Navigating India’s STP and EHTP Schemes: A Strategic Guide to Export-Led Growth 

India’s Software Technology Park (STP) and Electronic Hardware Technology Park (EHTP) schemes, administered by the Software Technology Parks of India (STPI), are pivotal government initiatives designed to boost export-oriented growth in the technology sector by offering a compelling package of fiscal incentives and operational ease, including duty-free imports of capital goods and inputs, GST exemptions, 100% FDI allowance, and single-window clearance, which together create a streamlined, cost-effective environment for businesses—from startups to multinationals—engaged in software/ITES exports (under STP) or electronics manufacturing and design (under EHTP), provided they register through a structured process involving a Letter of Permission and maintain customs-bonded premises while achieving positive net foreign exchange earnings over a five-year period.

Navigating India’s STP and EHTP Schemes: A Strategic Guide to Export-Led Growth 

For any tech company—from a bootstrapped startup to a multinational giant—looking to harness India’s formidable software and hardware capabilities, understanding the Software Technology Park (STP) and Electronic Hardware Technology Park (EHTP) schemes is not just beneficial; it’s a strategic imperative. More than just a government program, these frameworks are powerful engines designed to fuel export-driven growth, offering a compelling blend of fiscal benefits and operational ease. 

Administered by the Software Technology Parks of India (STPI), an autonomous body under the Ministry of Electronics and Information Technology (MeitY), these schemes have been instrumental in building India’s “IT powerhouse” reputation. But their relevance isn’t historical—it’s accelerating in today’s era of digital transformation and electronics manufacturing self-reliance. 

STP vs. EHTP: Choosing Your Strategic Path 

While often mentioned together, the STP and EHTP schemes cater to distinct segments of the technology ecosystem. Choosing the right one is the first critical step. 

The STP Scheme: For the Architects of the Digital Realm 

Launched in 1991, the STP Scheme is the bedrock of India’s software exports. It is exclusively designed for businesses whose final “exportable product” is intangible. This includes: 

• Software Development: Custom application development, product engineering, and system software. 

• IT-Enabled Services (ITES): Business Process Outsourcing (BPO), knowledge process outsourcing (KPO), and customer support centers. 

• Digital Services & SaaS: Software as a Service (SaaS) platforms, cloud-based services, and data analytics services provided to clients overseas. 

An STP unit can operate from a dedicated building in an STPI-managed tech park or from its own private premises, which is then approved and bonded as a designated STP unit. This flexibility allows companies to scale within their own campuses while still reaping the scheme’s benefits. 

The EHTP Scheme: For the Builders of the Physical Tech World 

The EHTP Scheme is the STP’s counterpart for the hardware sector. It supports the end-to-end process of creating physical electronic products for the global market. Eligible activities include: 

• Manufacturing and Assembly: Production of electronic hardware, components, and sub-assemblies. 

• Research & Development (R&D): Designing and prototyping new hardware, including embedded systems and Internet of Things (IoT) devices. 

• Testing and Validation: High-end testing and quality assurance for hardware products. 

The EHTP scheme is a cornerstone of India’s “Make in India” and “Production Linked Incentive (PLI)” ambitions, providing the necessary duty and infrastructure support to make domestic electronics manufacturing globally competitive. 

The Compelling Value Proposition: Beyond Tax Breaks 

The benefits of registering under these schemes are multi-faceted, impacting both the bottom line and day-to-day operations. 

1. Direct Fiscal and Financial Incentives:

• Duty-Free Imports: Import capital goods, computer systems, raw materials, and specialized software without paying customs duties. This dramatically reduces the initial capital expenditure for setting up a state-of-the-art development lab or manufacturing line. 

• GST Benefits: Exemption from Integrated Goods and Services Tax (IGST) on imports and simplified compliance for exports. 

• 100% Foreign Direct Investment (FDI): Foreign investors can establish wholly-owned subsidiaries under the automatic route, without needing prior government approval, streamlining market entry. 

• Flexible Repatriation: 100% of foreign exchange earnings can be retained in an Exchange Earners’ Foreign Currency (EEFC) account, providing greater control over forex funds. 

2. Operational and Regulatory Ease:

• Single-Window Clearance: The STPI acts as a single point of contact for all approvals, including the crucial customs bonding, eliminating the need to navigate multiple government departments. 

