SoftEx Form for Export of Software

The RBI had vide a Circular in September 2013, laid down a revised procedure for filing of SOFTEX making it mandatory for all exporters. The instruction takes precedence over a Notification from RBI in 2004 requiring the filing of SOFTEX only if the invoice value exceeded USD 25,000. To help exporting units who are not members of STPI scheme, abide by the regulatory requirement, the STPI started services for NON-STP units. This involves a simple registration process which then allows companies to file for STPI approvals for SOFTEX forms. Several companies who were earlier not required to file SOFTEX were unaware of the change and did not file the SOFTEX for export transactions.

Software is defined under the RBI regulations to mean any computer programme, database, drawing, design, audio/video signals, any information by whatever name called. The definition given is exhaustive and includes all kinds of software that may be shared in any medium other than in physical medium. It implies both Information Technology (IT) and Information Technology Enabled Services (ITES) exports.

'IT' covers both Software products including Software as a Service (SaaS) and Software services. Software services has a huge ambit to cover development, consulting, design, implementation, maintenance, reengineering of a Software or a Software product.

'ITeS' covers all those services that are delivered to clients across borders of India using an IT driven system and process over a telecom/internet link (include BPO, KPOs, Digitization, Call centres, Data processing etc.)

Here's the issue- the above definitions might mean that freelancers working with overseas Companies may also need to file a Softexform.

TAXAJ Pro-tip:

If you're a freelancer or employed with a foreign company, check out our comprehensive guide on tax for freelancers.

In light of the above, it might be in your best interest to file a Softex form if you are in any way providing IT related goods or services and claiming the same as exports.

Software through physical medium:

Software exported in physical medium is treated as goods and declarations as applicable for goods will equally apply to such software exported in physical medium. This means that to these exporters, softex will not apply.

We know what you are thinking - I've been exporting goods/ services for years and no one has asked for a softex form. Why now?

Here's the thing - we're not trying to scare you. Based on our discussions with banks and authorities, we have come to the conclusion that filing softex may be required in all export cases where IT or ITeS is involved.

Good part is - there are no monetary penalties for non-filing of softex at this point of time. This might change in the future though. What we've been seeing is that systems are getting stronger. There might be a time 2-3 years from now when the RBI starts sending notices to everyone who exports IT related goods or services for non-filing of softex. Makes sense to file your softex forms to ensure compliance so you don't have any headaches in the future.

Simple answer? Contact TAXAJ Advisors!

More complicated answer? See below:

• Generate Softex number through the RBI facility
• Fill in the online Softex Form available on the STPI website not later than 30 davs from the date of invoice or date of last invoice raised in a month.
• Upload the filled Softex Form along with the Invoices, Contracts (if not pre-registered), Softex letter as generated from the RBI facility portal and the data com bill.
• Download the application copy of Softex Form.
• Digitally sign the Application copy and submit it for certification of the STPI officer.
• The certification process will be smooth and generally the values declared in the invoices issued towards software exports will be accepted and certified. Rejections are only in cases where there exists a doubt on genuineness of the export transaction undertaken.
• The copy of SOFTEX form duly certified by the designated authority of STPI/SEZ shall be submitted to the banker for the purpose of realization of export proceeds.
• 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 The Export Data Processing and Monitoring System (EDPMS) portal through which the bankers can access the said information to match the inward remittance of export proceeds and accordingly bankers shall issue a Bank Realisation Certificate.

Too complex? Don't worry. We've got your back. Just contact us and our team of experts will help you sort things out.

• As per the prevailing RBI Master Circular No. RBI/2013-14/14 dated 1st July 2013 (Para B15), RBI Circular No.80 dated 15th February 2012 and RBI Circular No.43 dated 13th September 2013, any company who does IT / ITES exports through data communication links needs to submit the SOFTEX form for certification.
• For getting the SOFTEX certification by STPI (which is the Designated Authority), the companies have to become STP members by either registering under STP scheme or as NON-STP unit with STPI. Nevertheless, the companies registered under STP scheme will have other benefits apart from getting their Software Exports certified.

Letter of Permission for Non-STP registration is issued for the period of 3 years. During the last three months prior to the expiry of LoP, Non-STP registered unit should approach Director, STPI for renewal of LoP. There shall be no charges for renewal of LoP.

Exports generally means sending 'goods and service' to clients in foreign country (outside territorial borders of India) for purpose of sale. Physical goods are exported through a physical port of shipping la sea port, airport or foreign post office) monitored by Central customs department.

When physical goods leave borders, from any port of shipment, the exporter in India is required to declared value of goods in a form called 'EDF' (Export Declaration Form). The value so declared is required to be accepted and certified by the customs office, at the port of shipment. This process is called "valuation of export". Once the valuation of export is complete, the value so certified by the Customs Officer is accepted both by RBI and the exporter's bank that then monitors, the inward remittance of an equivalent value in foreign currency in exporter's bank account.

A 'Software' exported through a physical medium (CD/DVD, magnetic tapes etc.) has to pass through similar steps as when exported physically through a port of shipment, it is treated as physical goods.

In early 1990s, when Software Technology Park (STP) scheme came in to existence, the need to export Software through data communication links emerged. Customs department had difficulty in managing this, as nothing physical was visible in a Software transmitted through the telecom links.

DeitY (then Department of Electronics) thus enabled an innovation in government policy and could get RBI to announce SOFTEX form and STPI being the administrative authority of ST scheme, became the designated authority for "Software export valuation" and certification of softex form, in place of Customs. As on date the jurisdictional STPI Directors and SEZ Commissioners are the designated authority for softex valuation.