Software Technology Parks of India a Step in Right Direction

APPLICATION FOR SETTING-UP UNIT UNDER SOFTWARE TECHNOLOGY PARK (STP) SCHEME FOR 100% EXPORT OF COMPUTER SOFTWARE (Combined Form for Letter of Permission and Foreign Collaboration/Investment)

No5, 3rd Floor, Rajiv Gandhi Salai, Taramani, Chennai 600 113.

Phone No : 39103525 Fax No : 39103505 E-mail Id : [email protected] SOFTWARE TECHNOLOGY PARKS OF INDIA – CHENNAI

PARTICULARS PAGE NO.

Software Technology Parks of India 3 Goals & Objective

Highlights of the Scheme 4

Process for submission of 6 Application

Communications Details 8 Application form to set up an 100% 9 Software EoU under STP Scheme

Post approval process 18

Procedure to obtain the bonded ware 19 house licence

Executing the B – 17 bond 20

Statutory Compliance under STP 21 Scheme

Service Charges to STPI 22

Documents to be submitted along 23 with the application

2 Software Technology Parks of India – a step in right direction

Ministry of Communication & Information Technology [MCIT], Govt. of India has recognized the potential for software exports and created the Software Technology Park Scheme [STP]. As a part of this scheme, MIT has taken the right step at the right time in establishing the Software Technology Parks of India [STPI], an autonomous society. STPI centres have been created at strategic locations across the country. New fiscal incentives offered under this scheme, Infrastructure created by STPI and the Industry friendly environment have contributed to a steep growth in the Software Exports.

To contribute to the prosperity of the national economy through promotion of exports from software and services industry by facilitating all the statutory services of the Govt., strengthening the communication infrastructure and by increasing the quality consciousness in the industry. Objectives

 To act as front-end to the Software Industry for the Govt. policies and approvals

 To establish and provide Data Communication facilities, Computer Facilities and Infrastructure facilities like Office Space and General Amenities.

 To promote development and export of software & the Services through technology assessments, market analysis, marketing segmentation, marketing support & related areas.  To train professionals and to encourage design and development in the field of Software Technology and Software Engineering.

The STPI scheme

Software Technology Park [STP] Scheme is a 100% export oriented scheme for undertaking software development for export using data communication links or in the form of physical media including export of professional services.

The benefits under the STP Scheme

 An STP project may be set up any where in India.

 100% Foreign equity is permitted.

 All the imports of Hardware & Software in the STP units are completely duty free, import of second hand capital goods also permitted.

 Re-Export of capital goods are permitted.

 Simplified Minimum Export Performance norms i.e.,

Net Foreign Exchange Earnings to be positive  Domestic purchases by STP unit are eligible for the benefit of deemed exports to the equipment suppliers.

 Use of computer system for commercial training purpose is permissible subject to the condition that no computer terminals are installed outside the STP premises.

 The sales in the Domestic Tariff Area [DTA] shall be permissible upto 50% of the export in value terms. (Prior approval from STPI is required)

 Deemed Exports – As per Exim Policy STP units can claim

4 deemed export benefits. Deemed exports are also taken towards discharge of Export Performance. (Deemed Export to be declared to STPI)

 Sub-Contracting :- As per Exim Policy sub-contracting of production and production process is permitted. (Prior approval from STPI is required)

 STP units are exempted from payment of corporate income tax upto 2009-10.

 The capital goods purchased from the Domestic Tariff Area [DTA] are entitled for the benefits like levy of Excise Duty & Reimbursement of Central Sales Tax [CST].

 Capital invested by Foreign Entrepreneurs Know – How Fees, Royalty, Dividend etc., can freely repatriated after payment of Income Taxes due on them if any.

 Call center permitted under the STPI scheme.

 All Services as listed in App.14-I of handbook of procedures (EXIM) are eligible for facility of STP scheme. Procedure for Approval under STP Scheme

Units undertaking to export their entire production of goods and services may be set up under the Software Technology Park Scheme. Commensurate with the policy to give a special thrust to export of computer software, such units would be encouraged to be set up under the aforementioned export oriented scheme. Software units may undertake exports using data communication links or in the form of physical exports [which may be through courier services also], including export of professional services.

