1) Setting up manufacturing in India requires numerous regulatory compliances including obtaining an industrial license, registering the business entity, procuring land or office space, meeting quality standards, and adhering to various sector-specific and environmental laws. 2) Full compliance is complex due to the large number (around 2000) of regulations and the dynamic nature of the regulatory environment. Hiring an experienced Indian law firm can help navigate requirements more efficiently. 3) The Indian government aims to streamline processes and ease norms to attract more foreign investment and manufacturing given increasing interest from multinational companies.

1. Step-By-Step Guide on How to Shift
Manufacturing to India
India is increasingly becoming the preferred location for businesses looking
to set up a strong business foothold, especially in the Asia-Pacific region.
The reasons for this could be manifold. Cheap availability of skilled labour,
availability of qualified and experienced managers, favourable tropical
weather conditions, space, access to the huge and often diverse consumer
market etc. are just some of the reasons in India.
Of late, many players in the technology sector, such as Apple have
expressed a desire to shift a significant portion of their manufacturing bases
to India. Apart from this, players in the FMCG, home appliances, education
technology sector etc. are also planning to take similar steps.
This article shall therefore provide you with a detailed guide on what
regulatory compliances are required while shifting manufacturing processes
to India.
Introduction

2. Setting Foot in India
Industrial Licenses
The first step toward setting up business in India, requires one to have a
registered office in India. This would involve, either purchasing or renting a
land and registering the same with the Registrar of Companies under Section
12 of the Companies Act, 1872as the registered office of your manufacturing
unit in India. This is important because all legal notices of suits, arbitrations,
etc. shall be sent to the same office and delivery to the registered office is
considered due service of summons under Indian civil procedural law.
Procuring a land would attract the provisions of the Indian Contract Act,
1872 and the Transfer of Property Act, 1882. The contract for sale or lease of
the land must be for a lawful purpose and must not be used for
manufacturing anything against the public policy of India, for example, for
manufacturing prohibited drugs.
If the entity is looking forward to a long-term existence in India, they must
either purchase the land or get a long-term lease. Section 105 of the Transfer
of property Act, 1882 permits perpetual leases.
Getting a license under the Industries (Development & Regulation Act),
1951 is the sine qua non for starting any manufacturing activity in India.
Application for an Industrial License may be made online on the e-Biz
portal of the government. Such a license, once granted is valid for a period
of three years from the date of grant. While there existed strict licensing
requirements under this act for almost all major commercial activities, the
scope of the same has been drastically reduced over time.

3. Industrial Classification Code
Conforming to Quality Standards
In fact, from September 2019 onwards a license under this act is required for
manufacturing activities in only four sectors- defence equipment, hazardous
chemicals, tobacco and explosives. Apart from this,there are some sectors
which are reserved only for the MSME sector. Non-MSMEs who wish to
manufacture products in these sectors would then be required to get an
industrial license for the same and are then also obliged to export 50% of the
production for at least three years.
Once you have determined the sector for which you shall be manufacturing
the goods and procured the requisite license for manufacturing the same, it
is necessary that you also procure an Industrial Classification Code under
the national Industrial Classification- 2008. This code helps the Central
Statistical Organisation of the Central Government to keep updated records
of all economic activities taking place in the nation. While these are more
important for the government, than for the industry, having a business
presence in India would imply conforming to this policy.
Once the unit is set for production, it is important that it meet the quality
standards. The Bureau of Indian Standards Act, 2016 governs the same.
Under the act, the BIS has appointed regional offices, where the factory
must send its sample manufactured products for testing.Only if the tests
meet the prescribed quality standards for sale in the Indian consumer
market will the unit be permitted to go ahead with mass production.

4. In case your enterprise qualifies under the prescribed turnover limits, it is
advisable to get registered under the relevant category an MSME. They are
governed by the MSMEs Development Act, 2006. Under the Act, micro,
small and medium sized industry is an entity involved in manufacturing or
processing whose investment in machinery does not exceed 25 lakhs, 5
crores and 10 crores respectively. Once registered, an MSMEmust also get
an Aadhar Udyog Registration number, which is a 12 digit Aadhar code
given to MSMEs for easing regulation of MSMEs.The government has de-
vised several incentive-based policies, ranging from liquidity assistance,
credit guarantee for borrowing, tax exemptions etc. to give a boost to the
MSME sector.
While these were the general steps that every manufacturer has to be mind-
ful of, there are other special compliances required to be adhered to by a
new business entrant in India. The Companies Act, 2013, the Goods and
Services Tax Act, 2017, the Income tax Act, 1961, the Factories Act, 1948,
are a few of such legislations.
Registration as an MSME
Companies Act, 2013
This is the legislation with the maximum number of compliance requirements.
Ranging from auditing, annual returns, maintenance of books of account,
holding of annual general meetings, requirements relating to composition of
the board, shareholders’rights, protection of minority shareholders etc.
However, these become applicable only once the manufacturing unit and

