STPI vs Non-STPI Registration in India: Which is Right for Your IT/ITES Business?
Riya Thawani
Riya Thawani is a Chartered Accountant and the founder of CA Riya Thawani & Company. With strong expertise in taxation, GST compliance, and business advisory, she assists individuals and startups with financial planning and legal compliance. She is passionate about simplifying tax laws for professionals and entrepreneurs through insightful articles and workshops.
In the rapidly growing Indian technology and software export sector, regulatory compliance plays a vital role in availing benefits and staying aligned with government policies. One of the significant schemes that has shaped India’s software exports over the past few decades is the Software Technology Parks of India (STPI) scheme. Many people wonder: What is the difference between STPI and non-STPI registrations? What are the benefits of Softex registration? What is the difference between SEZ and STPI? Is STPI a government or private organization? What is the purpose of STPI? Is STPI registration still beneficial? Can STPI companies sell in India?
While STPI registration continues to offer several incentives to exporters of IT and IT-enabled services (ITES), many businesses today also choose to operate without this registration, under what is commonly termed a non-STPI setup.
This article aims to demystify the nuances of STPI and non-STPI registration, examine their respective compliance structures, benefits, and the strategic choices businesses need to make when considering either model.
What is STPI?
Software Technology Parks of India (STPI) is an autonomous society under the Ministry of Electronics and Information Technology (MeitY), Government of India. Established in 1991, STPI’s primary objective is to promote software exports from the country by providing physical infrastructure, statutory services, and fiscal incentives.
STPI operates various centers across India, allowing companies to register and function under a specific scheme called the STP Scheme (Software Technology Park Scheme). This scheme is tailored specifically for 100% export-oriented units (EOUs) involved in software development and IT-enabled services.
STPI Registration: Key Features
- Export-Oriented Model
Businesses registered under the STPI scheme must commit to exporting their entire production (i.e., software services or products). They are not allowed to sell domestically unless granted special permission. - Customs and Excise Benefits
STPI units are allowed to import all hardware and software, as well as other capital goods, without paying customs duty. The imported goods must, however, be used exclusively for development and export purposes. - Deemed Foreign Territory Status
STPI-registered premises are considered “deemed foreign territory” under trade laws, which facilitates easier movement of goods. - Tax Incentives (Earlier)
Historically, STPI registration came with significant tax exemptions under Sections 10A and 10B of the Income Tax Act. However, these benefits have been withdrawn for new units post-2011, making the registration more operationally relevant than tax-incentivized. - Single-Window Clearance
The STPI scheme provides single-window clearances for imports, exports, and other approvals, easing regulatory burdens for exporters. - Other Facilities
STPI also offers incubation services, high-speed data communication (HSDC), project management support, and mentoring facilities to small and mid-sized enterprises.
Non-STPI Registration: Meaning and Relevance
On the other side, non-STPI refers to software exporters or IT/ITES companies that are not registered under the STPI scheme. These companies operate under the general regulatory framework applicable to all Indian businesses, including those under the Companies Act, Income Tax Act, GST, and other applicable labor and commercial laws.
While they do not enjoy some of the specific operational perks available to STPI units, non-STPI companies are still fully compliant and can legally engage in domestic and international trade.
Key Differences Between STPI and Non-STPI Units
Criteria | STPI Registered Units | Non-STPI Units |
Export Obligation | 100% software export-oriented | No such export restriction |
Duty-Free Import | Permitted for capital goods and inputs | Not permitted unless registered under other export schemes |
Tax Incentives | Historical benefits were withdrawn after 2011 | Standard corporate taxation |
Approval Requirements | Registration with STPI, periodic filings | Operates under general commercial licensing requirements |
Infrastructure Access | Access to STPI incubation and HSDC services | Independent infrastructure setup |
Domestic Sales | Restricted unless permitted | Freely allowed |
Registration Process for STPI
The STPI registration process includes the following steps:
1. Company Formation
The applicant company must be incorporated under the Companies Act, 2013, with the objective of software export.
2. Application Filing
An application must be submitted to the concerned STPI center along with:
a. Business profile
b. Details of promoters/directors
c. Export and employment projections
d. Floor plan and lease deed of the premises
3. Project Evaluation
The application is assessed by the STPI authorities, particularly evaluating the export potential and compliance history (if any).
4. Execution of Legal Agreement
Upon approval, the unit signs a legal agreement with the STPI authority, outlining terms related to operations, obligations, and liabilities.
5. Letter of Permission (LoP)
A formal Letter of Permission is issued, after which the unit is considered registered under STPI.
6. Bonding and Customs Approval
The unit must execute a legal bond with the jurisdictional customs authority for availing duty exemptions.
Benefits of STPI Registration
Although tax benefits have reduced over time, STPI registration still offers operational value:
- Smooth import/export operations due to single-window systems
- Incubation support for startups
- Branding advantage, particularly for international clients who view STPI-compliance positively
- Access to government programs and grants tailored to STPI units
- Reduction in logistics and data communication costs through STPI network support
Why Businesses Choose Non-STPI?
While STPI is helpful for export-heavy companies, many businesses prefer the non-STPI route for the following reasons:
- No export compulsion, allowing them to cater to the Indian market as well
- Lower compliance costs, as non-STPI units don’t need to go through customs bonding or periodic filings with STPI
- More flexibility in terms of procurement, employee deployment, and location
- Suitability for service-based firms that operate in SaaS or digital content without significant imports
Strategic Considerations
Choosing between STPI and non-STPI depends on the business model, size, and strategic goals of the company. For instance:
- A startup targeting international clients, especially in the U.S. or Europe, might benefit from STPI registration due to better brand perception and smoother compliance with export rules.
- A domestic IT services firm or a product-based startup may find the non-STPI structure more viable and cost-effective.
Companies should also evaluate whether they are eligible for newer schemes like SEZ (Special Economic Zones) or Export Promotion Capital Goods (EPCG) scheme, which may offer similar or better benefits.
In conclusion, STPI and non-STPI registrations represent two distinct operational frameworks for IT and software-exporting businesses in India. STPI continues to be a robust platform for export-centric companies, offering streamlined processes and infrastructure support. On the other hand, the non-STPI approach is more flexible and less regulatory-intensive, making it suitable for hybrid business models or companies focusing on the domestic market.
Ultimately, the choice between STPI and Non-STPI should be based on business objectives, scale of operations, export focus, and cost-benefit analysis. With evolving government policies and accelerating digital transformation, both models continue to coexist, serving distinct needs within India’s growing tech ecosystem.
For any clarifications or queries, please feel free to reach out to us at admin@fintracadvisors.com
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