Running a Business

Last updated: April 22, 2021

Running a Business

India’s latest set of reforms is built on five pillars – Economy, Infrastructure, System, Vibrant Demography and Demand – and provides enhanced access to at least eight sectors – Coal, Minerals, Defence, Civil Aviation, Electricity, Social Infrastructure, Space, and Atomic Energy.

The Ministry of Labour and Employment protects and safeguards the interests of workers in general, and those who constitute the poor, deprived and disadvantaged sections of the society in particular.

It focuses on promoting the welfare of and providing social security to Indian labour, both in the organised and unorganised sector. The ministry lays down policies to ensure a healthy work environment that results in higher productivity.

It also coordinates vocational skills, training programmes, and employment initiatives. These objectives are achieved through the enactment and implementation of different labour laws, which regulate the terms and conditions of service and employment of workers.

State Governments are also authorised to enact labour legislation, as labour is a subject in the concurrent list, under the Constitution of India. For more information see The Ministry of Labour & Employment.

India has steadily improved its diverse tax system to improve income as well as investment in the country. In 2017, the Government amended the national tax structure to introduce a simpler, unifying and more transparent mechanism called the Goods & Services Tax Law (GST) to make India’s trade and commerce much more efficient, hence attracting improved foreign investor interest.

A reduced 25 per cent corporate tax rate is applicable with effect from the financial year 2019-20 to Indian companies with total turnover or gross receipts not exceeding Rs. 4 billion (US$57 million). For other companies, the corporate tax rate of 30 per cent will continue to apply. 

There is a multitude of investor-friendly tax incentives that are offered related to various parameters, making India an attractive investment destination. For instance, tax rebates are provided in the Special Economic Zones as well as in high-priority projects such as those related to infrastructure development.

For more information see the Ministry of Corporate AffairsIncome Tax DepartmentIT Directory

Among the more than 7,000 business-oriented reforms undertaken by the Government of India over the last three years, the Good and Services Tax (GST) stands out as the most momentous, far-reaching reform. India’s GST replaces a complex and often punitive patchwork of indirect taxes levied on businesses.

Enterprises now deal with a simpler, uniform, and transparent tax system, regardless of which part of India they are doing business in.

With the introduction of GST, India embodies the “One nation, one market” spirit and joins the league of many advanced nations who already use a GST-based taxation system.

For more information see Goods and Services TaxGST Regulation, Central Board of Indirect Taxes and Customs

Industrial Policy

The Government’s liberalisation and economic reforms programme, initiated under the Industrial Policy Resolution, have substantially reduced the licensing requirements, removed restrictions on expansion, and facilitated easy access to foreign technology and FDI. 

The main objectives of the Industrial Policy of the Government are – (i) to maintain a sustained growth in productivity; (ii) to enhance gainful employment; (iii) to achieve optimal utilisation of human resources; (iv) to attain international competitiveness; and (v) to transform India into a major partner and player in the global arena. For more information see Industrial Policy

State Industrial Policies https://dipp.gov.in/sites/default/files/IndustrialPolicy_States_UT_25February2020.pdf

Foreign Exchange Management Act (FEMA)

The Foreign Exchange Management Act (1999) or in short FEMA has been introduced as a replacement for earlier Foreign Exchange Regulation Act (FERA). FEMA came into effect on the 1st day of June 2000.

The main objective behind the Foreign Exchange Management Act (1999) is to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of the foreign exchange market in India.

FEMA is applicable to all parts of India. The act is also applicable to all branches, offices, and agencies outside India owned or controlled by a person who is a resident of India.

For more information see Reserve Bank of India – Foreign Exchange Management Act.

