KRPR & Associates / Setting Up a Manufacturing or Trading Company in India
How to set up a manufacturing or trading company in India for foreign companies.
Most "how to set up in India" guides — including several of our own — are written for software and services companies: register the entity, open a bank account, hire a team, run payroll. If you're bringing in machinery, importing raw materials, or manufacturing physical goods, that guide is missing most of what actually determines your timeline.
This one covers the parts unique to manufacturing and trading — import-export registration, factory licensing, environmental clearances, product certification, and the customs and GST mechanics of moving goods — in the order you'll actually need them. We handle the full stack for foreign-owned entities.
This is a different regulatory stack, not a variation on it.
A services or IT subsidiary needs an entity, a bank account, and an office lease — full stop. A manufacturing or trading operation needs all of that, plus an entirely separate layer of approvals that a software company never touches. Here's the honest comparison.
| Requirement | Services / IT subsidiary | Manufacturing / trading company |
|---|---|---|
| Entity incorporation | Required — 15–20 business days | Required — same timeline |
| Import Export Code (IEC) | Only if exporting services abroad | Required for nearly all — 1–3 days |
| Factory licence | Not applicable | Mandatory above 10–20 workers |
| Pollution Control Board consent | Not applicable | CTE before construction, CTO before operation |
| Product certification (BIS) | Not applicable | Mandatory for 400+ product categories |
| Land use / industrial zoning | Standard office lease | Change of Land Use or industrial plot allotment |
| Customs duty exposure | Minimal | Direct — raw materials, capital equipment, exports |
| Typical time to operational readiness | 6–8 weeks | 4–6 months |
Entity registration itself is identical either way — see our India subsidiary registration service and the step-by-step guide for that part. Everything below is what comes after. For US, UK or European parents, also see the relevant jurisdiction pages: US, UK, Europe.
Setting up a manufacturing or trading company in India means layering Import Export Code registration, a location decision (DTA vs SEZ vs EOU), factory licensing, pollution board clearances (CTE/CTO), and — for many products — BIS certification on top of standard India subsidiary registration. Realistically, plan for 4 to 6 months from incorporation to first legal production — not the 6 to 8 weeks a services subsidiary needs. KRPR manages the full stack (entity + IEC + FEMA + ongoing compliance) under one engagement for foreign-owned companies.
Entity registration & the Import Export Code.
Incorporation itself doesn't change — you'll still register a wholly owned private limited subsidiary, exactly as covered in our India subsidiary registration service, the step-by-step guide, and the documents checklist. What's different is what happens immediately after: unless you're sourcing and selling 100% domestically, you'll need an Import Export Code (IEC) before you can bring in a single container of raw material or capital equipment.
The IEC is a 10-digit number issued by the Directorate General of Foreign Trade (DGFT), linked to your company's PAN. Without it, customs will not clear your shipments and your bank will not process foreign trade remittances — it's the single most foundational registration for any trading or manufacturing operation, and it's genuinely fast to get.
IEC registration at a glance
- Apply online via Form ANF-2A on the DGFT portal, linked to company PAN
- Government fee: ₹500, one-time, non-refundable
- Typical processing time: 1–3 working days with correct documentation
- Valid for lifetime — but requires an annual online confirmation each April–June, or it gets deactivated
- Register separately on ICEGATE for electronic filing of Bills of Entry (imports) and Shipping Bills (exports)
If your goods fall under the ITC(HS) "restricted" classification, or the SCOMET list for sensitive technology, you'll need an additional item-specific DGFT authorisation on top of the base IEC — worth checking early, since restricted-item approvals take considerably longer than the IEC itself.
Choosing your operating structure — DTA, SEZ, or EOU.
Before you commit to a location, decide which customs and tax framework your operation sits under. This decision shapes almost everything downstream — duty costs, GST treatment, and how fast you can get operational.
| Structure | Best for | Trade-off |
|---|---|---|
| DTA (Domestic Tariff Area) | Businesses selling primarily into the Indian market | Fastest to set up — standard company and industrial licensing, no customs overlay on domestic sales |
| SEZ (Special Economic Zone) | Export-dominant manufacturers importing significant raw materials or capital goods | Duty-free imports and zero-rated GST on inputs, but slower approvals and any DTA sale is treated as an import with full customs duty |
| EOU (Export Oriented Unit) | Exporters wanting SEZ-like duty benefits without relocating into a designated zone | Similar duty-free import privileges to SEZ, with different compliance mechanics and exit obligations |
For most first-time foreign manufacturers targeting the Indian domestic market, a standard DTA location is the pragmatic choice — you avoid the added customs characterisation questions that SEZ-to-DTA sales raise (an active area of tax tribunal litigation right now) and you can move faster. SEZ or EOU status becomes worth the added complexity once your business is genuinely export-majority, typically 70% or more of revenue.
