STPI / SEZ Registration

STPI (Software Technology Parks of India) is a scheme administered by MeitY (Ministry of Electronics and IT) that allows IT/ITES companies to register as 'STPI units' and import capital goods duty-free in exchange for a commitment to export software/services with positive Net Foreign Exchange (NFE) earnings. SEZ (Special Economic Zone) is a geographically demarcated zone under the SEZ Act 2005 where businesses operate as 'deemed foreign territory' for customs purposes — importing and exporting freely within that zone with customs duty exemption, and enjoying the Section 10AA income-tax deduction on export profits. The key practical difference: STPI is more accessible and simpler to register and maintain; SEZ offers stronger tax benefits (especially Section 10AA) but requires you to be physically located within a notified SEZ.

No. The income-tax deduction under Section 10A (for STPI units established before 31 March 2000) and Section 10B (for EOU/STPI units established before 31 March 2003) had sunset provisions that have expired. STPI units registered today do not have an income-tax benefit beyond the normal corporate tax rate. The customs duty benefit on capital goods import (duty-free under bond) remains. GST zero-rating on exports also remains. But the IT exemption for profits from STPI is no longer available for new units.

Section 10AA of the erstwhile Income-tax Act, 1961 provided a deduction from the total income of an SEZ unit equal to: 100% of the profits derived from export of articles or computer software (or from provision of specified services) for the first 5 consecutive assessment years, 50% for the next 5 years, and 50% of the amount transferred to the Special Economic Zone Reinvestment Reserve from such profit for a further 5 years. The deduction was available only on 'export turnover profits' — computed as: (Profit of the undertaking × Export Turnover) / Total Turnover. Critically, this is a sunset benefit: it is available only to SEZ units that commenced manufacture or provision of services on or before the prescribed cut-off date (the deadline was originally 31 March 2020 and has not been further extended in recent Budgets). Units commencing operations after the applicable cut-off do not get the Section 10AA deduction at all — no replacement income-tax holiday has been introduced for new SEZ units. For units that already qualified before the cut-off, the 15-year deduction window continues to run its course, and the equivalent provision continues to be administered under the Income-tax Act, 2025 (effective 1 April 2026) with renumbered section references.

Yes. There is no requirement that a company must be newly incorporated to apply for STPI or SEZ registration. An existing company that is already exporting IT services or manufacturing products can apply to add an STPI or SEZ unit. For STPI, the company simply applies to the relevant STPI nodal office. For SEZ, the company applies to the Development Commissioner for the SEZ where its proposed premises is located. The key consideration: if the company has been claiming tax benefits under another regime, the interaction with the new regime must be assessed. If the company has domestic operations alongside the proposed export unit, the accounting separation between domestic and SEZ operations must be established at the outset.

NFE is the net foreign exchange earned by the STPI or SEZ unit — broadly computed as: Foreign Exchange Earned (export receipts in foreign currency) minus Foreign Exchange Spent (import payments in foreign currency for capital goods, consumables, remittances to foreign personnel, etc.). STPI/SEZ units must maintain positive NFE over the prescribed monitoring period — typically the 5-year block. If NFE turns negative at the end of the period, the unit is in violation of its bond undertaking. Consequences include: customs duty demand on the shortfall, penalties, possible cancellation of registration, and bond enforcement against the sureties or bank guarantee.

IEC is a separate registration issued by DGFT (Directorate General of Foreign Trade) and is mandatory for any entity importing or exporting. STPI/SEZ registration does not replace the IEC — you need both. For capital goods imported duty-free under the STPI/SEZ bond, the IEC must be cited in the import documentation. For exports, the IEC is required for filing the Shipping Bill (goods) or the Software Export Declaration (for software/IT services exports). PNPC typically assists STPI/SEZ applicants with IEC registration as part of the same engagement.

Capital goods that are legitimately required for the STPI unit's approved activities can be imported duty-free under bond. For IT and software units, this typically includes: computers, servers, network equipment, storage systems, testing and development hardware, UPS systems, air-conditioning for server rooms, and software tools (if categorised as goods for customs purposes). The import must be for the exclusive use of the STPI unit — personal use or use outside the registered premises is not permitted. Each item imported duty-free must be entered in the Capital Goods Register maintained by the unit. Re-export of the goods (or payment of duty) is required when the goods are no longer needed for the STPI activity.

