Chip design, verification, firmware and board design work for overseas semiconductor and product companies is a service export, and from 1 October 2026 it goes on the single EDF. The first decision for an embedded or VLSI firm is whether each stream is "Software" or "Services" in field 1.1, because software exporters outside an SEZ may file with their AD bank or STPI, while other services go to the AD bank. After that, it is a monthly list of invoices, with one extra wrinkle: physical prototypes are goods and follow a different path.
Key takeaways
- Firmware and embedded software may be declared as "Software"; RTL design, verification and physical design may be better described as engineering or technical "Services". Agree the split with your CA and bank.
- Software exporters outside an SEZ can file with the AD bank or STPI. SOFTEX no longer exists, and STPI certification is not mandatory.
- Many design centres sit in SEZs. If yours does, the EDF goes to the SEZ Development Commissioner.
- NRE milestones, dedicated-team (ODC) billing and tape-out bonuses each become Part 2B rows in the month invoiced.
- Prototype boards or samples shipped abroad are goods, not services, and follow the goods export process.
Software, services or both?
Embedded and semiconductor firms often deliver several kinds of work to one client. The EDF asks you to pick one type of export per form, so a mixed business may end up preparing more than one declaration a month.
| Work stream | Likely field 1.1 | Likely SAC starting point | Purpose code to discuss with bank |
|---|---|---|---|
| Firmware, drivers, embedded software | Software | 998314 (IT design and development) | P0802 or P0807 |
| RTL design, verification, DFT, physical design | Services (or Software, per bank view) | 998314, or an engineering design code | P1008 or P1009 |
| Board and hardware design files | Services | Engineering design code | P1009 |
| Applied research for a client's next chip | Services | R&D services code | P1008 (R&D services) |
| Prototype boards shipped to client | Goods | HSN, not SAC | Not a services EDF |
None of these mappings is settled by the facts available to us; they are reasonable starting points. The SAC code finder helps you shortlist, and the distinction between P0802 and P0807 matters for firmware work done offshore.
AD bank, STPI or Development Commissioner
| Where your unit sits | Software streams | Non-software services |
|---|---|---|
| Outside an SEZ | AD bank or STPI | AD bank |
| Inside an SEZ | SEZ Development Commissioner | SEZ Development Commissioner |
Firms registered with STPI for other reasons sometimes keep filing software declarations there. That is allowed. But splitting software to STPI and services to your bank means two authorities each month. Many firms will find it simpler to send everything to the AD bank where the money lands, since AD banks are now on par with STPI as specified authorities.
How semiconductor work is billed
Non-recurring engineering (NRE) milestones. A design contract is split into milestones: specification freeze, RTL complete, verification sign-off, tape-out. Each milestone invoice is a Part 2B row in the month raised.
Dedicated teams or offshore development centres. A client funds a team of engineers at a monthly rate per head. One invoice per month, very predictable.
Tape-out or first-silicon bonuses. Contingent fees paid if the chip works first time. Invoice only when the event happens, because the 9-month realisation clock starts on the invoice date.
Tool or licence pass-throughs. Occasionally a client reimburses EDA tool costs. Whether a pure reimbursement belongs in the EDF value is a grey area; agree it with your CA and bank.
A worked example
Siliconpath Design Pvt Ltd in Hyderabad, outside any SEZ, has two clients: a US fabless start-up and a German automotive supplier. Its March 2027 invoices:
| Invoice | Client | Work | Type | Amount | INR value |
|---|---|---|---|---|---|
| SPD/2603 | Vireo Semi Inc (USA) | Verification milestone 3 | Services | USD 38,000 | ₹31,74,000 |
| SPD/2604 | Vireo Semi Inc (USA) | Dedicated DV team, March | Services | USD 21,600 | ₹18,04,000 |
| SPD/2605 | Albrecht Fahrzeugtechnik GmbH | ECU firmware sprint | Software | EUR 11,500 | ₹10,58,000 |
Siliconpath agreed with its AD bank to file one EDF for the two services invoices (₹49,78,000) and a second for the firmware invoice, marked "Software". Both go to the bank, and March invoices are due by 30 April 2027.
In the same month, Siliconpath couriered two evaluation boards to Vireo. Those are goods. They do not go on the services EDF; the firm follows the goods export process with its courier and bank. Our explainer on EDF for services vs goods covers the difference.
All three services and software invoices exceed ₹10 lakh, so EDPMS closure will need each invoice, the FIRA and matching instructions once paid. The ₹10 lakh declaration route will not help here.
Realisation for long design cycles
Design projects run for many months, but realisation is counted per invoice: 9 months from each invoice date (12 months for rupee invoices). Start-up clients are the main risk; funding gaps delay payments. Watch any invoice approaching six months unpaid, and if needed ask your bank for an extension with reasons before the deadline.
GST and documentation
Design services to a foreign client are generally zero-rated where all five Section 2(6) IGST Act conditions are met. Most firms export under LUT, with invoices stating "Supply meant for export under LUT without payment of IGST". Keep master service agreements and statements of work handy: Part 2B asks for the contract number and date on every row.
The EDF is a FEMA declaration and does not change GST or income-tax obligations. This article is general information, not legal or tax advice.
Frequently asked questions
Is VLSI design "Software" or "Services" on the EDF?
It depends on what you deliver and how your bank views it. Firmware is commonly treated as software; RTL design, verification and physical design may be described as technical services. Agree the classification with your CA and bank, then apply it consistently.
Can an embedded firm still file with STPI?
Yes, for software exports outside an SEZ. STPI and AD banks are both specified authorities, and STPI certification is no longer mandatory. Non-software services go to the AD bank.
Do prototype boards shipped abroad go on the services EDF?
No. Physical boards and samples are goods and follow the goods export process. Only the design and engineering services go on the services EDF.
How should NRE milestones appear on the EDF?
Each milestone invoice is one Part 2B row in the EDF for the month it is raised. The project's start or end date does not matter; the invoice date does.
Our design centre is in an SEZ. Who receives our EDF?
The SEZ Development Commissioner, for both software and services. Your bank still receives the foreign payments, so keep collecting FIRAs and ask both offices how they want realisation evidenced.
Bottom line
For embedded and VLSI firms, the EDF is routine once you have decided which streams are software and which are services, and where each one is filed. Keep goods shipments separate and invoice contingent fees only when earned. The free EDF form generator supports both Software and Services declarations.
This guide is general information for Indian businesses, not legal or tax advice. Rules and bank processes change — confirm specifics with your AD bank or chartered accountant.