Whichever structure you choose, two duty exemption tools are worth knowing early: Advance Authorisation allows duty-free import of inputs that go directly into export production, and the Export Promotion Capital Goods (EPCG) scheme allows duty-free or reduced-duty import of machinery in exchange for meeting an export obligation over several years — both administered by DGFT, both requiring careful tracking of the export commitment they create.
Land, factory licence & environmental clearances.
This is the sequence that has no equivalent at all for a services subsidiary, and it's where most timeline surprises happen. The steps are sequential — each depends on the one before it — so they can't be parallelised as much as founders expect.
If you're taking a plot in a designated industrial estate — through a state industrial development corporation, such as MIDC in Maharashtra — zoning is already in place. If not, you'll need Change of Land Use (CLU) approval from local authorities before anything else can proceed. Several states run active manufacturing subsidy schemes tied to industrial estate allotment; see our guide to Maharashtra's Industrial Incentive Policy for one example worth checking before you finalise a location.
Obtained from the State Pollution Control Board before construction begins. You'll submit your plant layout, manufacturing process details, and waste treatment plans. The CPCB classifies industries into four categories — Red, Orange, Green, and White, by pollution index — and the scrutiny level scales with your category. A textile dyeing unit and a light-assembly electronics plant go through very different levels of review here.
Once you employ 10 or more workers with power-driven machinery (or 20+ without), you're legally a "factory" under the Factories Act, 1948 — now overlaid by the Occupational Safety, Health and Working Conditions Code, 2020, effective November 2025. The licence requires building plan approval, a site inspection by the Chief Inspector of Factories, and submission via Form 2. Fees range from roughly ₹500 to ₹10,000+ depending on the state and factory size.
Issued after construction is complete and before you actually start production — confirms the built facility matches what CTE approved, and that pollution control systems are functioning as designed. Operating without CTO, even with a valid factory licence, is a direct violation.
Hazardous processes (chemicals, certain pesticides, asbestos-adjacent work) trigger additional Site Appraisal Committee clearance and a Disaster Management Plan. Pharmaceutical manufacturing needs a separate Drug Manufacturing Licence. Confirm early whether your specific process falls into one of these categories — it changes the timeline materially.
Factory licence data is now cross-checked by multiple regulators — pollution boards verify it before issuing CTE/CTO, GST authorities cross-reference it against registered addresses, and BIS surveillance teams reference it during compliance audits. Getting this sequence clean the first time avoids a cascade of downstream friction.
Product certification — do you need a BIS mark?
Over 400 product categories cannot be manufactured, imported, or sold in India without Bureau of Indian Standards (BIS) certification — electronics, steel, cement, batteries, toys, several food and chemical products among them. If your product isn't on the notified list, you can skip this section entirely. If it is, you cannot legally enter the Indian market without it.
| Scheme | Applies to | Process & timeline |
|---|---|---|
| CRS (Compulsory Registration Scheme) | Electronics and IT products (~80 categories) | Lab testing + self-declaration, no factory inspection — 3–5 weeks |
| ISI Mark | Industrial & household products (steel, cement, appliances) | Lab testing + BIS factory inspection — roughly 3 months |
| FMCS (Foreign Manufacturers Certification Scheme) | Foreign manufacturers exporting BIS-regulated products into India | Requires an Authorised Indian Representative — 4–6 months |
One practical note for foreign manufacturers: BIS registration for CRS and FMCS is granted to the manufacturer, not the importer or distributor. If you're importing finished goods into India rather than manufacturing locally, you still need to confirm your overseas manufacturer holds valid BIS certification for the specific product — the certificate doesn't transfer automatically just because your Indian entity is the one selling it.
GST, customs & duty exemption schemes.
GST registration itself is standard regardless of sector. What's different for manufacturing and trading is the volume and complexity of what flows through it — input tax credit on capital goods, HSN-based classification, and the customs duty layer that a services company never encounters.
GST essentials for goods businesses
- Full input tax credit is generally available on capital goods (machinery, equipment) used for business — a meaningful cash flow consideration when importing production equipment
- Correct HSN (Harmonised System of Nomenclature) classification determines your GST rate — misclassification is one of the most common sources of GST disputes for manufacturers
- E-way bills are mandatory for goods movement above ₹50,000 in value — a compliance step services businesses simply don't have
- Exports are zero-rated under GST, with input tax credit refundable — the mechanics differ slightly for SEZ units (refund-based) versus EOUs (direct credit utilisation)
Customs duty tools worth knowing
- EPCG scheme — import capital goods at zero or reduced customs duty against an export obligation, typically fulfilled over several years
- Advance Authorisation — duty-free import of inputs that go directly into goods you'll export
- Bonded manufacturing warehouse (Section 65, Customs Act) — defer duty on imported inputs used in export production without needing SEZ or EOU status
- RoDTEP — post-export duty-equivalent refund scheme for goods exporters, rate determined by HS code
Related reading: our FEMA export-import rules guide covers the foreign exchange side of cross-border goods movement — the compliance layer that sits alongside, not instead of, the customs and GST mechanics above.
