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Frequently Asked Questions
 
1. What is STP scheme?
2. Who can become a STP member?
3. Is the registration under STP scheme mandatory?
4. Whether 100% Foreign Equity is allowed?
5. What are the documents required prior to filing application to STP?
6. Who is the appropriate authority for allotment of Importer-Exporter Code No. (IEC No.) & Business Index No. (BIN)?
7. Is IEC valid for all branches/divisions of the company?
8. What are the activities covered under the STP scheme?
9. What is the normal time taken to complete the registration formalities and start commercial operation?
10. What are the steps to be taken by the unit after the Letter of Permission is granted?
11. What are the benefits and facilities under STP scheme?
12. How a unit can become a member under the scheme?
13. What are the services provided by STPI under STP scheme?
14. What are the charges for STP registration and membership?
15. What are the mandatory and statutory requirements/obligations on units under the STP Scheme?
16. In case the stipulated/minimum export obligation is not met by the unit?
17. What are the main prohibitory functions for a unit registered under STP ?
18. Whether an undertaking can operate as both STP & Domestic Unit?
19. Whether DTA unit can be converted into a STP Unit?
20. Can an Export Oriented Unit (EOU) get converted into an STP Unit?
21. Can one set up the operations in his own premises?
22. Can one change the location / Space expansion of STP subsequently after registration?
23. Can one change the company’s name after STP approval?
24. Can two or more STP units get merged?
25. Can the unit operate in multiple locations?
26. Is it mandatory to get the company registered in India?
27. Is custom bonding of the STP unit mandatory?
28. What is the purpose of Custom Bonding?
29. What are the relevant notifications, policy & procedures for 100% EoU and for Custom Bonding purposes?
30. What are the relevant provisions under Income Tax Act 1961 with respect to the units registered under 100% EoU scheme?
31. Can we enhance our approved capital goods limit?
32. Is the import of Second Hand Capital Goods permissible?
33. Is High Sea Sales permitted for import of CG?
34. Is Import of equipment on loan basis/free of cost permissible?
35. Can the equipment already imported on loan or free of cost basis be converted into the equity of the company at a later date if required?
36. What are the procedures for clearance of import of capital goods?
37. What are the procedures for clearance of procurement of indigenous goods?
38. Can the equipment procured duty free by one unit be transferred to another unit?
39. What are the Export Declaration Procedures for Export through Data Communication link?
40. Whether domestic sale (DTA sale) by an STP unit is permitted?
41. Whether DTA sales are exempted from IT?
42. What are deemed exports ?
43. Is Export of Professional Service (Onsite Services) permitted?
44. Is sub-contracting permitted?
45. Can the computers procured duty free be utilized for training purpose?
46. Can the Computers, imported duty free, be donated by an STP unit?
47. Who are the ‘Eligible Donees’ for donation of Computer and peripherals?
48. What happens if an STP unit is unable to succeed after trying for a year or so?
49. Can an STP unit continue with the scheme after completion of 5 years?
50. What are the guidelines for De-bonding of duty free equipment?
 
Answers
 
1. This is a scheme for 100% Export Oriented Units for development of Software/Hardware, Execution of On-site Consultancy projects at customers’ site abroad and rendering IT enabled services for export purpose.
2. The following patterns of units can become a STP member:

An Indian Company, A Partnership Firm, A Sole Proprietorship Concern, An Indian Subsidiary of a Foreign Company, A Branch office of the foreign company, An existing Software Company operating in India, A Joint Sector Undertaking, A Co-operative Undertaking, A State Government Undertaking, A Central Government Undertaking.
3. NO. Although registration under STP scheme is optional, the same is recommended for availing various benefits offered by the scheme.
4. YES. 100% foreign direct investment, NRI Investment on repatriable and non-repatriable basis, resident holding and combination thereof are allowed.
5. A unit should have supporting documents certifying its existence, e.g., Certificate of Incorporation, Memorandum and Articles of Association / Partnership Deed and Trade License. Also it has to obtain the Importer-Exporter Code Number from Director General of Foreign Trade.
6. The office of the Director General of Foreign Trade is the appropriate authority for allotment of Importer-Exporter Code No. (IEC No.) & Business Index No. (BIN).
7. YES. The IEC No., once allotted to the concerned unit, will stand valid for all its branches/division/factories as recorded on the IE Code, which needs to be updated by DGFT on application.
8. The activities covered under the STP scheme are as under:
Development of Software/ Electronic Hardware for Export.
Execution of Onsite Consultancy projects at client’s site abroad.
Rendering IT-enabled services for export.
9. Under normal circumstances it requires 10 working days to complete the process of registration under STP scheme.
10. The required steps are as under:
Letter confirming Acceptance of the terms and conditions of the LoP is required to be furnished by the registered unit.
Legal Agreement with the STP authority has to be executed.
Green Card has to be applied for and obtained from STP.
Private Bonded Warehouse License has to be obtained from the Customs authority.
11. Refer to Benefits & Facilities under ‘MEMBERS’ GUIDE’
12. Refer to Registration Procedures under ‘MEMBERS’ GUIDE’.
13. Refer to STP Services under ‘MEMBERS’ GUIDE’
 