In order to become a certified member unit under STP Scheme, approval from the competent authority is required. The steps involved for obtaining approval are as follows :

1.1.1 Submission of application

a) An application in the prescribed format for establishing a Software Technology Park unit is to be submitted to Software Technology Parks of India.

b) The application should be along with the details of the Software Project in terms of strengths, area of expertise, marketing arrangement, business plans, means of finance, mode of export projected P & L and Balance Sheet.

c) Each application should be duly signed by the competent authority on each page of the application along with office seal of the company.

d) The application should be supported by Certificate of Incorporation, under the Companies Act of 1956, Memorandum of Association, Articles of Association, of the company.

e) Resume of the Chief Executive heading the STP operations.

f) In case FIPB/RBI Approval for bringing in Foreign Equity or & NRI Repatriation of Capital is already obtained a copy of the approval should be accompanied with the application.

g) In case the project is for setting up a STP as 100% Subsidiary/Branch office a copy of the incorporation certificate of

6 the parent company along with the board resolution for setting up the subsidiary is to be attached with the application.

h) Copy of the lease deed / sale deed for the proposed STP premises. The lease period should be for a minimum period of 5 years.

i) Details of previous export performance if any along with copy of IE code.

j) Permanent e-mail address of the company and also operational website address of the company is mandatory. (applications without e-mail address and website will not be accepted)

1.1.2. Competent Authority for approval

Director of Software Technology Parks of India

Time frame for processing and granting approvals

In case the applications are complete in all respect, the time frame for granting approval is generally as below :

Director(S) STPI 15 working days

The above time frame may vary due to unavoidable circumstances.

Application must accompany a Demand Draft of Rs. 2,500/-+service tax applicable as per govt. norms drawn in favour of “The Director STPI” as processing fees. High Speed Data Communication Services ( HSDC)

STPI offers Datacom (HSDC) services under the service name “ SoftNET “. SoftNET comprises of mainly two types of services, namely: SoftPOINT (IPLC) & SoftLINK(Internet).STPI has established independent international gateways across the country, through which SoftNET services are offered. Each one being an independent gateway, customers have the advantage of being directly connected to the international backbone in the next hop from Customer premises.

SoftPOINT:

The traditional Point to Point international private lease connectivity IPLC (n x 64 Kbps) offered to the customers from the respective STP location to any destination across the globe . STPI provides the Indian half circuit (In case of bandwidth through Satellite and has strong tie ups with all the global players to provide the foreign end connectivity to any part of the world. STPI also offers SoftPOINT on OFC as per the Customer’s requirements.

SoftLINK :

Under this, STPI offers dedicated internet bandwidth (n x 64 KBPS).As STPI’s services are focussed to software exporting community, a very healthy download and uploads are maintained with symmetric backbones and load balancing. Connectivity uptimes over 99% plus are maintained by implementing redundancies at all critical areas.

Last mile Connectivity :

The last mile connectivity from the gateway to the customer premises is offered through one of the following:

 Radio Local loops  BSNL / any other service provider  ISDN lines  STPI Network - Available at TIDEL Park, Elnet Software City and NSIC Park

Further details can be obtained from [email protected]

8 APPLICATION FORM

I. a) Location of the proposed STP unit

b) Name of the Applicant Undertaking

c) Address in full of the Registered Office of the Applicant Undertaking (with Pin Code, Telephone, Fax & e- mail, web site) d) Address in full of the proposed location of the STP unit (with Pin Code, Telephone Fax & e-mail, web site)

II. Whether the applicant has STP unit at other location (Please tick () the appropriate box)

Yes No

If yes, indicate name of the Location(s):

S.No. Location Name & Address Jurisdictional Approval No. STPI & Date

III. Whether the promoter(s) have promoted any other undertaking(s) which is/are registered under STP Scheme. (Please tick () the appropriate box)

Yes No

If yes, indicate name of the Location(s):

S.No. Name of Promoter Name of STP Location unit promoted IV. Status of the Applicant Undertaking (Please tick () the appropriate box)  Limited Company  Private Limited Company V. Brief Background of the Applicant(s) (Give details of professional background, existing lines of business etc.,)

VI. Type of Proposal A. Indicate whether this proposal is for (Please tick () the appropriate box)  Establishment of a STP Unit  Conversion from other scheme to STP unit  Conversion from DTA to STP unit  Renewal of 100% EoU Status.

B. If the investment is proposed to be undertaken for A(1,3 & 4) a new undertaking, indicate the name of proprietors, partners or Board of Directors with full details of their addresses & occupation.

