', 'Service Export House', International Star service House', etc.
The Simplified Minimum Export Performance policy under the STP scheme allows USD 0.25million or 3 times the CIF value of the imported capital goods,whichever higher, along with 10% of the Net Foreign Exchange Earnings against Export Earnings.
The Simplified Minimum Export Performance policy under the EHTP schemeallows USD 1million or 3 times the CIF value of the imported capital goods, whichever higher, and the Net Foreign Exchange Earnings.
Depreciation on the capital goods above 90% for more than five years and an accelerated rate of 7% in every quarter of the first two years provided it satisfies the 70% limit criterion in the first three years.

Statutory procedures
The following are the statutory procedures to be followed by the STP units in India.

Accounting procedure
Each STP unit has to maintain separate account and annual balance sheet for its operations. Individuals units will have separate balance sheets as part of the main balance sheet. The following procedures have to be followed in order to maintain separate accounts for different units.

Maintain all sales invoices.
Maintain the copies of the contracts obtained from different buyers.
Maintain a Fixed Asset register.
Prepare individual balance sheets annually for each unit.
Maintain the Foreign Inward Remittance Certificate (FIRC) file & Bank Realization Certificate (BRC) file
Maintain separate vouchers along with the cashbook and bankbook.

Banking procedure
The following procedures are involved in maintaining a banking account for an STP unit.

Each unit should have separate bank account.
Even though a unit is allowed to join as many bank accounts as needed, it shall assign a single branch of the selected bank in order to carry out the transactions of the unit.
Submission of all export and shipping documents and the realization of all export proceedings will be done through the designated branch.