Special Economic Zones (SEZ)

The Special Economic Zones (SEZs) Policy was first announced in April 2000, intended to make SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package, both at the Centre and the State level, with the minimum possible regulations. The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005. The main objectives of the SEZ Act are:

  • generation of additional economic activity
  • promotion of exports of goods and services
  • promotion of investment from domestic and foreign sources
  • creation of employment opportunities
  • development of infrastructure facilities

The SEZ Rules provide for:

  • “Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting business in SEZs;
  • Single window clearance for setting up of an SEZ;
  • Single window clearance for setting up a unit in a Special Economic Zone;
  • Single Window clearance on matters relating to Central as well as State Governments;
  • Simplified compliance procedures and documentation with an emphasis on self certification

For more details, please click here 

As on 31 January 2021, a total of 425 SEZs have been formally approved, of which 378 have been notified. As on 31 December 2020, 265 SEZs were already operational. For more details, please refer SEZ Fact Sheet

National Manufacturing Policy

The National Manufacturing Policy (NMP) aims to bring about a quantitative and qualitative change; to give the necessary impetus to the manufacturing sector; to enhance the share of manufacturing in GDP to 25 per cent and create 100 million jobs in ten years. The policy is based on the principle of industrial growth, in partnership with the States.

The Central Government creates the enabling policy framework, provides incentives for infrastructure development on a Public Private Partnership (PPP) basis, through appropriate financing instruments. The State Governments are encouraged to adopt the instrumentalities provided in the policy. For more information see National Manufacturing Policy.

National Design Policy

Under the National Design Policy formulated by representatives from various ministries, and the National Institute of Design, the Design Clinic Scheme has been implemented across the country to improve the manufacturing competency of Micro, Small and Medium Enterprises (MSMEs).

The initiative is targeting a design intervention into their products and services in order to provide MSMEs with a design edge for the global market. The programme also supports the government’s Make in India initiative. For more information see National Design Policy

National IPR Policy

The Union Cabinet approved the National Intellectual Property Rights (IPR) Policy on 12th May 2016 to lay the future roadmap for IPRs in India. The National IPR Policy is a vision document that encompasses and brings to a single platform all IPRs. It views IPRs holistically, taking into account all inter-linkages and thus aims to create and exploit synergies between all forms of intellectual property (IP), their concerned statutes and agencies.

It sets in place an institutional mechanism for implementation, monitoring, and review. It aims to incorporate and adapt global best practices to the Indian scenario. 

For more information see National IPR Policy and Make in India – Intellectual Property Facts

Modernisation and Strengthening of Intellectual Property Office (MSIPO)

The objective of the scheme is to strengthen the capabilities of the Intellectual Property Offices in India; to develop a vibrant Intellectual Property regime in the country; and also to develop modern infrastructure for the Indian Patent Offices to function as an International Search Authority and International Preliminary Examining Authority in order to meet the requirements for international registration of Trademarks.

For more information see Modernisation and Strengthening of Intellectual Property Office (MSIPO).

Intellectual Property Appellate Board (IPAB)

Intellectual Property Appellate Board, a statutory body under DPIIT established under the provisions of the Trade Marks Act on 15th September 2003 in Chennai to hear appeals against the decisions of the Registrar of Trademarks and Geographical Indications and Controller of Patents.

For more information see Intellectual Property Appellate Board (IPAB).

North East Industrial & Investment Promotion Policy (NEIIPP)

In order to boost industrialisation in the North Eastern Region, the erstwhile North East Industrial Policy (NEIP), 1997 was revised and a new policy, namely North East Industrial & Investment Promotion Policy (NEIIPP) 2007, was notified w.e.f. 1.4.2007 which will remain in force up to 31.03.2017.

Benefits under NEIIPP, 2007 have also been extended, for the first time, to select Service Sector units, Biotechnology units, and Power Generating units (up to 10 MW), besides industries in the Manufacturing Sector. For more information see North East Industrial & Investment Promotion Policy (NEIIPP)

This policy was effective up to 31 March 2017, but units that commenced commercial production by 31.3.2017 shall continue to receive benefits beyond this date up to the committed number of years for each unit. (LINK).

Indian Acts

To enable uniform, profitable and seamless functioning of enterprises in India, several other policies, rules, regulations, and acts govern the landscape.

For more information on various Acts in India see the Department for Promotion of Industry and Internal Trade – Acts. For more information on various Rules and Regulations in India see the Department for Promotion of Industry and Internal Trade – Rules