VII. Capital Structure for proposed company (Rs. Lacs) (In case of companies registered under the Indian Companies Act, 1956)

(A) Pattern of Equity Share Holding Investor Percentage Central Government State Government Promoters Private Public

(B) Equity Existing Proposed . Authorised Capital . Subscribed Capital . Paid-up Capital

(C ) Pattern of Share Holding in the Paid up Capital Existing Proposed Amount % Age Amount % Age

(a) Foreign Holding (i) Direct Participation (ii) Indirect Participation (iii) Total ( i + ii)

(b) Non Resident India Company/Individual Holding (i) Repatriable (ii) Non-Repatriable (c ) Resident Holding (d) Total Equity (a+b+c) (e) Commercial Borrowings . External . Internal (f) Any other Source (g Total Investment (d+e+f) )

VIII. Project Export Over 5 Years (in Lacs) Year 1st 2nd 3rd 4th 5th Total

IX. Requirement of Capital Goods (in Lacs) Year Particulars 1st 2nd 3rd 4th 5th Total (A) CIF Value of Import Capital Goods

(B) Value of Capital Goods to be purchased indigenously

12 X. Is any Foreign Collaboration (Whether Financial, Technical Marketing or Consultancy) Envisaged? If so, give followings details Part A [for Financial Collaboration] Foreign Investment (a) Financial Collaborator

Name …………………………………………………………………….

Address …………………………………………………………………….

Country ……………………………………………………………………..

Amount of Foreign Equity Investment

Amount in Rupees Percentage in Paid-up-Capital

Part B [for Foreign Technology Agreement] (a) Technical Collaborator

Name ……………………………………………………………………………

Address …………………………………………………………………………

Country …………………………………………………………………………

Nature of the Technical Collaboration

Terms and conditions of the Collaboration

Part C [Additional Information for Foreign Collaboration]

(i) Whether your foreign investors have had or has any Financial/Technical Collaboration or trade mark agreement in India in the same or allied field for which approval has been sought? And

(Please tick () the appropriate box)

Yes No

(ii) If so details there and the justification for proposing the new venture/Technical Collaboration (including the marks) XI. Net Foreign Exchange Earnings as Percentage of Exports (NFEP) . Foreign Exchange Inflow

Value in Rs. Lakhs Total 5 years in US $ 1st 2nd 3rd 4th 5th Total Year Year Year Year Year (i) Foreign Equity (ii) Borrowings from parent/ collaborator Company (iii) Commercial Borrowings (External) (iv) Any other funds (Give Details) (v) Export Earnings (A)

Total Foreign Exchange Inflow

. Foreign Exchange Outgo on 1st 2nd 3rd 4th 5th Total Total Year Year Year Year Year 5 years in US $ (i) CIF Value of Import CG (ii) Import of raw-materials & components (iii) Import of Spares & Consumables (iv) Repatriation of dividends and profits to Foreign Collaborators (v) Royalty (vi) Lump sum know-how fee (vii) Design & Drawing fee (viii) Payment on training of Indian Technicians abroad (ix) Payment to Foreign Technicians (x) Commission on exports (xi) Foreign Travel (xii) Amount of interest to be paid on External Commercial Borrowings/deferred payment credit (specify details) (xiii) Any other payments

14 (specify details Total FE Out flow (i.) to (xiii) (B) Net Foreign Exchange Earnings (A-B)

XII. Export Performance a) The Unit shall be a positive net foreign exchange earner. The Net Foreign Exchange shall be calculated cumulatively for a period of five years from the commencement of commercial production. b) Items of manufacture for export specified in the Letter of Permission(LOP)/Letter of Intent(LOI) alone shall be taken into account for calculation of NFEP and EP.

Net foreign exchange earning shall be calculated annually and cumulatively for a period of five years from the commencement of commercial production according to the following formula:

NFE = A - B

where NFE is Net Foreign Exchange Earning

A:- .is the FOB value of exports by the EOU/EPZ/EHTP/STP unit; and

B:- is the sum total of the CIF value of all imported inputs, the CIF value of all imported capital goods, and the value of all payments made in foreign exchange by way of commission, royalty, fees, dividends, interest on external borrowings during the first five year period or any other charges. "Inputs" mean raw materials, intermediates, components, consumables, parts and packing materials.

Note-I: 1. If any input is obtained from another EOU/EPZ/EHTP/STP unit, the value of such input shall be included under B.

