Updated_Presentation_GST_Composition_Levy_v2.pptx

Index
 Regulation of Export Trade
 Meaning and Scope of ‘Software’
 What is SOFTEX
 Services other than software exports
 Eligibility Criteria and Precautions
 Registration and Compliance
 SOFTEX Filing Process
 Softex Mechanics
 Consequences for Non – Filing of Softex
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Regulation of Export Trade
• Export trade in India is regulated by the Directorate General of Foreign
Trade (DGFT) and its regional offices.
• The DGFT operates under the Ministry of Commerce and Industry,
specifically under the Department of Commerce, Government of India.
• The DGFT announces policies and procedures for exports from India
periodically.
• AD Category - Banks are authorized to conduct export transactions in
accordance with:
• The prevailing Foreign Trade Policy (FTP).
• Rules framed by the Government of India.
• Directions issued by the Reserve Bank of India (RBI) from time to time.
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Requirements Under FEMA For Export of Services
 As per Section 7(3) of the Foreign Exchange Management Act, 1999 (FEMA):
• Every exporter of services Shall furnish a declaration to the Reserve Bank of
India (RBI) or other designated authorities.
• The declaration must be in the prescribed form and manner.
• It should contain true and correct material particulars related to payment for
such services.
 According to Regulation 3 of the Foreign Exchange Management (Export of
Goods and Services) Regulations, 2015:
• Exporters of software services are required to declare the value of their
services.
• This declaration must be submitted to the specified authority, i.e., the Director
of STPI or the Commissioner of SEZ.
 The RBI requires certification of the export value by the specified authority to
monitor payment realization.
 The designated authority (Director of STPI/Commissioner of SEZ) is
responsible for certifying the value of exports.
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Requirements Under FEMA
 As per RBI/2013-14/14 dated 1st July (RBI Master Circular) and RBI FED Master Direction
No.18/2015-16 dated 01-01-2016:
• Companies engaged in software exports through data communication links must submit
the Softex Form for certification.
 Units involved in IT or ITES are required to:
• File the Softex Form with the Software Technology Park of India (STPI).
• STPI was set up in 1991 as an autonomous society under Ministry of Electronics and
Information Technology (MeitY) with the main objective of promotion of software
exports from the country.
 Units located in the Domestic Tariff Area (DTA) must:
• Register as Non-STPI units.
• File the Softex Form accordingly.
 Non-STPI units are not eligible for special benefits offered under the STPI scheme, such as:
• Infrastructure support.
• Tax exemptions, etc.. provided from time to time.
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Meaning and Scope of ‘Software’
The term ‘software’ is defined in Regulation 2(viii) of FEM (export of Goods and Services) Regulations, 2015 to mean any
computer programme, database, drawing, design, audio/video signals, or any information shared by the medium other
than physical form.
 The definition given is comprehensive and includes all kinds of software that may be shared in any medium
other than in physical medium.
 Software services can generally be classified as IT services and IT Enabled Services (ITES).
 IT services :IT services is related to Information Technology services which includes systems software
development, Data Analytics, cloud technology, Customer relationship management(CRM) Solutions, Web Mobile
Application, System Integration Networking etc.
 ITES Services :ITES includes services like data entry and processing services, Engineering and design services,
business processing services, Health care services, Legal and content writing services, IT education and training
services etc.
 No physical movement of goods is present in service exports and hence the onus to prove that these services are
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Softex for software Export
 General Export Process:
• Exports involve sending goods and services to clients in foreign
countries for sale.
• Physical goods are shipped through ports like sea ports, airports, or
foreign post offices.
• These exports are monitored by the Central Customs Department.
 Software Export Process:
• For software exports, the SOFTEX form must be filed after the
actual export of software has occurred.
• The SOFTEX form acts as a post-facto authorization for software
export.
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What is SOFTEX
 Definition:
• SOFTEX (Software Technology Export) is a certification
process introduced by the Indian government to streamline and
facilitate software exports.
 Primary Objectives:
• To monitor and regulate foreign exchange transactions related
to software exports from India.
• To provide formal recognition to software service exporters,
making them eligible for various benefits and concessions.
• To Keep track of export of software.
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Services other than software exports
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 Separate Category of Exports:
• According to RBI guidelines, there is a distinct category of computer and
information technology exports that does not fall under SOFTEX (Software
Exports).
 Not-Applicable for SOFTEX Certification:
• SOFTEX certification is not required for Computer & Information Services where
software or data is not shared through data communication links.
 Examples of Non-SOFTEX Services:
• Hardware Consultancy
• Software Consultancy
• Data Processing
• Repair and Maintenance of computers and software
• Subscription Services for newspapers and periodicals
• News Agency Services

