1) Why India for Manufacturing
India pairs a large domestic market with globally competitive engineering talent, improving infrastructure, and a broad supplier base. For foreign manufacturers, the opportunity spans consumer goods, automotive and EV components, electronics, renewables, chemicals, pharmaceuticals, textiles, food processing, and more. The legal pathway is straightforward when you choose the right entry route, comply with foreign investment rules, and maintain strong governance from day one.
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2) Market Entry Options for Foreign Manufacturers
Wholly-Owned Subsidiary (WOS) or Joint Venture (JV)
An Indian private limited company is the default choice. A WOS offers full control where sector rules allow; a JV can accelerate permits, supply chain access, and distribution through a local partner.
Limited Presence Models: BO / LO / PO
A Branch Office (BO), Liaison Office (LO), or Project Office (PO) operates under the foreign parent’s name and RBI rules. These are narrow in scope—LOs cannot earn revenue; BOs are suitable for specific, permitted activities; POs suit project-bound contracts. For full-fledged manufacturing, an Indian company (WOS/JV) is typically the suitable structure.
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3) FDI Policy & Sectoral Caps (Manufacturing)
Manufacturing generally permits up to 100% foreign direct investment under the automatic route, subject to applicable laws, standards, and sectoral regulations. Certain activities (e.g., defence-related manufacturing, specific financial services, multi-brand retail) have conditions, caps, or approval requirements. Before finalising your structure, confirm the route (automatic/approval), any licensing prerequisites, and downstream conditions (such as sourcing norms in retail contexts).
- Deal planning: Align term sheets and timelines with any approval conditions; ensure pricing/valuation follows applicable regulations for share issues/transfers.
- Documentation: Maintain robust KYC, board/shareholder approvals, and traceable remittance documentation.
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4) Incorporation via SPICe+ (Step-by-Step)
Pre-requisites
- Directors: Minimum two; at least one resident in India. Obtain DIN and Digital Signature Certificates (DSC).
- Name clearance: Check availability and restricted terms.
- Charter documents: Draft MoA/AoA aligned with intended manufacturing activities and any licence conditions.
SPICe+ Filing Flow
- Reserve the company name via SPICe+ Part A.
- Complete SPICe+ Part B: e-MoA (INC-33), e-AoA (INC-34), AGILE-PRO-S (for tax/labour options). Attach notarised/apostilled foreign docs as applicable.
- Receive Certificate of Incorporation with CIN; PAN/TAN generally allotted together.
Tip: If manufacturing begins later (after land and licences), incorporate early so vendor onboarding, banking, and hiring can start on time.
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5) Land, Location & Incentives
- Industrial parks & estates: Evaluate state industrial development corporations for plug-and-play plots/sheds and utilities. Compare power, water, waste management, and logistics.
- Special regimes: Consider SEZ units or EOU status for export-oriented models, keeping in view evolving incentive frameworks and compliance requirements.
- Incentives: Central/state incentives may cover capital subsidy, interest subvention, stamp duty concessions, and employment-linked benefits. Track scheme-specific eligibility, application windows, and compliance milestones.
- Leases vs freehold: Ensure title diligence, permitted land use, and environmental zoning before committing.
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6) Industrial Licences, Quality & EHS
- Industrial licences: Most manufacturing is de-licensed; however, certain sectors need prior licences/registrations. Verify early.
- Standards & certification: Many products require BIS certification or quality control orders (QCOs). Plan for testing, marking, and periodic audits.
- Environment, Health & Safety (EHS): Obtain applicable consents/authorisations (air, water, hazardous waste), factory licences, and building/warehouse permits. Implement safety training and incident registers.
- Metrology & labelling: Legal Metrology rules apply to packaging, declarations, and net quantity standards.
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7) GST, Customs & Supply Chain
GST Operations
- Obtain GST registration per state of operation; enable e-invoicing where applicable.