2. If any capital goods imported duty free is leased from a leasing company, received free of cost and/or on loan basis, the CIF value of the capital goods shall be included, pro-rata, under B for the period it remains under bond XIII. Staff proposed to be employed in the Software Development

Type Existing Proposed Total Men Women 1st 2nd 3rd 4th 5th M F M F M F M F M F Managerial Supervisory Technical Non Technical Other Categories Total

XIV. Details of development activities (A) Area of Expertise in Software Development

 System Software development

 Systems Software Conversion

 Design and implementation of management Information systems and decision support system

 Financial Control accounting systems

 Production management and Inventory control

 Project feasibility studies and project monitoring system

 Microprocessor based software

 Communication software

 CAD/CAM/CIM/FEA

 Expert System

 Back Office/Remote Data Entry

 Application Re-Engineering

 IT Enabled Services (Specify details)

 Any other please specify

16 XV. Data Communication Requirement

STPI provides world-wide datacomm service through its own gateways. It provides International Private Leased Circuits (IPLCs) and Internet Services to the Software Exporters.

(A) Existing communication facility (B) Service provider (C) Proposed Communication facility (D) Interested to avail communication services YES NO from STPI (If no reasons for the same) XVI. Establishment time required for commencement of development/export from the date of issue of permission

XVII. Whether the applicant/party has submitted any other application(s) for Letter(s) of Intent/Permission is/ are pending. If so, the details thereof including the items of manufacture, proposed capacity, location and investment.

XVIII. Whether the applicant has been issued any Industrial License of Letter of Intent so far under 100% Export Oriented Unit (EOU)/Export Processing Zone (EPZ) Scheme under Normal Industrial Licensing Scheme for domestic tariff area. If so, full particulars of each Letter of Intent/ Industrial License/ Permission Letter issued to him with reference number, date of issue items of manufacture and progress of implementation of each such Letter of Intent/Industrial License/Permission Letter. XIX. a) Indicate whether the applicant or the Undertaking or any of the Partner/Director of the Undertaking who is a Partner/Director of another Company or its associate concerns.

b) If answer to part (a) is in affirmative, then give details.

XX. (a) Indicate whether the applicant or the Undertaking or any of the Partner / Director who is also a Partner / Director of any other company or its associate concern have been debarred or placed in abeyance from getting any License / Letter.

XXI. Indicate whether the applicant or Undertaking or any of the Partner/Director who is also a Partner/Director of another company or its associate concern have been issued notice by the Government of India, or Letter of Intent/Permission Letter.

XXII. If reply to part (a) and/or (b) is in affirmative, then give details.

UNDERTAKING

I/We hereby undertake that

(i) The Capital equipment (hardware/software) required for software development, imported by us would be used for production of computer software for 100% export in STP Scheme. (ii) The unit is amenable to bonding by Customs; (iii) That I/We will abide by other conditions which may be stipulated by the Department of Electronics, Government of India. (iv) I/We hereby declare that above statements are true and correct to the best of my/our knowledge and belief. I/We fully understand that any Letter of Intent/Permission letter granted to me/us on the basis of the statement furnished is liable to cancellation or being made ineffective, in addition to any other penalty that the Government may impose or any other action that may be taken having regard to the circumstances of the case, if it is found that any of the statements or facts therein are incorrect or false. (v) I/We Undertake to fulfill the Export Obligation as per Export-Import Policy in force”

18 (Signature with full name) Name : Designation : Place : Full Address :

Date: Seal/Stamp of the Company

Note: Wherever the information desirous is to be attached in annexures

Documents to be submitted for STP registration

Pl. visit STPI-Chennai website www.stpc.soft.net/Formats & Procedures/General Formats/ or detailed checklist on registration process..

Documents to be submitted for Execution of Legal Agreement: (also pl. visit our website for detailed checklist)

 Legal agreement to be executed on Rs. 100 stamp paper

 Acceptance letter to SIA / IP Division and STPI-Chennai

 Importer exporter code obtained from DGFT

 Advance service charge - As indicated in the STPI Approval letter

 Copy of bank certificate

 Copy of the board resolution

 Application for green card

 List of CG to be imported

 List of CG to be procured indigenously 

20 Procedure to obtain the bonded ware house licence

The bonded ware house licence can be obtained from sea customs or the air customs. The following documents are to be submitted to the customs.

