Regulations for export of software depends of the medium through which the export is made. If the software export is made through CD/DVD, Pen drive or in any physical forms, such export is treated as export of goods and FEM (Export of Goods and Services) Regulation, 2015 along with Master Directions will apply.
In the present article, our focus is the export of software through data communication links from domestic tariff area. In this case, there is no physical movement of goods, so the regulations of export of goods will not apply.
However, in order streamline the process, RBI has issued the following Master Circulars which provide the guidance:
- Master Circular No. 14/2013-14/dated 1-07-2013
- Master Circular No. 80 dated 15-02-2012
- Master Circular No. 43 dated 13-09-2013
Let us further explore the software export through data links.
- Software is defined under Regulation of 2 of FEM (Export of Goods and Services) Regulations, 2015 as any computer programme, database, drawing, design, audio/video signals, or any information shared by the medium other than physical form is termed as Software.
- General meaning of export through data communication links means a virtual circuit is established to connect two or more devices for the purpose of data communication. One device is located in India and others are located outside India.
- It is not mandatory to obtain and submit the SOFTEX form and certification of invoices by STPI (Software Technology Parks of India) in case of export though DTA.
- However, every software exporter is advised to obtain SOFTEX form and do get certification from STPI and submit the bank the certified forms due to the following reasons:
- AD Bank will require the Softex invoices to treat export as software export.
- Bank will be unable to classify the remittance under appropriate purpose code.
- Input tax credit on GST will not be available for refund, as there is no IGST on export.
- In case of mismatch, RBI may keep the exporter under “Caution List”.
- The process of export will flow from obtaining Softex number, Registration with STPI, Certification of invoices by STPI and submission of certified invoice to the bank.
- Softex number is the code issued by RBI. One can visit rbi.gov.in and under FEMA Forms, get this number after submitting the documents.
- Next step is obtaining of STPI Registration. A question arises whether the SPTI registration is granted to STPI Members. But there is a provision to get registration under Non-STPI category as well. One can apply on https//stpionline.stpi.in with fees of Rs. 1000 plus GST. The registration is valid for 3 years.
- The exporter is required to pay Annual Service Charges based on turnover. Once paid, the exporter may visit regional STPI office and submit along with Form A to regional STPI.
- After registration, the Softex invoices are required to be submitted to regional STPI office, along with other required documents. The exporter can download the submitted invoice and then digitally sign and submit it.
- Monthly Softex invoices shall be filed in excel format in 30 days of the last invoice raised in a particular month.
- Softex invoices will be submitted to AD Bank. This closes the loop for export of software as data communication links.
- The whole process can be managed through online.
- Please note that other relevant provisions of FEM (Export of Goods and Services) Regulations and Master Directions will also apply.
In case you have any concern and queries or need any support in compliance/FEMA you may like to contact us.
Abhinarayan Mishra, FCA, FCS; Managing Partner, KPAM & Associates, Chartered Accountants, Dwarka, New Delhi; 9910744992, ca.abhimishra@gmail.com
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