Exports of goods and services are zero-rated supplies under GST — the exporter does not charge GST on the export invoice, and can either: (a) export under a Letter of Undertaking (LUT) without paying IGST and claim a refund of accumulated input tax credit, or (b) pay IGST on the export and claim a refund of the IGST paid. For most IT/ITES exporters, the LUT route is preferred as it avoids upfront payment. For SEZ units specifically: supplies to an SEZ from within India (DTA supplies to SEZ) are also zero-rated. The LUT must be filed annually on the GST portal before the first export invoice of the financial year.

Every export of software or IT services — even when delivered electronically — constitutes an export transaction under FEMA and must be supported by: an export invoice in foreign currency, realisation of the export proceeds within the prescribed period (currently 9 months for software exporters, subject to RBI guidelines), and a Foreign Inward Remittance Certificate (FIRC) or Bank Realisation Certificate (BRC) from the bank for each receipt. Outstanding export proceeds must be reported to the bank and, if beyond the permitted period, an application for extension or compounding must be filed with RBI. STPI units are additionally required to submit export performance data to the STPI authority, which cross-checks FIRC records against declared export turnover.

SEZ units are required to submit annual performance returns to the Development Commissioner's office in the format prescribed by the SEZ Rules. The return includes: export earnings (in INR equivalent and foreign currency), imports made (duty-free capital goods and consumables), NFE computation, employment data (headcount, salaries), and additional information on capital goods register, DTA sales, and inter-unit transfers if any. The DC office may also conduct periodic physical inspections. The review is an important compliance checkpoint — a unit that shows declining export performance or negative NFE trajectory may receive a notice or have its LOA conditions reviewed.

Yes, but with restrictions. STPI units can supply to the Domestic Tariff Area (DTA), but such supplies are treated as deemed imports and customs duty is payable by the recipient. For software services exported by STPI units, the concept of DTA sales is less common — the focus is on export earnings. SEZ units can supply to the DTA subject to: prior approval from the Development Commissioner, payment of full customs duty and IGST (treated as if the goods/services were imported), and specific documentation. DTA sales from an SEZ are counted against export performance and affect NFE computation. SEZ units with high DTA sales may struggle to maintain positive NFE.

Any change in the entity holding the STPI / SEZ registration — including merger, demerger, acquisition, or change of name — requires prior approval from the STPI Director / Development Commissioner. The registration is issued to the specific legal entity: it does not automatically transfer to a new entity or continue after a corporate reorganisation. The LOP/LOA must be amended to reflect the new name or transferred to the successor entity through a formal application. Outstanding bonds must be reviewed, and new bonds may need to be executed in the successor entity's name. Failure to notify and obtain approval may result in the successor entity's imports being treated as unauthorised.

Closing an STPI/SEZ unit — called 'de-bonding' or 'exit from scheme' — requires: a final NFE audit confirming the unit's cumulative NFE over its operating period; payment of customs duty on any capital goods that are being retained in India and not re-exported (the duty is assessed on the depreciated value of the goods as of the exit date); submission of final performance returns; cancellation of the bond; and issuance of a closure certificate by the STPI Director or Development Commissioner. The exit process typically takes 2–4 months and involves multiple interactions with the STPI/DC and Customs authorities.

Yes. An STPI or SEZ unit can also be registered as an MSME under the Udyam Registration portal if it meets the MSME investment and turnover criteria. The MSME registration provides separate benefits: priority lending from banks at lower interest rates, MSME credit guarantee schemes, GeM (Government e-Marketplace) seller eligibility, and protection under the MSMED Act for delayed payment. STPI/SEZ registration and Udyam registration are not mutually exclusive — many IT/ITES companies hold both simultaneously.

STPI has 63+ nodal offices across India, covering major and Tier-2 cities. Each nodal office has jurisdiction over units physically located in its region. The major offices with high IT/ITES registration volumes include: Chennai (covering Tamil Nadu and parts of Andhra Pradesh/Telangana), Bangalore (Karnataka), Hyderabad (Telangana), Pune, Noida (covering Delhi-NCR), Mumbai, and Ahmedabad. Registration must be with the STPI nodal office having jurisdiction over your proposed business premises — you cannot register with a more convenient office if your office is not in that office's area.

There is no statutory minimum revenue or headcount required for STPI registration. Even a small software company with 2–3 employees exporting services to a single client can register as an STPI unit, provided the proposed activity is genuinely IT/ITES and there is a credible plan for positive NFE. However, the practical question is whether the compliance overhead — bond maintenance, annual performance reporting, capital goods register — is worthwhile at very small scale. For companies with revenue below approximately ₹25–50 lakh, a simpler IEC + FEMA compliance approach may be more cost-effective than full STPI registration.