Eligibility Criteria for Non-STPI Units:
 Non-STPI units that engage in the export of software services are eligible to apply for
SOFTEX certification.
 Registered Legal Entities:
• Any company / partnership firm / proprietorship which is into development of Export
Oriented Computer Software / IT Enabled Services can register itself as NON-STP unit
under STPI to avail SOFTEX certification.
 Software Developed in India:
• The software being exported must be developed in India. Software developed outside
India is not eligible for SOFTEX certification under Indian export laws.
 Exported Directly to Foreign Countries:
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Software Exports - Precautions
IEC Code (Import Export Code):
• - A 10-digit code issued by the DGFT.
• - Mandatory for all exporters, including software service providers.
• - Acts as the PAN for the assessee and is obtained from the DGFT website.
 Zero-Rated Supply under GST Act:
• - Export of software services is classified as zero-rated supply.
• - Exporters must file a Letter of Undertaking (LUT) on the GST website to export services without IGST payment.
 SOFTEX Filing Requirement:
• - Mandatory for all software exports other than in physical medium.
 GST SAC codes must be selected accurately:
• - 998313: IT Consulting and Support Services (No SOFTEX required).
• - 998314: IT Design and Development Services (SOFTEX required).
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• Regulatory Clarity:
SOFTEX certification brings a level of regulatory clarity for non-STPI units.
• Export Recognition:
The certification allows non-STPI units to gain formal recognition for their exports.
• Access to Export Incentives:
With SOFTEX certification, non-STPI exporters can avail of government schemes designed to
promote software exports.
Benefits and Opportunities for Non-STPI Units

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Benefits and Opportunities for Non-STPI Units
• Enhanced International Credibility:
SOFTEX certification adds credibility and trustworthiness to a non-STPI unit’s software
products/services.
• Streamlined Export Process:
The SOFTEX process simplifies export documentation, making international transactions easier
and more compliant with legal regulations
.
• GST Refund Processing
Exports are classified as Zero Rated supply. Service exports can be made under LUT without the

Registration & Compliance
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 Registration with STPI:
• Non-STP units must register with STPI by submitting an application form and required documents to the Director of STPI.
• Registration fee: 1,000 + GST, payable electronically via NEFT, RTGS, or other online methods.
₹
 Certificate of Registration:
• Issued by the STPI center upon successful registration.
• Validity: Three years.
• Renewal must be applied for at least three months before expiry.
 Reporting Requirements:
• Monthly Progress Report (MPR) and Annual Performance Report (APR) must be submitted to the respective STPI centers.
 SOFTEX Certification Eligibility:
• Registered Non-STP units are entitled to submit SOFTEX forms for certification as per RBI guidelines.
• Export contracts must be registered before submitting the corresponding SOFTEX forms.
 Service Charges:
• Based on the value of registered contracts.