• The “Green Card” Facility: This is a game-changer for operational efficiency. STP/EHTP units with a Green Card receive priority clearance for their import and export consignments at customs, minimizing logistics delays. 

• Streamlined Compliance: While reporting is mandatory, the process is centralized through the STPI, making it more transparent and manageable than dealing with the broader domestic tariff area (DTA) regulations. 

The Registration Journey: A Three-Act Play 

Setting up an STP/EHTP unit is a structured process. Eligible entities include private limited companies, LLPs, partnerships, and even proprietorships. 

Act 1: The Submission – Presenting Your Vision 

The process begins with a detailed application to the regional STPI director. This is more than just form-filling; it’s about presenting a compelling business case. The required documents include: 

• A comprehensive Project Report detailing the company profile, promoter background, export projections, and foreign exchange earnings outlook. 

• Company incorporation documents (Certificate of Incorporation, MOA, AOA). 

• Import-Export Code (IEC) from the DGFT. 

• Proof of premises (lease deed or ownership documents). 

• A detailed list of capital goods to be imported. 

Pro Tip: A well-articulated project report that clearly demonstrates export potential, job creation, and technical innovation can significantly speed up the approval process. 

Act 2: The Evaluation – Securing the Letter of Permission (LoP) 

The STPI directorate rigorously evaluates the application based on its export potential, financial soundness, and the promoters’ credentials. This may involve a presentation or requests for clarification. Upon satisfaction, the director issues the Letter of Permission (LoP). 

The LoP is your license to operate. It specifies the approved activities, location, validity period (typically three years, renewable), and the conditions you must adhere to, including achieving positive Net Foreign Exchange (NFE). 

Act 3: The Operationalization – Customs Bonding and the Green Card 

The final, crucial step is establishing your premises as a bonded warehouse under the Customs Act. This legal status is what enables the duty-free imports. This involves: 

• Signing a Legal Undertaking (LUT) with the STPI. 

• Implementing physical security measures (CCTV, access control) as per customs standards. 

• Undergoing a joint inspection by STPI and customs officials. 

Once approved, the STPI issues the coveted Green Card, officially marking your unit as operational and granting you access to priority customs clearance. 

Sustaining the Advantage: The Art of Post-Approval Compliance 

Registration is not the finish line; it’s the start of a compliant operational lifecycle. Key ongoing obligations include: 

• Quarterly and Annual Performance Reports: Submitting detailed data on exports, imports, and employment to the STPI. 

• Net Foreign Exchange (NFE) Compliance: Units must achieve a positive NFE (Total Forex Earning – Total Forex Spent) over a five-year block. This ensures the scheme is fulfilling its export-promotion mandate. 

• Customs Bonding Integrity: Maintaining meticulous records of all bonded goods and facilitating periodic customs audits. 

Strategic Implications: Why This Matters for Your Business 

The STP and EHTP schemes are not just about saving money; they are about building a strategic, scalable, and competitive global operation. 

• For Startups and MSMEs: The schemes drastically lower the barrier to entry for global trade. The duty-free imports and reduced compliance overhead free up crucial capital for R&D and market expansion, allowing Indian startups to “born global.” 

• For Foreign Investors and MNCs: These frameworks offer a proven, stable, and business-friendly pathway to establish a wholly-owned export hub in India. It simplifies the regulatory maze and provides access to India’s deep talent pool in engineering and manufacturing, all within a cost-competitive environment. 

• Alignment with Future Tech: The schemes are perfectly tailored for sunrise sectors like Artificial Intelligence, Machine Learning, Semiconductor Design, and IoT. Whether you’re developing AI algorithms (STP) or manufacturing the sensors that collect data (EHTP), these schemes provide the ideal springboard for innovation-led exports. 

The Final Analysis: Your Gateway to India’s Digital Destiny 

As India aggressively positions itself as a global technology and manufacturing leader, the STP and EHTP schemes remain cornerstone policies. They offer a rare combination of financial incentives and operational freedom, creating a fertile ground for businesses to innovate and scale. 

For any company serious about leveraging India’s tech prowess for the global market, navigating and integrating into the STP/EHTP ecosystem is not just an option—it is a decisive strategic move. It’s a commitment to being an active participant in the next, exciting chapter of India’s export-driven digital future.