The bond value for STPI registration is typically set by the STPI Director based on the value of capital goods proposed to be imported duty-free. The bond amount is broadly equal to the customs duty that would be payable on the proposed imports. A bank guarantee from a scheduled commercial bank is the most common form of security — cash bonds are rarely used. Bank guarantees are typically issued for 1–2 years and must be renewed. Some STPI offices accept a blanket bank guarantee covering all imports over the approval period, while others require item-specific guarantees. The exact requirement depends on the STPI nodal office.

Yes. An SEZ unit must be registered under GST separately from any DTA establishment of the same company — SEZ and DTA are treated as distinct persons under the GST Act for the purpose of self-supply between them. The SEZ unit's GSTIN is separate from the DTA GSTIN. Exports from the SEZ are zero-rated; supplies between the DTA and SEZ (to the extent they are treated as domestic in certain scenarios) have specific GST treatment under Schedule III and Section 16 of the IGST Act. For STPI units, the GST treatment is similar to any exporter — standard GSTIN with LUT for zero-rated exports. The complexity for companies with both SEZ and DTA operations is significant and requires careful GST input credit apportionment.

STPI registration is available to proprietary firms, partnership firms, LLPs, and companies — not just private limited companies. However, the legal and FEMA implications of operating an export business as a sole proprietor or partnership are significantly different from a company structure. For any export business with significant capital goods import needs, investor plans, or foreign clients, a private limited company is the appropriate structure. Individual-level STPI registration is rare in practice and is more common among established freelance IT professionals with a single large export contract.

The Development Commissioner (DC) is the primary regulatory authority for SEZ units under the SEZ Act 2005. The DC: issues the Letter of Approval (LOA), approves each capital goods import item list, approves DTA sales, approves changes to approved activities, approves changes to premises or area, conducts annual performance reviews, can issue show-cause notices for NFE shortfall, can suspend or cancel the LOA, and issues the No Objection Certificate (NOC) for de-bonding and exit. Every material change in your SEZ unit's activities, area, or import plans requires DC approval — the SEZ unit cannot act unilaterally on these matters.

An STPI or SEZ unit that provides IT/ITES services to a foreign parent company is engaged in an 'international transaction' under Section 92B of the Income-tax Act. The price charged for such services — the transfer price — must be at arm's length as determined by one of the six prescribed methods (CUP, RPM, CPM, TNMM, PS, or other method) under the Income-tax Rules. The income-tax benefit under Section 10AA applies only to the 'export turnover profit' — and the Assessing Officer may challenge the transfer price to reduce the export profit and thereby the 10AA deduction. A contemporaneous Transfer Pricing Study (TP documentation) must be maintained for each year in which international transactions exceed ₹1 crore.

Yes. DPIIT startup recognition and SEZ registration are entirely independent and non-conflicting. A company registered as an SEZ unit can simultaneously hold DPIIT startup recognition — and benefit from both. DPIIT recognition provides: eligibility for Startup India incentives, fast-track patent and trademark processing, self-certification under certain labour laws, and Income-tax exemption under Section 80-IAC (if approved) on profits for 3 consecutive years out of the first 10 years. Note that Section 80-IAC (Startup India profit exemption) and Section 10AA (SEZ profit exemption) may not both apply to the same profit in the same year, and for a startup registering its SEZ unit today, Section 10AA eligibility itself needs to be checked first — it is a sunset benefit that no longer applies to units commencing operations after the applicable cut-off date.

For SEZ units: the application requires projected export figures, and the DC evaluates whether the projections are realistic. There is no hard numerical minimum prescribed by the SEZ Act, but the unit must demonstrate positive NFE — meaning exports must exceed foreign exchange spent on imports, employee remittances abroad, and other foreign exchange outflows. The DC assesses the feasibility of the projections. For STPI: the positive NFE requirement applies similarly over the 5-year monitoring period. There is no per-year minimum, but a consistent pattern of zero exports will trigger scrutiny and bond enforcement.

The Section 10AA deduction window is calculated from the assessment year in which the unit commenced manufacturing or providing services. Dormant years — where no exports are made — still count toward the window period even though no deduction is claimed in those years. The 5-year, 10-year, and 15-year phases progress regardless of whether the unit was active in a particular year. There is no provision to pause or extend the window for dormancy. This means a unit that is dormant for 2 years loses 2 years of the deduction window permanently.

Form 10CCB is the audit report that must be obtained from a Chartered Accountant and filed with the income-tax return for every year in which the SEZ unit claims the Section 10AA deduction. The CA certifies: that the unit is a qualifying SEZ unit, the computation of profits from export, the export turnover and total turnover, the deduction amount claimed, and that the conditions of Section 10AA have been satisfied. Without Form 10CCB, the Section 10AA deduction claim is not valid and can be disallowed by the Assessing Officer. The form must be filed electronically on the income-tax portal before or with the ITR.