Annual Service Charges
S No Export Turnover for the Year Annual Services Charges (INR)
1 Up to 12.5 lakhs INR 4,000
2 Above 12.5 lakhs to 25 lakhs INR 8,000
3 Above 25 lakhs to 50 lakhs INR 16,000
4 Above 50 lakhs to 3 Cr INR 55,000
5 Above 3 Cr to 10 Cr INR 1,10,000
8 Above 50 Cr to 100 Cr INR 3,50,000
9 Above 100 Cr to 500 Cr INR 5,75,000
10 Above 500 Cr to 1000 Cr INR 6,00,000
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SOFTEX Filing Process :
 The procedure related to filing of export declaration in SOFTEX Form and its certification has been provided under Master Circular
No. 14/2013-14 dated 01.07.2013 read with Master Direction on Export of Goods and Services
 SOFTEX Declaration to STPI for certification:
• The exporter of software is required to make a declaration in SOFTEX Form online not later than 30 days from the date of invoice
or date of last invoice raised in a month.
 Generating SOFTEX Numbers:
• Exporters must generate SOFTEX numbers from the RBI website.
• Both single and bulk numbers can be generated online.
• As per FEMA requirements, the exporter must complete the SOFTEX Form using the allotted softex number generated from the
RBI site.
 Document Submission:
The following documents must be submitted online for certification:
• Service export invoice
• Internet bills
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Softex Mechanics
 Submission to Bank:
• Exporter has to submit the certified SOFTEX form, along with the FIRA (Foreign Inward Remittance Advice), invoice,
and a request letter to the bank.
• The data submitted through SOFTEX forms shall be transmitted electronically from STPI/SEZs to RBI.
• The data received by RBI will be made available in EDPMS (Export Data Processing & Monitoring System) portal
through which the bankers can access the said information to match the inward remittance of export proceeds.
 E-BRC Issuance:
• Based on the submitted documents, the bank used to issue the E-BRC (Electronic Bank Realization Certificate) for the
export proceeds.
• EBRC is a confirmation document that verifies payment receipt against export and trade transactions and links the
invoice raised for services rendered to the remittance received.
 New Process as per Trade Notice 33/2023-24 issued by DGFT:
• Effective from 15/11/2023, banks are required to transmit Electronic Inward Remittance Messages (IRMs) to the
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Consequences for Non Filing of Softex
• Non-filing of Softex: If a Softex form is not filed, the remittance received will be treated as "general services" rather
than software export proceeds. This can adversely affect the business entity's ability to claim previous export
performance for participation in tenders related to software projects.
• Zero-rated GST supply: Exporters are allowed to export goods or services without the payment of IGST by filing a
Letter of Undertaking. However, when the RBI and GST databases are eventually linked, non-filing of Softex forms
may cause complications.
• GST Refund Claims: Entities engaged in software exports are entitled to claim a refund for the GST paid on inputs
and input services. However, tax authorities require the submission of Softex forms for processing these refund
claims. Non-filing could delay or prevent these refunds. 12/01/2025
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Penalties for Non-Filing of SOFTEX:
• Non-Submission of SOFTEX Forms amounts violation to the Foreign
Exchange Management (Export of Goods and Services) Regulations,
2015.
• A penalty up to 3 times the amount involved in the contravention or up
to two lakh rupees where the amount is not quantifiable may be levied
under section 13(1) FEMAAct.
• Further, the Unit may also be subjected to a continuous penalty which
may extend to INR 5,000 for every day after the first day during which
the contravention continues.
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I haven't filed Softex, What Now?
• Why Now?: You may be wondering, "I've been exporting services for years, and no
one has asked for a Softex form. Why is it necessary now?" The reason is that based on
discussions with banks and authorities, it has become clear that filing a Softex form
may be required for all software export cases involving IT or ITeS, particularly those
shared through data communication links.
• Current Status of RBI Penalties: As of now, the RBI has not been imposing monetary
penalties for non-filing of Softex forms. However, this could change in the future as
systems are becoming more stringent.
• Potential Future Impact: In 2-3 years, there might be a scenario where the RBI starts
sending notices to all software exporters for non-filing of Softex forms.
• Advised Action: It is recommended to start filing Softex forms now to ensure
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Conclusion:
• Mandatory Filing of Softex: Filing a Softex form is mandatory
for the export of computer software, including audio, video, and
television software, unless it is in a physical medium.
• Exemption for Non-Software Services: Services that are not
classifiable as software exports are not required to file Softex
forms.
• Requirements for DTA Units: Units operating outside of STPI
or SEZ (i.e., DTA units) must register with the STP authorities
as Non-STP Units and comply with the relevant requirements.
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“ Compliance isn't just a rule —it's a pathway
to global growth.”
CA SEEMA V MEHTA
SEEMA V. MEHTA & COMPANY
Chartered Accountants
Cont.: 9820513875
Email: casvmehta@gmail.com
Website: www.caseemamehta.com
LinkedIn:
https://www.linkedin.com/in/seema-mehta-51036
625

