TP Difference invoice from Old STPI Unit or Current SEZ Unit

[Sudhir M]

ABC Ltd provides services to foreign entity and has TP agreement with foreign holding entity- as per TP they are doing retrospective adjustment in TP Agreement due to which they have to recover differential margin of 74 Cr covering FY 2017-18 to FY 2021-22 from the holding company. During 17-18 to 21-22 ABC ltd was an STPI unit (Deboned Now) but now ABC Ltd in SEZ Unit. ABC has separate active GST Registration for STPI unit as well as SEZ Unit.

Query:

1. For the markup difference pertaining to the STPI unit period, should ABC raise export invoices from the SEZ or STPI unit?
2. If invoicing from the STPI unit, then how to comply with Softex, MPR, and APR requirements? Note: ABC has debonded its old office, but GST registration remains active.
3. If invoicing from the SEZ unit, how do we manage compliance for differential revenue not related to the SEZ unit?

[YAGAY andSUN]

In short, if STPI Unit had been closed down or merged in SEZ unit then you need to comply with the provisions of SEZ unit by clearing providing the reference of basis for this markup difference. Since its just a markup difference and not the physically export of software etc., then, formalities such as SOFTEX, MPR/APR should not be come into picture.  However, keep the Development Commissioner of STPI and SEZ duly information about this new development to avoid any unwarranted situations which may arise at later stage.

AI Summary

Transfer pricing markup adjustments: invoice under SEZ rules where STPI merged, with SOFTEX/MPR/APR generally inapplicable. Where the STPI unit has been closed or merged into the SEZ unit, invoicing and compliance should follow SEZ provisions, with invoices referencing the basis for the retrospective markup difference. The markup adjustment, being monetary rather than a new physical export, does not typically trigger SOFTEX, MPR or APR formalities for the retrospective revenue, but the Development Commissioners of both units should be informed to avoid administrative issues.