Company Registration in India- few Challenges faced by Foreign Companies
Added: (Wed Feb 23 2022)
Pressbox (Press Release) -
Company Registration in India- few Challenges faced by Foreign Companies
In recent years, India has become one of the most sought after destination for doing business as well as investment. India has witnessed tremendous growth in FDI investment across the sectors. Further, India has witnessed growth in foreign company registration in India owing to huge middle class consumer base, vibrant economy, democratic set up and government’s initiative of ease of doing business and attracting foreign direct investment.
India has jumped to 63rd position in year 2020 in ease of doing business report as compared to 142nd position in the year 2015. However, still business set up in India is a challenging task and requires expert guidance and handholding in the entire process.
To begin with, there are many options for foreign company registration in India depending upon the long term vision and nature of business of foreign company.
Any foreign company or foreign investor may enter India in form of incorporated entity or in the form of unincorporated entity. Under incorporated entity, they have options of private limited company registration or public limited company registration or joint ventures or limited liability partnership registration.
Under unincorporated entity, they have option of branch office registration or liaison office registration (representative office) or project office registration.
Further, they may register wholly owned subsidiary company in India or opt for normal subsidiary company registration in India.
There are different timelines for different type of company registration in India. Normally, subsidiary company takes 20-25 working days for company incorporation; branch office takes approx. 40-50 working days for registration and so on and so forth.
For approvals for company registration, normally, RBI, MCA and FIFP are involved from whom either necessary approval need to be taken or they need to be intimated post incorporation.
In this write up, we would be discussing about few challenges faced at the time of foreign company registration in India.
1) Time consuming Process-
Although processing time of MCA for private limited company registration is 10-12 working days from receipt of all the documents, however, it takes time to collate documents from foreign country. This is due to the fact that all the documents which belongs to foreign company or foreign director or foreign shareholders, need to be apostille and notarized in the foreign country before sending to India for further filing with RBI or MCA. This takes lots of time and delayed the entire procedure of
Company registration in India.
2) FIFP Approval
In case foreign company is starting business in India and bringing foreign investment in sectors where 100% FDI is not permitted under automatic approval route or when investment into India is coming From countries which are having landlocked with India like China, Pakistan, Afghanistan, Bangladesh, Hong Kong etc., in such cases prior permission of FIFP is required. Further, getting approval from FIFP is quite time and takes 2-3 months and in case of investment from China or Pakistan, it may take even more time.
3) Compliances
Post company registration in India, Indian companies need to complete lot of compliances under various statutes like Companies Act, Income Tax Act, GST laws, FEMA and RBI Regulations, Labor laws and custom act and laws. Further, noncompliance of various regulatory requirements leads to interest and penalty and in some cases even prosecution.
4) At least one local Director
Although both the shareholders of the proposed subsidiary company in India can be foreign citizens and foreign residents, however as per law, at-least one Director shall be local director i.e Indian resident and Indian citizen.
5) Acquisition of Land in India
Acquisition of land in India is quite a cumbersome and time consuming process in India due to the difficulty in establishing legal ownership and clean title of the property.
6) Construction permits
Another tedious task is to get permit for construction of factory building or commercial complexes. Although, over the years, the total time taken for getting such permits has reduced from 164 days to 60 days, still it is quite a complex process.
7) Electricity
Obtaining electricity connection is a time consuming process and involves upto 40-45 days and lot of procedures, although things has improved as compare to the past.
8) Infrastructure
India lags behind lot of developing and developed countries in terms of infrastructure development. This sector is in the focus area of the government and over the years, lot of efforts has been made in modernizing the state owned infrastructure and creation of new roads, ports, railways, airport, power generation and solar energy plants. Still, a huge amount of investment is required in this sector.
9) Registering property
Property registration is yet another time consuming process and different stamp duties are applicable for different states.
10) Exports and imports
Here, the exporters face non transparent tariff regimes and regulations. With the introduction of Goods & Service Tax (GST) with effect from 1st July, 2017, some export related things has been streamlined.
Now, goods can also be exported out of India under a Letter of Undertaking (LUT) / Bond prior to export without payment of GST in India.
Further, for the promotion of exports, government has introduced schemes from time to time like the Service Exports from India Scheme (SEIS)
11) Taxation and Regulatory
Indian tax and regulatory environment is quite complex with lots of statutes and acts. Further, under each act, lot of monthly, quarterly and yearly compliances are
Required to be done which is both time consuming as well as quite tedious for entrepreneur. India has amongst the highest tax rate in the world. Corporate tax rate has different rates for
Different categories of company starting from 22%, 25%, 30%. Further, surcharges and cess are also payable over and above the Income Tax. Similarly, GST is applicable on supply of goods and services t different rates like 5%, 12%, 18%, 28%
All the aforesaid factors make it quite imperative to take the help of experts while planning for foreign company registration in India.
A good advisor will not only guide you in deciding about best entity structure according to the business model of the company but will also assist in all pre-incorporation and post incorporation tax and regulatory compliance.
https://income-tax-return-ezybizindia.blogspot.com/2022/02/company-registration-in-india-few.html