Know This: The STP Scheme Every IT Exporter Should Explore

When India’s IT sector began making global waves in the 1990s, one government initiative played a quiet but powerful role in that rise—the Software Technology Park (STP) Scheme. Even today, as startups and IT service companies look for export-led growth, the STP scheme remains one of the most important enablers, offering duty exemptions, tax benefits, and world-class facilitation to enterprises dedicated to technology exports.

What is the STP Scheme?

The Software Technology Park (STP) Scheme, launched by the Ministry of Electronics and Information Technology (MeitY) and implemented by Software Technology Parks of India (STPI), is a 100% export-oriented scheme. It focuses exclusively on the development and export of computer software and IT-enabled services, including professional services delivered through communication links or physical media.

Uniquely, the STP scheme integrates three global best practices in one:

• The Export-Oriented Unit (EOU) model

• The Export Processing Zone (EPZ) concept

• The Technology/Science Park framework

This combination provides Indian IT companies, both large and small, a structured pathway to tap into international markets.

Eligibility Criteria for STP Scheme

Not every IT business can qualify for the STP Scheme. Here are the key conditions:

• Company Registration: Must be registered under the Companies Act, 2013 or as a Limited Liability Partnership (LLP).

• Export Orientation: At least 50% of annual turnover should come from exports of software, IT services, hardware, or AVGC (Animation, VFX, Gaming, Comics) content.

• Technology Focus: The unit should be primarily engaged in developing or delivering technology-driven products or services.

• Compliance: Companies must maintain net positive foreign exchange earnings, invest in minimum infrastructure, and comply with statutory regulations.

Benefits of the STP Scheme

The STP scheme is less about direct grants and more about powerful facilitation benefits that reduce costs and encourage global competitiveness. Key advantages include:

• Duty-Free Imports: All hardware and software imports for STP units are exempt from duty, including second-hand capital goods.

• Tax Incentives: Units enjoy tax benefits that significantly reduce operational costs.

• Single Window Clearance: Simplified approval process for setting up STP units.

• 100% Foreign Equity Allowed: Foreign entrepreneurs can invest fully in STP units without restrictions.

• Capital Goods Flexibility:

  • Capital goods can be re-exported.

  • Goods purchased from the Domestic Tariff Area (DTA) are eligible for excise duty exemptions and Central Sales Tax reimbursement.

• Freedom for Investors: Capital invested through know-how fees, royalties, and dividends can be freely repatriated after applicable taxes.

• Project Clearance: Projects costing up to ₹100 million with Indian investment are cleared quickly by jurisdictional STPI authorities.

Final Words

The STP Scheme has been instrumental in positioning India as a global IT powerhouse. By lowering barriers to entry and reducing costs, it enables startups, mid-sized firms, and large IT service providers to focus on innovation, exports, and scaling globally.

Even today, as India’s IT landscape expands into AI, cloud computing, cybersecurity, and digital content, the STP scheme remains a key facilitator for businesses that want to compete on the world stage.

For startups, this scheme doesn’t just offer regulatory relief—it provides a springboard to global markets.