A connected DPI system is needed as a solution

“Digital colonisation” is no longer theoretical. A handful of large US-based technology companies have dominated, but with AI, that colonisation can be completely disastrous. India remains primarily a consumer of foreign digital products and services. The need for “Sovereign AI” recognition alone is recent and very late. AI can flip our services trade, which accounts for over 40% of India’s exports, from export surplus to import surplus.

Digital trade governance is a challenge.

No one knows today how much businesses and individual consumers use ChatGPT or Claude. We lack the systems needed even to measure, track, or govern the consumption of foreign digital products.

Reason → The system is broken – India’s trade governance architecture remains overwhelmingly goods-centric. Physical goods move through ports and customs checkpoints, but Digital products move through communication networks and “electronic transmissions” undetected.

3 Corollaries arise from here

Intuitively, what is digital must ultimately be governed through digital means.
India has demonstrated its capability to build sovereign-scale digital infrastructure by creating DPI like UPI and Account Aggregator-led FinTech.
Trade governance can’t be done in regulatory silos in the data-driven AI era.

Cross-border digital trade now requires a similar strategic intervention.

We need a reimagined trade management architecture. A unified digital framework for both goods and services.

The digital silos of GST, DGFT, ICEGATE, and RBI must be connected to form a connected systems DPI. A unified DPI across these systems enhances trade governance for both goods and services. It helps manage the movement of physical goods through ports, as well as intangible assets like services and intellectual property, by positioning them as a “digital port”.

The challenge is not a lack of data, but fragmented systems that don’t share it. The power of connected systems DPI is that it can be built:

Without centralising data, and
Departmental boundaries remaining intact

Gains from Digital Port are multiple: some early, some advanced.

Export Financing: GSTN has emerged as the primary source of truth for export invoices. The consequences are significant. Small exporters struggle to access export credit on time. GSTN and ICEGATE sharing invoices for verification will remove double-dipping of Invoices.
Unified Trade filing: Export and Import filing can become seamless if GSTN reconciles export invoices online with bank remittances.
Domestic value addition (local content) measurement can be done for every firm and product.
Cross-border digital e-commerce: presently, B2C digital trade leaks revenue.
Fraud detection remains inefficient because visibility is fragmented.
Unified duty-free import schemes can be digitised and integrated. Proposed industrial parks and manufacturing corridors can offer a healthy mix of manufacturing and digitally managed export zones with integrated bond management systems.

This transformation is no longer optional.

BTN was announced in 2025. An effective way to achieve foolproof BTN is to connect DGFT, GSTN, ICEGATE, and RBI systems. This can evolve into a “Digital Port” or BTN++.

Conclusion – Overcome Slios & adopt Whole of Govt Approach

The Honourable Prime Minister has called for overcoming silos in Government and adopting a whole-of-government approach. Connected Systems DPI helps achieve this. The Concept of Digital Port is based on the same approach.

DGFT has taken up BTN development. However, a) BTN is limited to export financing for now, and b) it seems the approach is still to build BTN as another digital Silo and limit development within DGFT’s walls.

→ BTN should not become another digital silo.
→ It should become the connective tissue of India’s trade architecture.
→ Establish a ‘Trade DPI’ Institution (or SPV) Quickly

Create or designate a neutral Trade DPI body, analogous to the role played by GSTN, to steward common standards, APIs, the interoperability layer, and the ecosystem.

With the formation of a three-member Secretary Committee, the Government of India has already made data sharing one of its top priorities. Government has to rally behind the concept to build a “Digital Port”. Data Sharing by GST, Customs and RBI is a necessity; any hurdles in the way must be removed.

This connected-systems DPI in foreign trade can be built as a vertical, as most of the systems are already digital in the set of GST, ICEGATE, RBI (EPDMS and IPDMS), and DGFT.

This would position India to build one of the world’s first “Digital Ports” for the Digital economy in the AI era, while also including physical goods. Our DPI can then be used across the entire Global South. This can be another milestone in our DPI journey and global DPI positioning, while strengthening our economy internally through frictionless trade and ease of doing business.

We had published a Blog in 2016 on Sofex form confusion. It became one of the most-read pieces on our blog. Read here for ready reference.