STPI Software Technology Park of India
• STPI stands for Software Technology Parks of India. STPI is an autonomous society under the
Ministry of Electronics and Information Technology (MeitY).
• Software Technology Parks of India (STPI) was established in 1991 to promote the software
industry in India.
• STPI's main objective is to promote software exports, startups, and small and medium
enterprises (SMEs).
• STPI offers services like incubation facilities, training, and data communications services to
software exporters.
• STPI promotes emerging technologies like artificial intelligence (AI), machine learning (ML),
and internet of things (IoT).
• STPI has centers across India, including in New Delhi, Mohali, Noida, Gurugram, Guwahati,
and Patna.
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STPI Software Technology Park of India
• Establishment and Purpose: Established in 1991, STPI is an autonomous society under the Ministry of
Electronics and Information Technology (MeitY). Its primary objective is to promote software exports,
support startups, and assist small and medium enterprises (SMEs) in the IT sector.
• Services Offered: STPI provides incubation facilities, training, and data communication services to
software exporters. It also promotes emerging technologies like artificial intelligence (AI), machine
learning (ML), and the Internet of Things (IoT).
• Benefits:
• Duty-Free Imports: STPI units can import capital goods without paying customs duty.
• 100% Foreign Direct Investment (FDI): Allowed through the automatic route.
• Tax Incentives: Historically, STPI units enjoyed income tax exemptions under Section 10A of the
Income Tax Act; however, these exemptions have been phased out since April 2011.
• Simplified Procedures: Streamlined processes for setting up units and conducting business.
• Compliance Requirements: STPI units must submit periodic reports, such as Quarterly Progress Reports
(QPR) and Annual Progress Reports (APR), and comply with other regulatory requirements.
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Special Economic Zones (SEZ)
• Special Economic Zones (SEZ)
• SEZs are duty-free enclaves that operate outside India's customs territory.
• SEZs are designed to attract foreign direct investment, stimulate exports, and create employment
opportunities.
• The SEZ Act, 2005 came into effect in 2006 to promote exports, employment, and economic activities.
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Special Economic Zones (SEZ)
• Establishment and Purpose: SEZs are designated duty-free enclaves deemed to be foreign territories
for trade operations, established to attract foreign investment, boost exports, and create employment
opportunities.
• Benefits:
• Tax Exemptions: SEZ units enjoy 100% income tax exemption on export income for the first
five years, 50% for the next five years, and 50% of the plowed-back export profit for another five
years under Section 10AA of the Income Tax Act.
• Duty-Free Imports: Exemption from customs duties on imports of capital goods, raw materials,
and consumables.
• Goods and Services Tax (GST) Exemptions: Exemptions on goods and services supplied to
SEZs for authorized operations.
• External Commercial Borrowings (ECB): SEZ units can avail ECB without any maturity
restrictions.
• Compliance Requirements: SEZ units must be net foreign exchange earners and comply with specific
operational guidelines, including submitting periodic reports to the Development Commissioner.
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Key Differences Between STPI and SEZ:
• Location Flexibility: STPI units can be established anywhere in India, providing flexibility in
location choice. In contrast, SEZ units must be set up within designated SEZs.
• Tax Benefits: SEZ units currently enjoy more substantial tax benefits, including extended
income tax exemptions, compared to STPI units, whose tax holidays have been phased out.
• Sector Focus: STPI is specifically focused on the software and IT services sector, whereas SEZs
cater to a wide range of industries, including manufacturing, pharmaceuticals, and multi-product
sectors.
• Regulatory Oversight: SEZs operate under the SEZ Act, 2005, with specific regulatory
frameworks, while STPI units are governed by policies under the Ministry of Electronics and
Information Technology.
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Non-STPI Units
• Definition: Non-STPI units are entities that export software but are not registered under the STPI
scheme.
• Requirements:
• Registration: Such units must obtain Non-STPI unit registration to avail of SOFTEX
certification, which is essential for declaring software exports.
• SOFTEX Filing: They are required to file monthly SOFTEX forms, typically in the form of
an Excel summary sheet, to report export transactions.
• Benefits:
• Access to Export Benefits: Enables claiming benefits related to software exports.
• Government Incentives: Allows availing incentives provided by the government for
software exporters.
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Key Differences Between STPI and Non-STPI Units:
• Duty-Free Imports: STPI units enjoy duty-free import benefits for
capital goods, whereas Non-STPI units do not.
• Tax Incentives: STPI units historically had income tax exemptions
(now phased out), while Non-STPI units are subject to regular tax
provisions.
• Compliance: Both units must comply with export reporting
requirements, but STPI units have additional obligations, such as
submitting QPR and APR.
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Goods and Services Tax - Composition
Levy
• A Simplified GST Option for Small Businesses
• Your Name
• Date