Labour compliance — factory floors are regulated differently.
An office-based services team and a factory floor sit under materially different compliance obligations. The Occupational Safety, Health and Working Conditions Code, 2020 — effective November 2025 — consolidated and modernised the old Factories Act provisions, but the underlying obligations remain substantial for any physical manufacturing operation.
- Working hours, overtime, and rest interval rules specific to factory shifts — different from standard office-hours compliance
- Mandatory welfare amenities: canteens above a worker threshold, first aid facilities, restrooms, drinking water provisions
- Health and safety measures scaled to process risk — protective equipment, ventilation, and regular medical checkups for workers exposed to hazardous processes
- Contract labour compliance where third-party workers are engaged on the factory floor, a common structure for manufacturing but rare in services businesses
- Chief Inspector of Factories notification at least 15 days before commencing operations or occupying the factory premises
This runs alongside standard payroll and PF compliance — see our payroll compliance guide for the baseline that applies to every employer regardless of sector.
The realistic timeline.
| Phase | Typical duration | Can run in parallel? |
|---|---|---|
| Entity incorporation | 15–20 business days | Yes — with land search and CTE prep |
| Land / CLU / industrial plot allotment | 4–8 weeks | Yes — alongside incorporation |
| IEC registration | 1–3 days | Yes — any time after incorporation |
| Consent to Establish (CTE) | 4–8 weeks | No — needs finalised land and layout first |
| Construction / plant setup | 8–16 weeks | No — needs CTE first |
| Factory licence + Consent to Operate | 3–6 weeks | No — needs completed construction |
| BIS certification (if applicable) | 3 weeks – 6 months | Yes — start early, in parallel with construction |
Total realistic timeline from decision to first legal production: 4 to 6 months for a straightforward, non-hazardous manufacturing setup on an already-zoned industrial plot. Add 2–3 months if land needs Change of Land Use, or if your product requires ISI or FMCS certification rather than the faster CRS route.
Five mistakes that add months, not days.
A cheap plot outside a designated industrial estate can mean months of Change of Land Use approval before you can even apply for Consent to Establish. Confirm zoning status before committing to any site.
CTE has to be secured before construction begins, not applied for retroactively. Founders eager to move fast sometimes break ground early — this routinely triggers stop-work orders and re-approval delays that cost far more time than waiting for CTE would have.
Check whether your product falls under a notified BIS category before finalising your product line, not after your first shipment gets held at port. FMCS certification for foreign-manufactured goods alone can take 4–6 months.
SEZ benefits are real, but every domestic sale from an SEZ unit is treated as an import with full customs duty. Unless 70%+ of revenue is genuinely export-bound, the added complexity usually outweighs the duty savings.
The IEC requires an annual online confirmation between April and June. Miss it, and the code gets deactivated — customs will not clear shipments and banks will not process trade remittances until it's reactivated.
Manufacturing & trading setup — questions we get asked.
Is setting up a manufacturing company in India slower than setting up an IT subsidiary?
+Do I need an Import Export Code even if I only manufacture for the domestic Indian market?
+What is the difference between Consent to Establish and Consent to Operate?
+Is BIS certification mandatory for all manufactured products in India?
+Should a foreign manufacturer choose an SEZ or a normal domestic (DTA) location?
+What is the minimum number of workers that triggers factory licence requirements?
+Can a foreign company own 100% of a manufacturing or trading company in India?
+Do foreign directors need to visit India to set up a manufacturing company?
+What does it typically cost to set up a manufacturing subsidiary in India?
+How does KRPR support foreign manufacturing and trading companies?
+Bringing manufacturing or trading operations into India?
We coordinate entity registration, IEC, FEMA/FDI filings, factory licensing guidance, pollution board sequencing, GST/customs setup, and ongoing monthly compliance as one managed process for foreign-owned companies. Schedule a confidential consultation with a senior partner.
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Rohit Lohade is a Chartered Accountant and India entry specialist at KRPR & Associates. With 15+ years of experience, he has assisted 250+ international companies — including global brands — incorporate and operate in India. He currently serves as Resident Director for multiple foreign-owned Indian subsidiaries.