Foreign nationals employed in an STPI or SEZ unit in India require a valid Employment Visa (E-Visa) issued by the Indian government, subject to the conditions of their visa category. The company must register the foreign national's employment with the Foreigners Regional Registration Office (FRRO) within 14 days of arrival. Salary paid to foreign nationals — if remitted abroad or if the individual is tax resident in another country — involves TDS under Section 195, DTAA considerations, and FEMA reporting for outward remittances. SEZ units and STPI units do not have special visa exemptions — the standard employment visa process applies.

Yes. A single company can operate both an STPI-registered unit and a domestic/DTA division. However, the STPI unit must maintain separate books of account — particularly for capital goods (which were imported duty-free under the STPI bond) and for export/import activity. Capital goods belonging to the STPI unit cannot be transferred to the DTA division without customs duty payment. Shared resources — employees working across both divisions, shared premises — must be appropriately allocated between STPI and non-STPI activities for purposes of NFE computation and income-tax deduction claims.

Many companies registered in STPI or SEZ in the early years of the scheme find themselves with: missed annual performance returns, under-maintained capital goods registers, unreconciled FIRC records, pending GST refund claims, and incomplete bond management. PNPC undertakes a structured regularisation process for such situations: a compliance gap audit covering all regulatory dimensions (STPI/DC, Customs, GST, Income-tax, FEMA), preparation of arrear returns and performance statements, engagement with the STPI Director or DC office to regularise the position, penalty assessment and minimisation, and setting up a clean forward-looking compliance system from the point of regularisation.

PNPC Global has been operating since 1986 — pre-dating the current STPI and SEZ frameworks. Our Chennai, Bangalore, and Hyderabad offices have worked with IT/ITES exporters through multiple regulatory cycles: from the STP scheme of the 1990s, through the SEZ Act 2005, through the STPI modernisation and the sunset of Section 10A/10B, to the current Section 10AA framework. We have registered STPI units with the Chennai, Bangalore, Hyderabad, and Pune STPI offices, and SEZ units with the Development Commissioner offices at multiple SEZs including MEPZ, TIDEL Park, and Rajiv Gandhi International Airport SEZ area. Our engagement extends beyond registration — we manage annual performance returns, Section 10AA deduction claims, capital goods registers, and exit/de-bonding for our STPI/SEZ clients every year.

PNPC charges a fixed, agreed professional fee for the STPI or SEZ registration engagement — confirmed in writing before any work begins. The fee covers: pre-registration advisory consultation, project report drafting, complete application filing and document coordination, query management with STPI/DC office until LOP/LOA is issued, bond documentation preparation, GST LUT filing, initial accounting setup for STPI/SEZ compliance, and the first annual performance return. Government fees (registration charges with STPI/DC, bank guarantee charges) are additional and billed at actuals. We do not quote over a discovery call — we understand your business first and then confirm the engagement scope and fee.

SEZs notified under the SEZ Act 2005 can be sector-specific (restricted to a particular category of goods or services, such as IT/ITES-only SEZs) or multi-product SEZs (permitting a wider range of manufacturing and service activities). An IT/ITES company applying to a sector-specific IT SEZ generally faces a more streamlined approval process because the DC office is accustomed to evaluating software/services project reports. Applying to a multi-product SEZ may involve a broader evaluation process, and the available built-up space or land allotment terms may differ. We identify whether the SEZ nearest to your location is sector-specific or multi-product as part of the pre-registration advisory, since it affects both the application format and the realistic timeline.

No. There is no separate PAN or separate income-tax return for an STPI or SEZ unit — the unit is a division or undertaking of the company, and the company files a single consolidated income-tax return (ITR-6 for companies) covering all its business activities. However, the return must include a segment-wise computation that isolates the profit attributable to the STPI/SEZ unit — because the Section 10AA deduction (for SEZ units) applies only to eligible export profits of that specific undertaking, not to the company's income as a whole. This requires unit-wise profit and loss statements supported by proper cost allocation between the STPI/SEZ unit and any other business activity of the company.

Capital goods imported duty-free remain the property of the STPI/SEZ unit but are subject to bond conditions requiring them to be used for the approved activity, re-exported, or duty-paid on exit. If goods are damaged beyond repair, lost, or become technologically obsolete before the bond period ends, the unit must typically approach the STPI Director or Development Commissioner for permission to write off or dispose of the asset — supported by evidence (insurance claim, condemnation certificate, or technical obsolescence report). In most cases, applicable customs duty on the depreciated value of the asset becomes payable at the time of write-off or disposal, unless a specific exemption or waiver is granted.

