The government of India introduced the SEZ & STPI schemes with the main purpose of providing a competitive and hassle-free environment for attracting foreign direct investment, earning foreign exchange, and employment generation in India.
Here, let’s discuss the major differences and benefits of Special Economic Zone (SEZ) and Software Technology Parks of India (STPI) in this article:
Software Technology Parks of India (STPI)
Software Technology Parks of India is a 100% export oriented scheme under the Ministry of Electronics and Information Technology (MeitY) engaged in promoting IT/ITES Industry, innovation, R&D, start-ups, product/IP creation in the field of emerging technologies like IoT, Blockchain, Artificial Intelligence (AI), Machine Learning (ML), and more. This scheme mainly focuses on one sector that is “Computer software”.
As per statistics, “STPI has played a tremendous role in transforming the country as the preferred IT destination, a fact that aptly proven by the stupendous growth in exports by STPI-registered units from Rs. 52 crores in 1992-93 to Rs. 4,74,183 crores in 2019-20, which is approx. 50% of the national software exports and 2.3% of India’s GDP. ”
The main objectives of STPI are:
- To promote development and export of Sass (Software and Software services)
- To provide statutory and other promotional services to the exporters
- To provide data communication services
- To promote micro, small, and medium entrepreneurs in the field of IT / IT enabled services.
STPI Centers in India
The government of India established the STPI centers across the country. The first STPI center opened in 1990 in Mumbai, Pune. At present, there are 15 STPI centers located in India across various cities.
Major Functions of STPI:
- To establish software technology parks at various locations in the country.
- To work closely with respective State Government and act as an interface between Industry and Government.
- To perform financial management functions.
- To promote quality and security standards in the I.T industries.
- To work jointly with venture capitalists for providing financial assistance to the IT industries.
Special Economic Zone (SEZ)
Special Economic Zone (SEZ) is a specifically delineated duty-free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. The main objective of SEZ is to enhance foreign investment and the creation of employment opportunities in India. Economic laws are liberal in SEZ than the country’s typical economic laws.
The Major Objectives of SEZ:
- To increase domestic and international investments
- To generation of additional economic activity
- To generate employment opportunities
- To development of infrastructure facilities
Common Highlights of STPI & SEZ:
- Exemption from central excise duty on the procurement of raw materials, capital goods, etc. from the domestic market.
- Exemption from customs duty on import of capital goods and raw materials, etc.
- Simplified procedures and single window clearance to set up units and conducting business.
- 100% foreign equity is permitted to be invested in the units.
- External commercial borrowings up to $500 million a year allowed without any maturity restrictions.
Special Economic Zone (SEZ) vs Software Technology Parks of India (STPI)
|Benefits||Special Economic Zone (SEZ)||Software Technology Parks of India (STPI)|
|Location||Setup an unit only in designated SEZ parks only.||Can be Setup an unit anywhere in India.|
|Sub-leasing of surplus space||SEZ cannot allow sub-leasing surplus unless it is also the “developer” of the SEZ park.||STPI unit can sublease the surplus office space, with subject to bonded capital goods.|
|Income Tax||100% income tax exemption for first 5 years, after 50% exemption for next 5 years, re-investment of profit in terms of section 10AA of income tax act.||From April 2011, income tax exemption has been withdrawn.|
|Construction & Raw materials||In SEZ, construction materials can be procured without payment of duties.||In STPI, goods for infrastructure cannot be procured without payment of applicable duties.|
|GST||Any supply of goods or services or both to a Special Economic Zone developer/unit will be considered to be a zero-rated supply.||The capital goods purchased from the DTA are entitled for refund of GST.|
|Custom recovery charges||SEZ unit is not liable for payment of customs supervision charges. It will be paid by developer.||STPI unit is liable to reimburse custom supervision charges for staff deputed at the unit.|
|Examination & Monitoring of Goods||No routine examination of exported and imported goods by customs officials.||All goods in STPI unit should be physically examined by customs officials.|
|Labor Laws||The state governments are authorized to treat the units in SEZ as public utilities and based on delegate the powers of labor commissioner to development commissioner of SEZ unit.||The state government is not responsible to delegate the power of labor commissioner to anyone.|
|EEFC ( Exchange earners’ foreign currency account )Account||Special economic zone (SEZ) units cannot open EEFC accounts. But, a unit located in an SEZ can open a foreign currency account with an authorized dealer in India subject to certain conditions. SEZ unit is permitted to retain 100% of the export proceeds received in convertible foreign exchange account.||STPI unit can convert 100% of export proceeds received in convertible foreign exchange account to Rupees within 30 days from the date of receipt.|
The Government of India aims to increase production capacity in the domestic market and enhance foreign direct investment (FDI).
As per Statista, “FDI Equity inflows in India FY2020 almost 15% contributed to the service sector and computer hardware & software”.
The world is looking at India in a big way; the presence of both Special Economic Zone (SEZ) and Software Technology Parks of India (STPI) has an encouraging eco-system to leverage India’s position of innovation and startups that make it a global tech hub.
Chennai One is the leading IT SEZ in Chennai, provide the space and services to nurture a holistic and innovation-centric work culture that combines form and functionality with a perfect blend of work and leisure. Chennai One IT SEZ stands out as one of the best IT Park in Chennai and the ideal destination to set up your business unit for long-term development & growth.