In today’s globalized economy, the export of goods and services plays a vital role in driving economic growth and fostering international trade. When it comes to exporting software, a unique set of challenges arises due to the intangible nature of digital products. In order to regulate and monitor the export of software, the Indian government has introduced the SOFTEX Form. This form serves as a declaration of software exports and is required to be filed by every exporter of computer software and audio/video/television software. In this comprehensive guide, we will delve into the details of the SOFTEX Form, its significance, and the obligations and consequences associated with it.
1. Understanding the SOFTEX Form
The SOFTEX Form is a crucial document that exporters of software must file to declare their exports. This form is governed by Regulation 6(C) of the Foreign Exchange Management (Export of goods and services) Regulations, 2000. It is designed to provide information about the export of computer software and audio/video/television software in a non-physical form. Unlike traditional goods exports, which are tracked at custom ports, software exports require a different monitoring mechanism due to their digital nature.
2. Scope of the Term ‘Software’
Before we delve into the details of the SOFTEX Form, it is essential to understand the scope of the term ‘software’ as defined under Regulation 2(viii) of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015. The term includes computer programs, databases, drawings, designs, audio/video signals, or any other information shared in a non-physical form. It encompasses all types of software that can be transmitted through digital platforms.
3. The Evolution of the SOFTEX Form
The introduction of the SOFTEX Form was necessitated by the growing need to export software over data communication links. In the early 1990s, the concept of Software Technology Parks (STPs) was established to facilitate software exports. However, the Customs Department faced challenges in managing software exports as they lacked the resources and expertise to handle exports over telecommunications networks, where no physical evidence was evident.
To address this issue, the SOFTEX Form was introduced as an alternative to the GR/PP forms used for goods exports. The administrative authority of the STP scheme, namely the Software Technology Parks of India (STPI), was designated as the authority responsible for certifying the SOFTEX Form. This form allows for post-facto approval of software exports after the actual export has taken place.
4. Obligation to File the SOFTEX Form
Every exporter engaged in the export of computer software and audio/video/television software, in a non-physical form, is obligated to file the SOFTEX Form. This requirement applies to all units, including those located in Software Technology Parks (STPs), Special Economic Zones (SEZs), Export Processing Zones (EPZs), and Domestic Tariff Areas (DTAs). Even companies located outside STP areas and engaged in software exports must comply with this obligation.
5. Exemptions from Filing the SOFTEX Form
There are certain exemptions from filing the SOFTEX Form, as specified under Regulation 4 of the Foreign Exchange Management (Export of goods and services) Regulations, 2000. Previously, exporters were exempt from filing the form if the value of the software export did not exceed INR 25,000. However, this exemption limit was revised to USD 25,000 by Circular No. RBI/2004/35 A.P.(DIR Series) Circular No.61 dated 31st January 2004.
From 1st October 2013, all exporters of software are required to file the SOFTEX Form, regardless of the value of the export. This ensures that all software exports are properly monitored and accounted for.
6. Filing the SOFTEX Form by Non-STP Units
Non-STP units that are not located within the jurisdiction of Software Technology Parks of India (STPI) may face challenges in filing the SOFTEX Form. To overcome this issue, STPI offers the option of registration for Non-STP units. These units can register themselves with STPI by submitting an application form along with supporting documents and the applicable processing fee. By becoming a Non-STP unit under STPI, exporters can fulfill their obligation to file the SOFTEX Form.
7. Periodicity and Time Limit for Filing the SOFTEX Form
The filing of the SOFTEX Form is subject to specific periodicity and time limits. Initially, the form was required to be filed for each transaction of software export within 30 days from the date of the invoice. However, a facility for bulk generation of the SOFTEX Form was later introduced, allowing exporters to file a single form for multiple software export invoices.
As per the current guidelines, the SOFTEX Form should be filed on a monthly basis. Exporters are required to furnish details of all invoices issued for software exports in a single form. The due date for filing the form is not later than 30 days from the close of the month in which the invoice is raised. Additionally, export proceeds for software exports should be released within 180 days from the date of export, and the RBI may take action against entities that fail to comply with this time limit.
8. Obligations under FEMA for SOFTEX Form
The export of goods and services, including software exports, is governed by Section 7 of the Foreign Exchange Management Act (FEMA). According to Section 7(3), every service exporter must submit a declaration to the Reserve Bank of India (RBI) or other authorities, stating the accurate particulars of payment for such services. The Foreign Exchange Management (Export of Goods and Services) Regulations, 2015 specify the manner and details to be contained in such declarations.
Exporters of goods and services, including software, are required to declare the value of their exports to the specified authority. For goods exports, this authority is the Commissioner of Customs, while for software exports, it is the Director of STPI or the Commissioner of SEZ. The specified authority is responsible for certifying the value of exports, and the RBI relies on this certification to monitor the realization of export proceeds.
9. Fees for Filing the SOFTEX Form
No legal fee is applicable or required to be deposited along with the filing of the SOFTEX Form. However, Non-STP exporters who register with STPI are required to pay service charges for the certification of the form. The service charges are determined based on the export turnover of the year and are applicable to Non-STP units.
10. Penalties for Non-Compliance with SOFTEX Form Filing
Failure to file the SOFTEX Form for software exports is a violation of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015. Such non-compliance can result in legal action under Section 13(1) of FEMA, with penalties of up to three times the amount involved in the violation. Additionally, non-compliant entities may be subjected to a continuous penalty of up to INR 5,000 per day after the first day of non-compliance.
In the absence of certified SOFTEX forms, banks treat inbound foreign exchange remittances as proceeds realized for service exports rather than software exports. This can create hurdles for businesses in claiming previous export performance for participation in software project tenders.
Conclusion
The SOFTEX Form is an essential document that allows for the effective monitoring and regulation of software exports. By filing this form, exporters fulfill their obligations and ensure that their software exports are accounted for in a compliant and transparent manner. It is crucial for exporters to understand the scope, obligations, and consequences associated with the SOFTEX Form to avoid penalties and legal issues. By adhering to the guidelines and fulfilling the requirements of the SOFTEX Form, exporters can contribute to the growth and development of the software export industry in India.
