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STPI & SEZ

'Software Technology Parks of India' (STPI) Back ground STPI is a government agency in India, established in 1991 under the Ministry of Communications and Information Technology, that manages the Software Technology Park scheme. It is an Autonomous Society under Department of Information Technology, Govt. of India It is an export oriented scheme for the development and export of computer software, including export of professional services. The STP Scheme provides various benefits to the registered units, which includes 100% foreign equity, tax incentives, duty free import, duty free indigenous procurement, CST reimbursement, DTA entitlement, deemed export etc. The applications for registering an STPI unit is to be submitted to the jurisdictional Director, STPI. STPI has played a seminal role in India having earned a reputation as an information technology superpower. The exports done by STP units has crossed over Rs. 204,440 crores in FY 2010-11. The state with the largest export contribution was Karnataka (Rs. 65,423.00 crores) followed by Maharashtra (Rs. 49,873.78 crores) and Andhra Pradesh (Rs. 28,470.49 crores). STPI has a presence in many of the major cities of India including Bangalore, Trivandrum, Chennai, Hyderabad, etc. Besides regulating the STP scheme, STPI centers also provide variety of services, which includes High Speed Data Communication, Incubation facility, Consultancy, Network Monitoring, Data Center, Data Hosting etc. STPI provides physical hosting for the National Internet Exchange of India. Recent development in STPI The tax benefits under the Income Tax Act Section 10A applicable to STP units has expired since March 2011, most of the STP registered SME units shall be affected, who now will have to pay Income Tax on profits earned from exports. Hence STPI has recently apponted Deloitte & Touche to study and prepare a draft incentive scheme for IT & ITEScompanies. It will help dispersal of IT industry in smaller cities and also support STPI-registered units which have not come under SEZs as well as other units which are not covered under any incentive scheme. This incentive scheme is seen as an alternate scheme to compensate the STPI units, but the same would be restricted to those units located in tier II and III cities.

Special Economic Zones (SEZ) Introduction A Special Economic Zone (SEZ) is a geographical region that has economic and other laws that are more free-market-oriented than a country's typical or national laws. "Nationwide" laws may be suspended inside a special economic zone. The category 'SEZ' covers , including Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), Industrial parks or Industrial Estates (IE), Free Ports, Urban Enterprise Zones and others. Usually the goal of a structure is to increase foreign direct investment by foreign investors, typically an international business or a multinational corporation (MNC). As an initiative for SEZ India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports, with Asia's first EPZ set up in Kandla in 1965. India passed special economic zone act in 2005. Currently there are 114 SEZs (as of October 2010) operating throughout India. A SEZ is a geographically bound zones where the economic laws in matters related to export and import are more broadminded and liberal as compared to rest parts of the country. SEZs are projected as duty free area for the purpose of trade, operations, duty and tariffs. SEZ units are self-contained and integrated having their own infrastructure and support services. SEZs, the units may be set-up for the manufacture of goods and other activities including processing, assembling, trading, repairing/reconditioning, making of gold/silver, platinum jewellery etc. As per law, SEZ units are deemed to be outside the customs territory of India. Goods and services coming into SEZs from the domestic tariff area or DTA are treated as exports from India and goods and services rendered from the SEZ to the DTA are treated as imports into India.

Benefits for SEZ


The major incentives and facilities available to SEZ developers include:

Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA. Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act (incentives which include 100% income tax exemption for a period of five years and an additional 50% tax exemption for two years thereafter). Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act. Exemption from dividend distribution tax under Section 115O of the Income Tax Act. Exemption from Central Sales Tax (CST). Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).

Similarly, 100% Foreign Direct Investment is also provided in the manufacturing sector. Exemption from industrial licensing requirements and no import license requirements is also given to the SEZ units. Considering the need to enhance foreign investment and promote exports from the country and realising the need that a level playing field must be made available to the domestic enterprises and manufacturers to be competitive globally, the Government of India had in April 2000 announced the introduction of Special Economic Zones policy in the country, deemed to be foreign territory for the purposes of trade operations, duties and tariffs. The Special Economics in India closely follow the PRC model. In India, the government has been proactive in the development of the SEZs. They have formulated policies, reviewed them occasionally and have ensured that ample facilities are provided to the developers of the SEZs as well as to the companies setting up units in the SEZ Source : CBEC

Compiled By Sandeep Suresh K