SOFTEX and Inward Remittances

This webinar is a masterclass on understanding the usage of SOFTEX for software exports, inward remittances and compliances. Maulik Doshi, Deputy Managing Director, Transfer Pricing and International Tax at Nexdigm, shared his insights on using technology in foreign remittance compliances.

What is SOFTEX form?

As mandated by FEMA (Foreign Exchange Management Act), exporters have to file SOFTEX form to value the software exports done by the exporter. This ensures that one does not perform money laundering or export cheaper software for higher inward remittances.

• It contains all the information about the software across maker, end-receiver, dealer managing the transaction, invoice value, etc.
• It’s a declaration by exporter given to the RBI via various nodal agencies like STPI (Software Technology Park of India), SEZ (Special Economic Zone)
• It serves as proof of export for claiming indirect tax refunds
• It’s the only recognized document to verify the value of an exported software

Under FEMA Laws:

• EDF (Export Declaration Forma) is used to declare the value of exported goods, while SOFTEX is to declare the software exports
• For the export of goods, the declaration and certification take place at the time of export, while software export is undertaken after the export performance.

Who needs to file SOFTEX?

• SEZ units: by Development Commissioner
• STPI units: by Director of STPI
• DTA (Domestic Tariff Area) units: since they do not have a specific nodal agency looking at them, they can get certified by registering as a non-STPI unit with the STPI authorities.

How does STPI help with SOFTEX certification?

STPI is an autonomous organization established in 1991 under the Ministry of Electronics and Information Technology. The mission of this organization is to nurture an increase in software exports from India via incubation, promotion via awards, statutory services, liaising, etc.

STPI has 5000+ units registered under them, with 62 offices across India.

Steps involved in certification:

• Registration for DTA units is available online on https://stpionline.stpi.in with a list of documents required
• The application processing fee is INR 1000/- + GST
• The validity of non-STPI registration is 3 years from the date of issue
• Advance annual charges and periodic performance reports have to be submitted to STPI

You can view the webinar to understand step-by-step instructions via visual representation to fill the SOFTEX form.

Steps involved in SOFTEX filing:

• Get your SOFTEX number online from RBI
• Submit the form to STPI via the online portal
• Processes involving submission, certification and sharing data to RBI EDPMS is done electronically
• Form submission is to be done within 30 days of raising the invoice
• STPI disposes the SOFTEX form within 7 working days

The documents to be submitted for filing like statement of work, invoices, etc. can be checked on the portal. Purpose codes as applicable, can be viewed and understood from the webinar.

Consequences of non-filing of SOFTEX

Deference in reporting and certifying your software exports violates Foreign Exchange Management (Export of Goods and Services) Regulations, 2015 with below consequences:

• Penalty up to 3X the involved sum
• A continuous penalty which may extend to INR 5000 per day
• Rejection for GST refunds claims
• Banks will issue inward foreign exchange remittances receivables as export of services instead of software

FEMA and inward remittances

Inward remittance transactions fall as current (day-to-day business transactions) or capital (shares, securities, etc.) account transactions. Key considerations involved in shares/securities are explained in detail in the webinar.

How to use technology for foreign remittance compliances?

Key challenges in foreign remittances include:

• Lack of record maintenance
• Lack of clarity in taxations and currencies
• High turnaround time due to multiple stakeholders
• Glitches in the income tax portal

Automation helps overcome the above challenges as follows:

• Focusing on tax positions than processes while processing the payments
• Creates a systematic workflow to eliminate processes, especially for bulk processing
• Repository of documentation helps with search, pull-out, and tracking

With Nexdigm’s automated tool, one can overcome challenges and leverage the benefits of end-to-end automation. This includes an automated platform for collecting Form-15G/Form-15H from shareholders. Contact our team today for more information.