- Classify goods/services correctly (HSN/SAC), maintain timely returns (e.g., GSTR-1/3B), and reconcile input tax credit.
Customs & Imports
- Secure IEC (Importer-Exporter Code) for cross-border trade.
- Evaluate bonded warehousing, duty-exempt procurement for SEZ/EOU, and import duty structures.
- Maintain accurate valuation, origin documentation, and compliance with product-specific restrictions/standards.
Supply Chain & Logistics
- Use multi-state registrations where factories and depots operate; plan stock transfers and e-way bills.
- Contract carefully with vendors, logistics providers, and distributors—define specs, SLAs, indemnities, and compliance undertakings.
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8) Direct Tax, Permanent Establishment (PE) & Transfer Pricing
- Choice of vehicle: Company vs branch affects tax rates, profit attribution, and compliance.
- PE risk: Even without a subsidiary, fixed place/agent/project presence can trigger Indian tax on attributable profits.
- Withholding tax: Cross-border royalties, fees, interest may attract withholding—check domestic law and treaty relief.
- Transfer pricing: Related-party transactions must be at arm’s length; maintain robust documentation and inter-company agreements.
- MAT/Surcharge/Cess: Model total tax cost, incentives, and depreciation benefits for capex-heavy projects.
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9) Labour, Payroll & Workplace Compliance
- Contracts & policies: Issue written employment contracts, HR handbooks, POSH policy, and shop/factory-specific rules.
- Registrations: Apply applicable state registrations; manage EPF and ESIC where thresholds apply.
- Time & safety: Maintain muster rolls, working hour records, safety drills, and accident registers as mandated.
- Expatriates: Ensure correct visas, FRRO registration (where applicable), and tax equalisation arrangements.
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10) Banking, FX & FEMA Reporting
- Banking: Open current accounts with AD Category-I banks; align remittances to permitted modes.
- Equity inflows: Follow pricing/valuation norms for share issues/transfers; complete foreign investment filings within timelines.
- External commercial borrowings: If leveraging debt, ensure eligibility, end-use, and reporting compliance.
- Records: Maintain share registers, certificates, and minutes; ensure statutory books are up-to-date for diligence.
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11) Governance, Compliance Calendar & Hygiene
- Company law: Board/AGM meetings on schedule; file annual returns/financials.
- Tax & GST: Return calendars, e-invoicing, reconciliations, and audits (where applicable).
- Factory & EHS: Renewals for consents/licences; periodic safety training and audits.
- IP & contracts: File trademarks early; standardise vendor/MSA templates and NDAs.
- Internal controls: SOPs for PO-to-pay, inventory, and fixed assets; segregation of duties.
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12) FAQs
Is 100% foreign ownership allowed in manufacturing?
Generally yes, under the automatic route, subject to applicable laws and any sector-specific conditions. Verify your exact product/activity early.
Do I need an industrial licence?
Most sectors are de-licensed, but specific products/chemicals/defence-linked items may require prior licences and additional clearances.
What quality marks are required?
Where notified, BIS certification/QCOs apply. Many electronics, appliances, and safety-critical items have mandatory standards.
Should I choose SEZ, EOU, or Domestic Tariff Area (DTA)?
It depends on your export share, duty incidence, and compliance appetite. Model landed costs and operational obligations before choosing.
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Suggested Reading (Internal)
- Doing Business in India: A Complete Legal & Compliance Guide for Foreign Companies (2025 Edition) — Pillar Post
- Understanding India’s FDI Policy: Sectoral Caps & Approval Routes
- Setting Up a Wholly Owned Subsidiary in India as a Foreign Investor
- Forming a Joint Venture in India: Legal & Regulatory Requirements for Foreign Partners
- How to Register a Liaison Office in India: Rules for Foreign Companies
- Setting Up a Branch Office in India: RBI & MCA Guidelines for Overseas Firms
- Establishing an LLP in India: Process & Compliance for Foreign Nationals
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