Why the STPI Notification Circular from RBI can ruin IT startups and SMEs?

With the Indian IT industry contributing excellently to GDP and exports every year and rise in the number of companies, the new circular from RBI seems to have dented the spirits.

The circular vide notification No. RBI/2013-14/254 A.P. (DIR Series) dated September 13, 2013, effective from October 1, 2013, has done quite some harm to the green IT segment.

Before digging deep, it’s good to understand more about the RBI circular, which states that exporter of any kind of software products/services must get export invoices certified from Software Technology Park of India.

 

The limit of USD 25,000 export has also been removed, which means STPI will be charging every export, irrespective of the invoice value.

The regulation brings an end to tax holiday schemes that were enjoyed by software companies under STPI. As the tax holiday blanket is nonexistent anymore, startup tech companies chose their own way of not being with STPI. The new circular now forces them to join STPI for getting resume to exports.

The government has to take note; else many of the Small & Medium Enterprises along with startups are more likely to suffer. The mandatory registration with STPI will increase the costs and increase the waiting period, and add to that, even the smallest invoices would be certified, thanks to the no threshold limit.

For transactions that are happening between $100- $1000, startups will have to pay more, and thereby, contracts that are registered on emails are much on loss.

The certification fees will add to revenue of the govt. for sure, but at the same time, the exporter will have lesser client, and the overall effect can be huge.

Quite obvious, RBI needs to check for amendments in this circular and must find new ways to regulate incoming foreign exchange, without which the IT industry is ready for some huge losses in days to come.