 Application for obtaining bonded ware house licence  Sale deed / lease deed of the premise  MOA , ROC  Copy of - Approval letter as 100 % EoU - Legal agreement executed with STPI - IE code - Green card - List of CG to be imported – attested by STPI - List of CG to be procured indigenously – attested by STPI.

The customs authorities will process the application and they will come for an inspection of the premises. After this the customs will inspect the premise and issue the bonded ware house licence

The STP units have to now execute the B – 17 bond which will enable them to import capital goods free of duty. B-17 is the general bond to be executed with the Asst. Commissioner of Customs with surety / security. The B-17 bond covers the following:

- Bond for carrying our in-bond manufacture - Bond to fulfill the export obligation - Double duty bond in respect of ware housing of the Imported goods - Bond for procuring duty free goods from domestic manufacturers - Bond for movement of duty free imported goods for export or other 100% EoUs or for repair.

Procedure for executing the B – 17 bond The STP units have to now execute the B – 17 bond which will enable them to import capital goods free of duty. B-17 is the general bond to be executed with the Asst. Commissioner of Customs with surety / security. The B-17 bond covers the following:

- Bond for carrying our in-bond manufacture - Bond to fulfill the export obligation - Double duty bond in respect of ware housing of the Imported goods - Bond for procuring duty free goods from domestic manufacturers - Bond for movement of duty free imported goods for export or other 100% EoUs or for repair.

The B-17 bond value is 25% of the rate of duty (customs + central excise) foregone for CG purchase.

The B-17 has to be supported by a surety which is equal to the bond amount or with a security in the form of bank guarantee to a tune for 5% of the bond value.

Statutory compliance for STP units.

22 Important statutory compliance for STP units are listed below as reference:

Accounts: Each of such unit is required to maintain separate accounts for its operations. Separate annual balance sheet will have to be made for each such unit which would be become a part of the main balance sheet of the company. For maintaining separate accounts the following will have to be done : a) Maintenance of separate Cash & Bank book and corresponding vouchers b) Maintenance of sales invoices. c) Maintenance of Fixed Asset register. d) Maintenance of Foreign Inward Remittance certificate file (FIRCs) & Bank Realisation Certificates file where the original of the FIRCs and BRCs are kept. e) Maintenance of contract file, where copies of contracts received from buyers are maintained. f) Preparation of yearly balance sheet for the unit which would ultimately become a part of the balance sheet of the company.

Banking: Each unit is required to maintain separate bank accounts for its operations. The units is free to have as many bank accounts as it desires but shall have to designate a single branch of bank whom all export documents will be submitted. In other words the work of handling of all shipping documents and realisation of export proceeds will have to be entrusted to this designated bank branch. Mandatory Statutory Obligation & Records :

The following are the details of other mandatory statutory obligation and records that have to be kept at the unit: a) Import Certificate : A copy of the import certificates issued by STPI permitted imports for the unit should be maintained. This should have the full debits etc., as per the actual imports. b) Export Certificate : A copy of the certified export forms attested by STPI should be maintained. c) Bill of Entry File : Copies of all the Bill of Entries for the import of materials have to be maintained in this file. This should be maintained in the same order as per the prescribed format d) Performance Reports File : Monthly & Quarterly performance reports have to be given to STPI. A copy of the return duly receipted by the authority must be maintained in the MPRs & QPRs file separately.

Annual Performance Return: Yearly performance report to be given to the Authority in the prescribed form as sought by them. Annual performance returns to STPI should be promptly as the actual export obligation etc., for the STP Unit is worked out by the authority on the basis of this return. Service Charges to STPI.

Each STP unit is required to pay service charges to STPI as per following:

Export Turnover Amount of Service Charge(service tax extra applicable as per govt.norms) Exports upto Rs.25 lakhs per annum Rs.8,000/= Exports between Rs.25 – 50 lakhs per annum Rs.16,000/= Exports between Rs.50 – 300 lakhs per annum Rs.55,000/= Exports between Rs.3 – 10 crore per annum Rs.1.10 lakhs Exports between Rs.10 – 25 crore per annum Rs.2.25 lakhs Exports between Rs.25 – 50 crore per annum Rs.2.50 lakhs Exports between Rs.50 – 100 crore per annum Rs.3.50 lakhs Exports above Rs.100 -500 crores per annum Rs.5.75 lakhs Exports above Rs.500 -1000 crores per annum Rs.6.00 lakhs Exports above Rs.1000 crores per annum Rs.6.50 lakhs Note: Wherever the information desirous is to be attached in annexures