14. Refer to Statutory Obligations (SERVICE CHARGES PAYABLE TO STP) under ‘MEMBERS’ GUIDE’
15. Refer to Statutory Obligations under ‘MEMBERS’ GUIDE.’
16. Failure to fulfill minimum required NFE & EP will make the unit liable to pay:
Penalty under the Foreign Trade (D&R) Act 1992.
Duties of Customs & Central Excise and interest as stipulated in the relevant customs/central excise notification.
17. Refer to Prohibitory Functions under ‘MEMBERS’ GUIDE’
18. YES. An undertaking can operate as STP unit and Domestic unit, provided distinct identities of both as a Domestic Unit and as an STP unit shall be maintained by way of separate Bank Account, separate set of Books of Accounts and separate location.
19. YES. An existing Domestic Tariff Area (DTA) unit can be converted into a STP Unit.
20. YES. An existing unit under EoU may apply to Director, STPI through the Development Commissioner, EPZ concerned, for its conversion into a STP unit
21. YES. An STP unit can be located in any area designated as STP complex and the same will be an individual unit by itself
22. YES. An STP unit can change its location and/or expand its space within the jurisdiction of the Director, STP, anytime after its registration on obtaining permission from the STP authority.
23. YES. Change of name by an STP unit is permissible on application for the same to the STP authority by producing appropriate legal documents.
24. YES. Merger of two or more STP units into one unit is permissible provided the units fall within the jurisdiction of the Director, STP and the same Commissioner of Central Excise & Customs.
25. YES. An STP unit is eligible to operate from multiple locations within the jurisdictional area of the Director, STP.
26. YES. Registration under the STP scheme requires a company to get registered in India with the Registrar of Companies under the Companies Act 1956.
27. YES. Custom bonding of an STP unit is mandatory, unless the same is specifically exempted by the competent authority (DGFT).
28. The purpose of the Custom Bonding is to enable the unit to procure goods and equipment duty free, to install them in the private bonded warehouse, to carry on the development activity in the custom bonded premises and also to afford compliance with the relevant conditions as stipulated.
29. The relevant notifications, policy and procedures are as follows:
Customs Notification No. 138/140 dt. 22/10/1991 (as the case may be) and as amended from time to time.
Central Excise Notification 1/95-C.E dt. 4/1/95 and as amended from time to time.
EXIM Policy & Hand Book of Procedures Vol. I, as amended from time to time.
30. The relevant provisions are as follows:
Section 10A towards exemption of income tax.
Section 92 to 92F regarding computation of income arising from an international transaction.
31. YES. The existing Capital Goods limit of an STP unit can be enhanced by the Director, STP on application.
32. YES.
33. YES.
34. YES.
35. YES. With the approval of RBI the capital goods already imported can be converted into the foreign equity of company.
36. Refer to Clearance, Permission & Certification Procedures under ‘MEMBERS’ GUIDE’
37. Refer to Clearance, Permission & Certification Procedures under ‘MEMBERS’ GUIDE’
38. Refer to Clearance, Permission & Certification Procedures under ‘MEMBERS’ GUIDE’
39. Refer to Clearance, Permission & Certification Procedures under ‘MEMBERS’ GUIDE’
40. YES. An STP unit can do the domestic business subject to 50% of foreign exchange earned and subject to fulfillment of the obligations under the STP scheme during the preceding year with prior permission of the Director of STPI.
41. NO.
42. The transactions in which the goods supplied do not leave the country, are termed as Deemed exports.
43. NO
44. YES.
45. YES, provided that the STP unit has fulfilled the following conditions:
No computer terminal is installed outside the bonded premises.
Minimum NFE & EP has been achieved
Approval from STPI, Customs & Excise have been obtained.
46. Subject to fulfillment of certain conditions, the STP units may be permitted by the Director, STP to donate (without payment of duty) to a few registered/recognised eligible organisations the computers and peripherals including printer, plotter, scanner, monitor, key-board and storage units, which was imported/ procured indigenously under duty free scheme.
47. The eligible donees are as follows:
Recognized non-commercial educational institutions
Registered charitable hospitals
Public libraries
Public funded R & D establishments
Organisations of the Govt. of India/state/Union Territories
48. An STP unit can withdraw itself from the STP scheme at any point of time subject to payment of (a) the customs and excise duty on the imported and indigenous equipments and (b) the penalty imposed by the appropriate authority under the Foreign Trade Regulatory Act 1992 for non-fulfillment of conditions of approval.
49. YES. It has to apply for the same to the Director, STP.
50. STP Units are allowed to de-bond the Imported Capital Goods and the Indigenously procured goods, after obtaining ‘No Objection’ from STPI and clearance from the Customs/Central Excise authority on payment of applicable Customs and Excise Duties.
 
 
 
 
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