Thursday, June 12, 2003

Doing Business in India

Setting up IT Software and services operations in India

General Indian Citizen / Company
Overseas Company
Liaison Office/Representative Office
Project Office
Branch Office
As an Indian Company
Joint Venture with an Indian partner
Wholly Owned subsidiary

General Indian Citizen / Company

An individual and citizen of India can set up I.T. software and services operations in India through the following:
as an Individual / Proprietor
as a Partnership / Firm / Trust
as a Company registered under the Companies Act, 1956
No prior permission of Government of India is required to set up I.T. / Software units in India. Moreover, to encourage units in this sector, Government of India has announced

Domestic Tariff Area: When the primary focus is to sell in the domestic market in India. This unit can be set anywhere in India. All normal laws apply. No concession is available on import duties. Exports are permitted. A special Export Promotion Capital Goods (EPCG) scheme of Ministry of Commerce can be availed. This scheme allows zero duty import of capital goods against export obligations.

Special Economic Zones (SEZs). SEZ is a new scheme announced by the Government of India. SEZs are areas where export production can take place free from plethora of rules, regulations governing imports and exports. Units operating in these zones have full flexibility of operations and can import capital goods and raw material duty free. The movement of goods from and to ports and from SEZ are unrestricted. The units in SEZ have to export the entire production. The first two SEZs are being set up at Positra, Gujarat and Nangunery, Tamilnadu. Immediately, Santacruz Electronic Export Promotion Zone, Kandla Export Promotion Zone, Vizag Export Promotion Zone and Cochin Export Promotion Zones are proposed to be converted in SEZs.

Export Processing Zones (EPZ). These zones are located at various places including Cochin, Falta (Near Calcutta), Kandla, Chennai, Noida, Santacruz (Mumbai), Vishakhapatnam and Surat. A unit can be set up in these zones subject to availability of space. No import duty, special 10 years income tax holiday are some of the incentives provided. There is no restriction on quantity of domestic sales.

100% Export Oriented Unit (EOU). This is similar to EPZ scheme. But in this scheme, there is no need to be physically located at EPZ. All other incentives are same as provided to EPZ units.

Software Technology Park (STP). A very special scheme under Ministry of Information Technology. STPs are located at Noida, Navi Mumbai, Pune, Gandhinagar, Hyderabad, Bangalore, Chennai, Bhubaneshwar, Jaipur, Mohali and Thiruvanathapuram. This scheme offers zero import duty on import of all capital goods, special 10 years income tax holiday, availability of infrastructural facilities like high speed data- communication links etc. are some of the incentives available under this scheme.

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