Index
• 1. Introduction to GST
• 2. What is the Composition Levy?
• 3. Eligibility for Composition Scheme
• 4. Key Benefits of the Composition Scheme
• 5. Tax Rates Under Composition Scheme
• 6. Limitations of the Composition Scheme
• 7. How to Opt for the Composition Scheme
• 8. Comparison: Regular GST vs Composition Scheme

Introduction to GST
• Goods and Services Tax (GST) is a single tax levied on the supply of goods
and services across India.
• Implemented on: July 1, 2017.
• Objective: Streamlining indirect taxes, improving tax compliance, and
creating a unified market.
• GST Structure:
• - CGST (Central GST)
• - SGST (State GST)
• - IGST (Integrated GST)

What is the Composition Levy?
• Definition: Simplified GST scheme for small taxpayers.
• Key Features:
• - Fixed rate of tax on turnover.
• - Simplified compliance.
• - Limited to eligible businesses.

Eligibility for Composition Scheme
• Annual Turnover Limit:
• - 1.5 Crore ( 75 Lakhs in special states).
₹ ₹
• Conditions:
• - Goods dealers only.
• - No inter-state supply.
• - Not in e-commerce or exempt goods manufacturing.

Key Benefits of the Composition Scheme
• - Lower Tax Rate.
• - Simplified Compliance (Quarterly filings).
• - Better Cash Flow.
• - Reduced compliance costs.

Tax Rates Under Composition Scheme
• - Manufacturer: 1% of turnover.
• - Trader/Dealer: 1% of turnover.
• - Restaurants (Non-Alcoholic): 5% of turnover.

Limitations of the Composition Scheme
• - No Input Tax Credit (ITC).
• - No inter-state sales.
• - Not for most service providers.
• - Business growth restrictions.

How to Opt for the Composition Scheme
• Eligibility Check → File GST CMP-02 → Quarterly filing (GST CMP-08) →
Annual GSTR-4 filing.

Comparison: Regular GST vs Composition
Scheme
• Eligibility: > 20 Lakhs vs ≤ 1.5 Crore
₹ ₹
• Tax Calculation: Value-added vs Turnover
• ITC: Available vs Not Available
• Filing: Monthly vs Quarterly
• Compliance: High vs Low

Case Study: Example of Composition
Scheme
• Example 1: Trader with 50 lakh turnover → 50,000 tax.
₹ ₹
• Example 2: Restaurant with 30 lakh turnover → 1.5 lakh tax.
₹ ₹

Challenges of the Composition Scheme
• - No ITC.
• - Intra-state only.
• - Limited for service providers.
• - Scaling up leads to regular GST.

GST Composition Scheme - Pros and
Cons
• Pros:
• - Simplified filing
• - Lower tax rates
• Cons:
• - No ITC
• - Growth restrictions

Key Takeaways
• Ideal for small, intra-state businesses.
• Simplified compliance with lower taxes.
• Limited expansion due to turnover cap.

Conclusion
• Simplifies GST for small businesses but has trade-offs like no ITC.
• Best for small traders, manufacturers, and restaurants.

References
• GST Council official website: www.gst.gov.in
• Government notifications and industry articles.

Updated_Presentation_GST_Composition_Levy_v2.pptx

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