Generally, no — not without specific approval. The premises approved under the STPI Letter of Permission or SEZ Letter of Approval are sanctioned for the exclusive use of the registered unit's approved activities. Subletting or sharing space with an unrelated entity, particularly a non-STPI/non-SEZ entity, typically requires prior written approval from the STPI Director or Development Commissioner and may not be permitted at all within an SEZ, where the entire notified area is meant for SEZ-approved units only. Any change in space utilisation should be reported and cleared before implementation.

GST registration is not a strict pre-condition for filing the STPI or SEZ application itself, since the application primarily concerns the STPI/DC approval of the business activity and premises. However, GST registration is required before the unit can raise export invoices and claim zero-rating benefits, and practically, most companies obtain GST registration either before or concurrently with the STPI/SEZ application so there is no operational gap once the Letter of Permission/Approval is issued. For SEZ units specifically, a distinct GSTIN for the SEZ unit (separate from any DTA GSTIN of the same company) is generally required before commencing SEZ operations.

A typical STPI or DC physical inspection reviews: the registered premises against the approved floor plan and area, the capital goods physically present against the Capital Goods Register, evidence of the approved activity actually being carried out (client contracts, work orders, delivery evidence), employee records supporting the manpower plan submitted in the project report, and export invoice and FIRC documentation supporting claimed export performance. Discrepancies between what was declared in the project report/LOP and what is found on inspection can lead to queries, show-cause notices, or delays in LOA renewal.

STPI/SEZ registration itself does not alter how Udyam (MSME) classification is computed — Udyam classification is based on the company's investment in plant and machinery/equipment and annual turnover, computed from the company's overall financial statements (including PAN and GST-linked turnover data), not specifically excluding or including STPI/SEZ activity. A company can be both an STPI/SEZ unit and a registered MSME simultaneously if its overall investment and turnover fall within the prescribed limits for micro, small, or medium enterprises. We monitor both classifications together for clients since exceeding the Udyam threshold can affect eligibility for MSME-specific credit and procurement benefits, independent of STPI/SEZ status.

Yes, generally. STPI registration is granted by the specific STPI nodal office having jurisdiction over the premises where the unit operates — a company with development centres in Chennai and Bangalore would typically require separate STPI registrations (or an extension/branch approval, depending on the STPI office's current practice) for each location. SEZ registration is even more location-specific, since the Letter of Approval is tied to a defined area within a specific notified SEZ — operating in a second SEZ (even in a different city) requires a fresh LOA application to that SEZ's Development Commissioner. We coordinate multi-location STPI/SEZ applications as a single engagement, but each location requires its own regulatory approval and bond.

STPI is a scheme specifically for the IT, software, and ITES sector, administered by the Software Technology Parks of India society under MeitY. EOU (Export Oriented Unit) is a broader scheme under the Foreign Trade Policy administered by the Development Commissioner of the jurisdictional SEZ (even for units outside an SEZ) or by Customs, and covers manufacturing and service exports across a wider range of sectors, not just IT. Many of the customs benefits (duty-free capital goods import under bond) and the requirement to maintain positive NFE are conceptually similar between STPI and EOU, but STPI has IT-sector-specific procedures and is often the more natural choice for software/ITES businesses because of the sector-specialised STPI nodal offices.

Yes. A wholly-owned Indian subsidiary of a foreign company, or an Indian company with foreign shareholding under the automatic route (subject to FDI Policy and sectoral caps, which are generally liberal for IT/ITES), can apply for STPI or SEZ registration on the same basis as any Indian company. In fact, captive delivery centres and global capability centres (GCCs) set up by foreign parent companies are among the most common STPI/SEZ applicants, since they combine export-oriented service delivery to the foreign parent with duty-free import of specialised IT infrastructure. FEMA compliance for the foreign investment (Form FC-GPR filing on share allotment) is a separate but related requirement that PNPC typically handles alongside the STPI/SEZ registration for such entities.

PNPC offers both end-to-end engagement (from pre-registration advisory through registration, ongoing annual compliance, and eventual exit/de-bonding if needed) and stage-specific engagements for companies that already have in-house compliance capability but need specialist support for a specific step — such as Form 10CCB certification, an APR filing, or a transfer pricing study for a captive SEZ unit. Most clients choose the end-to-end model because STPI/SEZ compliance spans multiple regulatory touchpoints (STPI/DC, Customs, GST, Income-tax, FEMA) that are easier to manage consistently under a single advisory relationship rather than coordinated across multiple service providers.