Move your Business to a Software Technology Park

Last Updated at: October 30, 2020
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The honourable Chief Minister of Tamil Nadu on 18th September urged the Union Minister for Electronics, IT, Law, and Justice to allot 10,000 seats under India BPO Scheme to Tamil Nadu. The state had so far provided 7,705 seats in Software Technology Parks of India (STPI) – Chennai jurisdiction to the BPO industry in the region, the Chief Minister said. This has resulted in creating direct employment for 8,387 people and indirect employment for 16,774 people.

 

India has been making giant leaps in transforming its Business environment to a more tech-friendly network. The last few years have traced several developments in fields such as fintech, Blockchain, artificial intelligence, cybersecurity, gaming, animation, machine learning, medical electronics, software designing in the Indian IT industry. The government has also been proactively promoting tech-oriented startups for exports. In this post, we assess the advantages of setting up your IT business in a software technology Park. 

What is software technology Park?

Software Technology Parks was envisaged in the year 1993 as specialised spaces providing an export-oriented setup. Services, especially software services constitute a major segment in the overall exports in India. Just like an SEZ, a Software Technology Park offers single point contact services to all member units. 

What’s special about Software Technology Parks?

  • Superior communication and technology services – Every Software Technology Park holds a category A internet service provider license – thereby giving superior network services. These spaces are also equipped with state of the art high-speed data network. This is especially helpful for consultancy services and offshore collaborations. 
  • Incubation services – While entrepreneurs in the tech space may have the necessary know-how about their product or service, they are often clueless about setting up a company. With incubation support, access to funding, labs, tools, mentoring, and marketing is available to entrepreneurs. 
  • Business Process Outsourcing – As part of the Digital India initiative, the Software Technology Parks is the nodal agency for creating BPO services in India. 
  • Electropreneur parks – Software Technology Parks of India has also established two specific centres for excellence in Bhubaneswar and Delhi for creating a holistic Ecosystem providing research and development, innovation, entrepreneurship for breakthrough innovations in the electronic system design and manufacturing industry. 

Software Technology Parks in the time of CoVid

Recently, the government of India announced a four months rental waiver to information technology companies operating in Software Technology Parks. Thus, technology startups and MSMEs facing a cash crunch encourage to utilise their precious funds internally for business development and supporting their IT staff.

What are the financial advantages of setting up a unit in a Software Technology Park?

To facilitate exports, the  Software Technology Parks provides tax incentives, duty-free import, duty-free indigenous procurement, and deemed exports. Here are the financial incentives that a unit in the Software Technology Park can draw – 

100% Income Tax holiday

Under Section 10A of the Income Tax Act, an assessee entitles to claim a deduction of such profits derived by the unit from the exports outside India of computer software as well as IT-enabled products and services. Thus, the deduction of export earnings is available to units in a Software Technology Park. 

plan your business 

Duty-free import

All imports by a unit inside a Software Technology Park are given 100% customs duty exemption on imports. 

Excise duty exemption on purchases from within India

In addition to duty-free imports, even indigenous purchases from within the country is in a 100% excise duty exemption. 

Capital Goods 

Since the IT Industry relies heavily on capital goods such as technical machinery, computers, etc, 100% depreciation on Capital Goods over five years is provided. 

Green Card

A green card is a novel initiative of the Software Technology Parks. For projects, less than or equal to ₹100 million, that does not have any equity participation – the Jurisdictional Director issued a Green Card. This helps the unit to get one-stop priority access to telephone lines, electricity, licenses, and other ancillary services from government agencies. 

Capital invested by foreign partners

100% foreign equity is permissible. Moreover, payments for royalty, fees, dividends, interest, etc., can freely be repatriated after payment of Income Tax in India. 

Export promotion

The Software Technology Parks often collaborates with overseas markets and promotional offices in other countries. It provides advisory and consultancy services, organises fairs, export promotional seminars, conferences, and enables companies to come together. 

Office spaces 

To relieve entrepreneurs of the struggle of arranging appropriate infrastructure, the  Software Technology Parks provide ready to move in office spaces and associated services such as conference rooms, back office, and support services. 

Frequently Asked Questions

1. Can a unit establish in a Software Technology Park do domestic sales?

Since units in the Software Technology Parks is primarily for export promotion, domestic sales of only up to 50% of foreign currency earnings that concludes. Further, prior permission of the Software Technology Parks of India may have requirements.

2. What are the prerequisites for applying for setting up in a Software Technology Park?

The following documents must be furnished alongside your application – 

  • Permanent Account Number from the Income Tax Office 
  • Importer Exporter Code from DGFT 
  • Company profile, capital structuring, and expertise area 
  • Memorandum of Association / Partnership Deed
  • Bank certificate 
  • RBI permission, in case of foreign equity 
  • Project report delineating financial arrangements predicted exports, marketing tie-ups, brochures of products, the export performance of the last three years, the feasibility of the set-up, and demonstration of expertise in software development, and IT-enabled services. 

3. What are the charges for setting up a unit in a Software Technology Park?

There exists an application processing fee of ₹2950 (₹2500 + GST), in addition to an annual service charge. This service charge progressively varies based on the export turnover of the unit and needs to be deposited three years in advance. The state government publishes the rate of annual service charges. While it is ₹8000 for exports under ₹25 lacs, it can increase to around ₹8 lacs for turnover over ₹100,000 lacs. 

