Invest India-Compliance Checklist. The vibrant Indian economy beckons entrepreneurs worldwide! Whether you've got a groundbreaking concept or a well-honed business plan, this guide equips you to navigate the exciting yet intricate journey from idea to a fully operational enterprise. We'll focus on the essential compliances you need to meet at every step, ensuring your business thrives in the Indian market. Get Expert Help Launching Your Dream Business with Appkomp Solutions' End-to-End Startup Services.
1. Craft Your Winning Business Plan: The Roadmap to Success
Before diving in, chart your course. A well-defined business plan acts as your blueprint, outlining your vision, target market, competitive analysis, marketing strategy, and financial projections. This not only clarifies your goals but also becomes crucial when seeking funding.
2. Choosing Your Business Structure: Selecting the Right Vehicle
Business ventures can be carried on in India through sole proprietorships, partnerships.
(including LLPs) or through companies incorporated in India. Think of your business as a vehicle. Limited Liability Partnership (LLP), Private Limited Company (Pvt Ltd), and Public Limited Company (Public Ltd) are some of the options available, each with its own set of regulations and advantages. Consider factors like liability, scalability, ownership structure, and fundraising needs when making this crucial decision.
3. Business Registration: Obtaining Your Official Seal
Now, let's get you registered! The Ministry of Corporate Affairs (MCA) portal is your one-stop shop for registering most business entities. The process involves obtaining a Director Identification Number (DIN), Digital Signature Certificate (DSC), and finally, registering your company name. Remember, specific requirements vary depending on your chosen structure.
Setting up legal existence of the entity
Department | Process | |
1 | MCA | Obtain Director Identification Number (DIN) |
2 | MCA | Digital Signature Certificate (DSC) for proposed Directors |
3 | MCA | Approval for proposed Company/ LLP Name |
4 | MCA | Finalization of supporting documents |
5 | MCA | Filing of e-forms with CRC |
6 | MCA | Verification of documents |
7 | MCA | Consent to establish & operate- Certificate of incorporation. |
8 | Income Tax | Obtain Permanent Account Number (PAN) |
9 | Income Tax | Registration for Tax Account Number (TAN) |
10 | CBIC | Registration of GST |
4. Taxing Matters: Registering for GST/PAN/TAN
The Goods and Services Tax (GST) is a crucial aspect of operating a business in India. Depending on your annual turnover, you might need to register for GST. This registration enables you to collect and deposit taxes on goods and services sold.
PAN (Permanent Account Number): Every business entity needs a PAN from the Income Tax Department. This acts as your tax identification number.
TAN (Tax Deduction and Collection Account Number): If your business is liable to deduct tax at source (TDS) on certain payments, you'll need a TAN.
Registering Unit
Department | Process | |
1 | State Government | Registering / categorization of unit in State |
2 | Industries Department - State Government (If Eligible) | Approval for State Incentives (If Eligible) |
3 | Department of Industries-DPITT | IEM/ EM Registration |
4 | Ministry of MSME | MSME/Udyam Registration |
Udyam Aadhar Registration: Udyam Aadhar is a mandatory registration for all micro, small and medium enterprises (MSMEs). It unlocks benefits like loans, subsidies, and participation in government tenders.
Industrial Entrepreneurs' Memorandum (IEM) from DPIIT: For certain industries, an IEM filing with the Department for Promotion of Industry and Internal Trade (DPIIT) is mandatory.
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5.Licenses and Permits: Complying with Industry Regulations - Pre-commissioning phase.
Depending on your industry and location, you might need additional licenses and permits to operate legally. These could include:
Pollution Control Board (PCB): If your business generates pollutants, you'll need to register with the relevant State Pollution Control Board and obtain a Consent for Establishment (CFE) and Consent to Operate (CTO/CFO) authorization.
Factories Act: Factories employing 10 or more workers with power, or 20 or more workers without power, need to register under the Factories Act and obtain a Factory License.
Mines and Geology Department: If your business involves mining or quarrying activities, you'll need to register with the relevant Mines and Geology Department and obtain necessary permits.
Registration under Contract Labour Act 1970: Under the Contract Labour (Regulation and Abolition) Act, 1970 approval required. It is usually granted by the Labour’s Department of each state however the competent authority may vary from state to state.
Registration under BOCW Act: Under the Building and other Construction Workers Act, 1996:Approval required during pre and post commissioning stage. It is usually granted by the Labour’s Department of each state however the competent authority may vary from state to state.
Professional Tax: Most states levy a professional tax on employees. You'll need to register for Professional Tax (PT) collection and remittance.
Import and Export Code (IEC) Application under DGFT: If you plan to import or export goods, you'll need to apply for an IEC from the Directorate General of Foreign Trade (DGFT).
Shops & Establishment Act: Registration under Shop & Establishment is provided by state government.
Labor Laws: Building a Compliant Workforce If you plan to hire employees, ensure you comply with labor laws such as the Minimum Wages Act and the Employees' Provident Fund and Miscellaneous Provisions Act. Registering with the Employees' State Insurance Corporation (ESIC) might also be mandatory depending on your employee count.
Grant for Bureau of Indian Standards (BIS) License: You'll need to register for Products that mandatory require BIS license.
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7. Banking and Taxation: Managing Your Finances Wisely
Open a separate business bank account to segregate your personal and professional finances. Familiarize yourself with the tax implications for your chosen business structure. India's tax system can be complex, so consulting a tax advisor is highly recommended. They can help you navigate GST, income tax, and other relevant levies.
8. Production and Operations: Setting the Wheels in Motion With the groundwork laid, it's time to focus on production! Ensure you adhere to any industry-specific regulations or quality standards. Obtaining necessary certifications can enhance your brand credibility and open doors to new markets.
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Foreign Direct Investment (FDI):
Foreign investment in India is primarily regulated by: (i) the industrial policy; (ii) FEMA and rules promulgated thereunder; (iii) the regulations and notifications issued by the Reserve Bank; and (iv) the FDI Policy issued by the DPITT.
The Foreign Investment is subject to Consolidated FDI Policy (relating to sectoral caps and whether entry is through automatic or approval route, pricing guidelines etc.)
FC-GPR stands for Foreign Currency Gross Provisional Return. It's a form mandated by the Reserve Bank of India (RBI) for companies receiving Foreign Direct Investment (FDI).
Compliance Requirements:
Who needs to file? - Any Indian company that issues shares or convertible instruments to a foreign investor needs to file the FC-GPR form. This includes foreign wholly-owned subsidiaries, joint ventures, and Non-Resident Indians (NRIs).
What to report? - The form captures details of the investment, including the type and value of instruments issued, the foreign investor's information, and the source of funds.
When to file? - The FC-GPR needs to be filed with the RBI within 30 days of allotting shares to the foreign investor.
Documents required: - Along with the form, you'll need to submit supporting documents like:
Foreign Inward Remittance Certificate (FIRC)
Company Secretary Certificate for compliance with Companies Act
Valuation report by a Chartered Accountant or Merchant Banker for issued shares
Board resolution approving the allotment
Foreign Investment Promotion Board (FIPB) approval (if applicable)
Additional points:
The FC-GPR filing is done electronically through the RBI's Foreign Investment Reporting and Management System (FIRMS) portal. The forms submitted on the portal will be auto acknowledged.
Failure to file the FC-GPR can lead to penalties and delays in future FDI transactions for the company.
This is not an exhaustive list, and specific laws may apply depending on the industry and size of the establishment. It's highly recommended to consult with professional for comprehensive guidance.
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