Since then, we have been exhorting the Government to remove the Softex and, more specifically, after GST came into existence. Softex forms have been replaced by RBI in a recent notification with a single form called the Export Declaration Form (EDF), for both Goods and Services. This Blog helps you decipher the Gazette Notification No. FEMA 23(R)/2026-RB given here (Click to read) dated 13 Jan 2026.

While we have been advocating for bold reform by the RBI and related foreign trade regulators, the RBI has delivered only on one part. A 100% digital transformation of regulatory systems could help India move from the 6-7% growth bracket to the 9-10% growth bracket. Unfortunately, the current policy step misses this opportunity. We hope there will be corrections to adopt a bold stance soon.

We have analysed below what this current notification has in store for the exporters in the Software or Services sector from October 01, 2026, the date when this notification comes into force.

What does it mean for the software sector?

Is Softex abrogated?

The Softex form will not exist from 1^st October 2026, but the export declaration will remain. RBI has mandated one single form known as the export declaration form (EDF). All goods and services (including Software) exporters will file EDF forms.

Is it still mandatory to get STPI certification?

RBI, through this notification, now recognises Authorised dealers as “Specified Authority” at par with STPI in DTA. Hence, STPI certification will not be mandatory, and Software, IT, or ITeS businesses in DTA will have the option to get it certified by bankers after 1 October 2026.

However, if an authorised dealer, i.e. your bank, wants STPI or SEZ to certify, then it may not be possible to bypass STPI. So this remains to be clarified after the banks notify their process, as the RBI has left the process to the banks.

Software definition

RBI has issued an interim relief earlier, asking IT-Enabled Services to be exempted from STPI /SEZ certification and to directly file with banks under the purpose code P802. This relief had come very recently, less than a year ago. Why code 802 came into existence is not known in the public domain.

The notification defines “Software” as “any computer programme, database, drawing, design, audio/video signals, any information by whatever name called in or on any medium other than in or on any physical medium.”

It is a very ambiguous definition, and it seems to include everything intangible. Effectively, this means only services that are delivered physically onsite in a cross-border geography will be out of the scope of this definition. After this notification, the distinction between Software, IT Services, and IT-enabled services will vanish. There is no clarity in the use of the purpose code in the notification. Perhaps this will evolve into standard operating procedure by banks in future and remove some of the anomalies.

It would have been better to accommodate this for the clear classification and separate purpose code for the following, or a way to map it with HSN and Service Accounting Code (SAC) as used by CBIC.

What and who is a specified Authority?

The notification does not define ‘specified officer’ but names them. The way this is defined will still keep some confusion alive.

(i) Commissioner of Customs in the Domestic Tariff Area (DTA) and Development Commissioner of Special Economic Zone (SEZ) in SEZ, for goods;

(ii) An Authorised Dealer in DTA and Development Commissioner of Special Economic Zone (SEZ) in SEZ, for services other than software; and

(iii) An Authorised Dealer or Software Technology Parks of India (STPI) in DTA, and Development
Commissioner of Special Economic Zone (SEZ) in SEZ, for software.

Only RBI can clarify why they used ‘and’ as a connector in (i) and (ii) and why they used an ‘or’ in (iii).

For now, it means that for Software as defined in the notification, it is either an Authorised Dealer or STPI in the Domestic Tariff Area (i.e. units not in SEZ) and an Authorised dealer or DC SEZ in a Special Economic Zone.

Conclusion

The Software or IT and ITeS businesses will file the new EDF instead of the SOFTEX form after 1st of October 2026. The DTA units have an option to get EDF certified by Authorised Dealers (your bank) or STPI, and Authorised Dealers (your bank) or DC SEZ in a Special Economic Zone.

All services exporters other than Software must now file an export declaration. This is a change, as earlier services exporters other than Software (IT and IT-enabled) services did not need to file an export declaration.

The operating process is largely left to Authorised Dealers, hence the Banks’ digital transformation in this area becomes the key, and what process the Banks adopt will be critical to ease of doing in business as the notification on its applicability after 1^st October 2026.

Disclaimer: The write-up here and ideas expressed should not be construed as legal advice. This is written with the industry practitioners’ approach on policy implications for the Software sector, for the purpose of benefiting the Industry members.

Tag: Customs

Digital Port as a Unified Cross-Border Trade System