 

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Move your Business to a Software Technology Park

596
The honourable Chief Minister of Tamil Nadu on 18th September urged the Union Minister for Electronics, IT, Law, and Justice to allot 10,000 seats under India BPO Scheme to Tamil Nadu. The state had so far provided 7,705 seats in Software Technology Parks of India (STPI) – Chennai jurisdiction to the BPO industry in the region, the Chief Minister said. This has resulted in creating direct employment for 8,387 people and indirect employment for 16,774 people.

 

India has been making giant leaps in transforming its Business environment to a more tech-friendly network. The last few years have traced several developments in fields such as fintech, Blockchain, artificial intelligence, cybersecurity, gaming, animation, machine learning, medical electronics, software designing in the Indian IT industry. The government has also been proactively promoting tech-oriented startups for exports. In this post, we assess the advantages of setting up your IT business in a software technology Park. 

What is software technology Park?

Software Technology Parks was envisaged in the year 1993 as specialised spaces providing an export-oriented setup. Services, especially software services constitute a major segment in the overall exports in India. Just like an SEZ, a Software Technology Park offers single point contact services to all member units. 

What’s special about Software Technology Parks?

  • Superior communication and technology services – Every Software Technology Park holds a category A internet service provider license – thereby giving superior network services. These spaces are also equipped with state of the art high-speed data network. This is especially helpful for consultancy services and offshore collaborations. 
  • Incubation services – While entrepreneurs in the tech space may have the necessary know-how about their product or service, they are often clueless about setting up a company. With incubation support, access to funding, labs, tools, mentoring, and marketing is available to entrepreneurs. 
  • Business Process Outsourcing – As part of the Digital India initiative, the Software Technology Parks is the nodal agency for creating BPO services in India. 
  • Electropreneur parks – Software Technology Parks of India has also established two specific centres for excellence in Bhubaneswar and Delhi for creating a holistic Ecosystem providing research and development, innovation, entrepreneurship for breakthrough innovations in the electronic system design and manufacturing industry. 

Software Technology Parks in the time of CoVid

Recently, the government of India announced a four months rental waiver to information technology companies operating in Software Technology Parks. Thus, technology startups and MSMEs facing a cash crunch encourage to utilise their precious funds internally for business development and supporting their IT staff.

What are the financial advantages of setting up a unit in a Software Technology Park?

To facilitate exports, the  Software Technology Parks provides tax incentives, duty-free import, duty-free indigenous procurement, and deemed exports. Here are the financial incentives that a unit in the Software Technology Park can draw – 

100% Income Tax holiday

Under Section 10A of the Income Tax Act, an assessee entitles to claim a deduction of such profits derived by the unit from the exports outside India of computer software as well as IT-enabled products and services. Thus, the deduction of export earnings is available to units in a Software Technology Park. 

plan your business 

Duty-free import

All imports by a unit inside a Software Technology Park are given 100% customs duty exemption on imports. 

Excise duty exemption on purchases from within India

In addition to duty-free imports, even indigenous purchases from within the country is in a 100% excise duty exemption. 

Capital Goods 

Since the IT Industry relies heavily on capital goods such as technical machinery, computers, etc, 100% depreciation on Capital Goods over five years is provided. 

Green Card

A green card is a novel initiative of the Software Technology Parks. For projects, less than or equal to ₹100 million, that does not have any equity participation – the Jurisdictional Director issued a Green Card. This helps the unit to get one-stop priority access to telephone lines, electricity, licenses, and other ancillary services from government agencies. 

Capital invested by foreign partners

100% foreign equity is permissible. Moreover, payments for royalty, fees, dividends, interest, etc., can freely be repatriated after payment of Income Tax in India. 

Export promotion

The Software Technology Parks often collaborates with overseas markets and promotional offices in other countries. It provides advisory and consultancy services, organises fairs, export promotional seminars, conferences, and enables companies to come together. 

Office spaces 

To relieve entrepreneurs of the struggle of arranging appropriate infrastructure, the  Software Technology Parks provide ready to move in office spaces and associated services such as conference rooms, back office, and support services. 

Frequently Asked Questions

1. Can a unit establish in a Software Technology Park do domestic sales?

Since units in the Software Technology Parks is primarily for export promotion, domestic sales of only up to 50% of foreign currency earnings that concludes. Further, prior permission of the Software Technology Parks of India may have requirements.

2. What are the prerequisites for applying for setting up in a Software Technology Park?

The following documents must be furnished alongside your application – 

  • Permanent Account Number from the Income Tax Office 
  • Importer Exporter Code from DGFT 
  • Company profile, capital structuring, and expertise area 
  • Memorandum of Association / Partnership Deed
  • Bank certificate 
  • RBI permission, in case of foreign equity 
  • Project report delineating financial arrangements predicted exports, marketing tie-ups, brochures of products, the export performance of the last three years, the feasibility of the set-up, and demonstration of expertise in software development, and IT-enabled services. 

3. What are the charges for setting up a unit in a Software Technology Park?

There exists an application processing fee of ₹2950 (₹2500 + GST), in addition to an annual service charge. This service charge progressively varies based on the export turnover of the unit and needs to be deposited three years in advance. The state government publishes the rate of annual service charges. While it is ₹8000 for exports under ₹25 lacs, it can increase to around ₹8 lacs for turnover over ₹100,000 lacs. 

 

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Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.