5. Foreign Investment Laws
business entity have been successfully established in India. Therefore, apart
from registration of the office, and registering the name of the entity in case
of a start-up, not many provisions of the Companies Act, 2013 are directly
applicable at the time of setting up of the manufacturing unit.
If a foreign entity is planning to shift its operations to India, the most
important relevant laws for that entity are those pertaining to foreign
investment. Since setting up a new manufacturing unit in India, amounts to a
greenfield investment,the laws pertaining to that will apply. These are
primarily governed by the Foreign Exchange Management Act, 2000 and are
subject to various regulations set by the central government and RBI for
foreign investment in India. Such investment may either be through the
direct route or the approval route. There are 11 specified sectors like atomic
energy where prior approval of the government is necessary before
investment. The other route is direct route wherein the entity may directly set
up a unit in India.
The government has set limits for foreign investment in every sector.
Therefore, the business entity must ensure that its investment in India falls
under the sectoral limits. The DPITT issues the FDI Policy from time to time
in this regard. It is therefore important to keep track of Press Notes issued by
the DPIIT under the FDI Policy to track the latest developments in the area.
Ensuring compliance with foreign investment would require conforming to
provisions of the Foreign Exchange Management (Non-debt Instruments)
Rules 2019 and the RBI Circulars and master Directions. As these vary for
different sectors, the entity would have to determine for itself, which of these
provisions are applicable to it and which are not.

6. Environmental Laws
Tax laws
All registered entities doing business in India are liable to pay tax on the
income they earn from India. This becomes more true for entities that seek to
have a physical presence in the country, for example, a manufacturing unit.
Section 115 BAB of the Income Tax Act, 1961 allows a newly set up domestic
company in the manufacturing sector to pay tax at the rate of 15% of its total
income. Apart from this, depending on whether the manufactured goods are
transported intra-state or inter-state, the entity shall also be liable to pay the
tax under the Goods and Services Tax, 2017. This will depend on the turnover
of the entity, the sector in which it is operating, the State in which the manu-
facturing is being carried out etc. Again, these are applicable, once the entity
starts manufacturing and begins earning profits and not at the time of setting
up.
Indian environmentalists are becoming increasingly conscious of the effects
industrial activities have on the environment. This has led to development of
a strict jurisprudence on environment. The manufacturing entity therefore
would have get environmental clearances under the EIA Notification, 2006
prior to setting up the unit. This would require the industry to submit detailed
plans of the geographical area sought to be covered etc. to the authorities.
Pursuant to that, the respective Pollution Control Boards under the Water
Act, 1974 and the Air Act, 1981 have the authority for inspection, collection
of samples, and analyse the pollution being caused by the industry. They
have even been vested with the authority to cancel the operating license of a
unit if they find the operations to be extremely harmful for the environment.

7. Labour Laws
Sectoral Compliances
Unlike, most other laws, these are applicable prior to setting up of the unit,
and in fact constitute a pre-requisite for commencing operation.
The factory being set up for manufacturing is bound to employ workers for its
operation. The Factories Act, 1948, the Payment of Wages Act, 1936 and the
Industrial Disputes Act, 1947 are just some of such legislations. They ensure
workers get proper living wages, in a timely manner and have adequate
means of dispute resolution with the employer.
Here are other social security legislations like the Maternity Benefits Act,
1961 (which provides for paid maternity leave for a period of 6 months), and
the Workmen’s Compensation Act, 1923 (which provides for compensation
for injuries received at the workplace).
This is probably the most resource consuming compliance. This is because
while other compliances are common to all industries, these are compliances
that are specific to the sector your company operates in. For example, an
entity manufacturing edible products, will have to comply with provisions of
the Food Safety and Standards Act, 2006 and obtain a license from the
FSSAI. Similarly, company engaged in refining oil and petrochemicals is
bound by the provisions of the Boilers Act, 1923, and a company manufac-
turing drugs would have to obtain the relevant license under the Drugs and
Cosmetics Act, 1940.

8. Ricky Chopra International Counsels:
Since these vary from sector to sector, it won’t be possible to list them
exhaustively. The entity would have to make sure that these are complied
with. Most of the time, the authorities do provide assistance in this regard.
For example, for SEBI related compliances, there is an informal advice
mechanism. Similarly, for tax related queries, the Authority for Advance
Ruling usually clarifies the same.
Full Service law Firms Excelling in Corporate Advisory
As a result, laws governing manufacturing and processing are changing by
the day. Such a dynamic and unpredictable regulatory scenario is bound to
burden business entities with the responsibilities of compliance. In order to
save time and resources sent of compliance, a lot of entities are increasingly
resorting to assistance of Indian legal professionals, being more adept with
the local laws.
Ricky Chopra International Counsels is one such corporate law firm in India
which specializes in advising clients on regulatory and compliance
requirements. We have decades of experience in assisting major corporate
houses, including the Fortune 500 companies in setting up businesses,
complying with local laws and fulfilling all regulatory requirements. Our
full-service firm has experts in every possible field ranging from tax, capital
markets, IPR, competition, and labour laws.

9. Conclusion
The Federation of Industrial Chambers of Commerce and Industry (FICCI)
recently brought to the notice of the government that an entity that intends to
set-up manufacturing in India requires close to 2000 regulatory compliances.
The government is therefore planning to streamline many of these processes
and ease the norms for manufacturing entities. This is the need of the hour
considering the number of entities that have expressed a desire to shift their
production units to India. The improvement of India’s rank in the Global Ease
of Doing Business Index is also an indication that foreign investors are likely
to show much interest in the Indian market in the coming years. It is only ad-
visable that the regulatory environment be made favourable for them when
they arrive.