EHTP Scheme: Benefits, Eligibility, & Growth Opportunities

The Electronic Hardware Technology Park (EHTP) scheme is an initiative by the Indian government to promote electronic hardware exports. This scheme is designed to strengthen India’s position in the global tech market. It offers sellers multiple benefits, like tax exemptions, duty-free imports, and a streamlined export process. 

This blog will break down the importance and essentials of the EHTP scheme, covering its eligibility, benefits, and growth opportunities to help sellers understand how they can use it to expand globally and reduce costs effectively.

What is the EHTP Scheme?

The EHTP (Electronic Hardware Technology Park) scheme is launched by the Ministry of Electronics and Information Technology, Government of India. This scheme is an initiative to encourage entrepreneurs in the manufacturing and exporting of units of electronic hardware equipment. It offers many incentives to encourage businesses to set up export-orientated units dedicated to electronic goods.

The EHTP scheme benefits from the duty-free imports of raw materials, components, and capital goods, with multiple tax benefits, exemptions, and other operational flexibilities. This scheme aims to enhance India’s competitiveness in the global technology market while supporting innovation and manufacturing excellence.

Key Benefits of the EHTP Scheme for Sellers

The EHTP scheme offers multiple benefits that make it a valuable opportunity for sellers in the electronics and technology industries. Some of these benefits include:

1. Duty-free imports: Sellers can import raw materials, capital goods, components, etc., without paying any customs duty or taxes, which directly reduces the production cost.
2. Simple operations: The EHTP scheme allows you to have simple and streamlined procedures for exports, imports, and other operational requirements, which saves you time and minimises administrative stuff.
3. Tax exemptions: The units under this scheme enjoy different tax exemptions, like income tax benefits and exemptions on export profits under the Special Economic Zones (SEZ) Act.
4. Increased market reach: You gain access to global markets by focusing on exports, which helps the growth and international recognition of your electronic products.
5. 100% FDI approval: Foreign direct investment (FDI) of up to 100% is permitted, which helps your business to attract international partnerships and funding.
6. Infrastructure support: EHTP units generally benefit from advanced infrastructure facilities and support services, which help ensure smooth and scalable operations.

Eligibility and Requirements for Joining the EHTP Scheme

To be a part of the Electronic Hardware Technology Park (EHTP) scheme, you must meet their specific requirements. 

Eligibility criteria:

• The scheme is open for people manufacturing and exporting electronic hardware products.
• Firms in research and development (R&D) departments in electronics are also eligible.
• The units must have their operations within an EHTP-designated area.
• When applying under this scheme, you must be registered as a legal entity under Indian law.
• Units should also have Net Foreign Exchange (NFE) earnings while making sure that your exports exceed imports over a specified timeline.

Requirements:

• You must have a detailed project outlining the business plan, investment details, and export potential.
• The Software Technology Parks of India (STPI), the governing body overseeing the scheme, should approve units.
• Your business should have the required infrastructure, like facilities for production, testing, and storage.
• It is important to adhere to export and import policies, labour laws, and environmental norms.
• Unites must operate as bonded warehouses under customs supervision to have duty-free benefits.

Documents required:

• Application form
• Detailed project report of the unit
• Memorandum and articles of association
• A copy of the board resolution document
• The name and other details of the board of directors
• Export order or memorandum of understanding.
• Exporter and importer code number
• Address proof of the technology park location
• Verified data communication proof such as payment receipt, service acceptance report, etc.

Application Process: How to Set Up an EHTP Unit

You can apply for the EHTP Unit through automatic and manual registration to receive the benefits. The eligible applicants can follow the following process to apply for the scheme:

1. Fill out and sign the application form and submit it to the Director of EHTPI. Make sure that each application form must be stamped.
2. Attach a demand draft of INR 2,500 in favour of the director, EHTPI, and their jurisdiction of the unit.
3. A detailed project report should be provided, including the promoter’s background, service offered, unit’s area of expertise, marketing strategy, arrangements, manpower plan of the unit, and other essential documents.
4. After the application is submitted, the director verifies the application and documents.
5. After that, acknowledge the receipt, and you will be given a reference number.
6. You must demonstrate the presentation about their project in the EHTPI office. The Letter of Permission is offered to the applicant by the Director upon the approval of the project.

Obligations and Compliance Under the EHTP Scheme

When you join the EHTP scheme, you must follow the following rules to ensure smooth operations and continued benefits.

• The main goal must be to export electronic hardware and related services while maintaining a positive net foreign exchange (NFE).
• All imported machinery and materials must be used for making export products only.
• If selling products within India, gain prior approval and pay applicable duties.
• EHTP units are treated as bonded warehouses and must comply with customs regulations for imported and exported goods.
• Proper records of imports, exports, and production must be maintained for audits.
• Units are required to submit regular performance reports to the STPI.
• It is important to comply with environmental, labour, and safety laws for all EHTP units.

Note: Non-compliance with the obligations can result in loss of benefits, penalties, or removal from the scheme.

Challenges Faced by EHTP Units and How to Overcome Them

Here is a list of challenges faced by EHTP units and how to overcome them:

Challenges:

1. EHTP units must navigate through regulations concerning imports, exports, and compliance with government policies, which can be complex.
2. Setting up an EHTP generally requires major capital for infrastructure, skilled labour, and machinery, which can be a barrier for small and new businesses.
3. EHTP units can face disruption in the supply of raw materials and components because of global market conditions.
4. Electronic hardware manufacturing involves handling potential hazardous materials, which must meet strict environmental standards and sustainability goals.

How to overcome these challenges?

• Be aware of the rules and regulations and seek legal advice actively.
• Use software tools to track compliance to streamline the process.
• Look for EHTP unit funding options like loans, government grants, or private investors to address the high capital requirements.
• Collaborate with educational institutions and offer in-house training programs, which can help create skilled workers.
• Invest in R&D and keep an eye on emerging technologies.
• To increase global market access, EHTP units can explore international trade fairs, collaborate with global distributors, and join export promotion bodies.
• Implement eco-friendly manufacturing processes and waste management strategies to meet environmental standards.

EHTP vs. Other Manufacturing Schemes in India

Consider the following table to compare the EHTP scheme with other popular manufacturing schemes in India:

Conclusion

The EHTP (Electronic Hardware Technology Park) scheme offers significant benefits for sellers in electronics industries, like tax exemptions, simplified export access, and duty-free imports. This scheme provides opportunities for cost reduction, global expansion, and access to advanced infrastructure. Some challenges, like regulatory compliance, high investments, etc., can be resolved with proper support and planning.

So, if you are looking to scale internationally and improve the profits of your electronics business, the EHTP scheme is a valuable and strategic option for efficiency and growth.