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Everything About How to Start Food Business in India

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Introduction

The Indian food and grocery market is the world’s 6th largest market, with retail contributing 70 % of the sales. Food has also been one of the largest segments in India's economy, which was valued at US$ 490 billion in 2013 and expected to reach Rs 61 lakh crore (US$ 894.98 billion) by 2020. Indian food industry is growing with a compound annual growth rate of around 20 % in some sectors. There is a huge potential for food startups in India. Indian Government has taken several steps to promote food industry.

If you’re planning to start you entrepreneur journey in food industry, be it a restaurant, food truck, dhaba, noodle shop, momo shop, Bakery shop, Sweet shop, Hawker, Itinerant vendor, temporary food stall shop, food processing plant, food product re-labeling, food re-packing,  Candy Making, Catering services, Coffee Shop, Cookies making shop, Desert Shop, frozen yogut shop, milk Chilling shop or plant, vegetable oil processing plant, Slaughtering house, wholesale food product business, food product distribution, food product retailing, Pasta shop, Pickle Making plant, biscuit making shop, bread production, homemade cakes shop, Fruit juice shop, Meat processing shop, its very much important to plan your business activities in an organized way.

We at Corpseedhave analyzed all the issues, problems and challenges faced by food industry entrepreneurs inbusiness setup and then managing it profitably. To make things extremely easy for food startups, we came up with “Five golden rule” in starting &managing food business successfully. 

  • Finalize product & place of operations
  • Setup legal business structure
  • Acquire all Government permits & Licenses for retail, production & export
  • Setup IT infrastructure
  • Quality & other certifications 

Finalize Product & Place of Operations

Finalizing product & place of operations is one of the mandatory rule to follow. This will help you out in validating your idea. Ignoring this rule might lead to financial loose for your business. Our expert team will consult you infinalizing your product, productdemand in market and best market to sell your product. Our consultants will also guide you in bringing a food product to market. 

Our consulting fee start from Rs 1999 only

Setup Legal Business Structure

After finalizing your product and place of operation, next step is to register your business with ministry of corporate affairs. In this step we will help you out in knowing which business structure suite your requirement. There are two basic food business operations

  1. Household Food business
  2. Commercial Food business

Household Food Business: - In order to run household business, you can take the decision to incorporate or not to incorporate your business entity. But there are few licenses which are mandatory to run your homebased business legally. Please refer License & permits section to learn more. Incorporating your business is always a better option to run your business without any legal implications. Best business structures in household / homebased business are sole proprietorship, limited liability partnership (LLP) and private limited company.

Commercial Food Business: - In order to run your food business commercially, below are few legal structures to start with

BASIS

Proprietorship

Partnership

LLP

Private limited company

OPC

Registration

Not Compulsory

Optional under partnership act 1932

Registered under MCA

Registered under MCA

Can be registered under MCA and Companies Act 2013

Annual Statutory Meetings

No requirements to conduct annual statutory meetings.

No requirements to conduct annual statutory meetings.

No requirements to conduct annual statutory meetings.

Board and General Meetings must be conducted periodically.

No requirements to conduct annual statutory meetings.

Legal status of entity

Not considered as a separate legal entity

Not considered as a separate legal entity

Considered to have a separate legal entity

Considered to have a separate legal entity

Separate legal entity

Members liability

Unlimited liability

Unlimited liability

Liability of its members is limited

Limited to the extent of share capital

Limited to the extent of share capita

Minimum number of member

Sole Proprietorship

At least 2 persons

At least 2 persons

At least 2 persons

Minimum number of 1 person

Maximum number of members

Maximum 1 person

Banking Sector – 10

No restriction

200

Maximum 2 person

Taxation

Taxed as an individual

Tax rate is 30% on the company’s profit

Tax rate is 30% on profits plus cess and surcharge

Tax rate is 30% on profits plus cess and surcharge

Tax rate is 30% on profits plus cess and surcharge

Existence or Survivability

Existence of a Proprietorship business is dependent on the Proprietor.

Existence of a Partnership business is dependent on the Partners. Could be up for dissolution due to death of a Partner.

Existence of a LLP is not dependent on the Partners. Could be dissolved only voluntarily or by an Order of the Company Law Board.

Existence of a Private Limited Company is not dependent on the Directors or Shareholders. Could be dissolved only voluntarily or by Regulatory Authorities.

Existence of a One Person Company is not dependent on the Director or Nominee Director. Could be dissolved only voluntarily or by Regulatory Authorities.

Foreign ownership

Not allowed

Not allowed

Allowed by permission from RBI

Allowed

Allowed if one is the director and other is the nominee. Both the director and the nominee cannot be foreign citizens

Transferability

Not allowed

Not allowed

Can be transferred

Can be transferred

Allowed to 1 person only

Annual filings

Income tax returns with the registrar of the company

Income tax return is filed with the registrar of the company

Filed with the registrar of the company

Filed with the registrar of the company

Filed with the registrar of the company

CorpSeed Registration Cost

Rs.3,999/-

Rs.4,999/-

Rs.5,999/-

Rs.7,999/-

Rs. 8,999/-

 

Our expert CA’s/CS’s will help you to know the best structure matches your business requirements.

 

Acquire all Government permits & Licenses for retail, production & export

Next step after business structure finalization is to acquire mandatory permits and licenses to operate your food business legally. There are three major sub-categories of permit & Licenses required as per business requirements, these are

  1. Manufacturing Food Industry Business Licenses / Permits
  2. Service Food Industry Business Licenses / Permits
  3. Trading Industry Business Licenses / Permits

Manufacturing Food Industry Business Licenses / Permits& Registrations

  1. Food License (Mandatory)
  2. Trademark Registration ( as per your business requirement)
  3. Shop and Establishment Registration (Mandatory)
  4. Trade License (in case if you are into food trade)
  5. Import/Export Code (IEC) (in case of import / export of food products within or outside India)
  6. GST Registration (Mandatory)
  7. Employee’s State Insurance (ESI) Registration (Mandatory)
  8. Drug License (In case if you are into drug manufacturing business)
  9. Ayush Herbal Product License (In case if you are into herbal product manufacturing business)
  10. MSME / SSI registration (in case if you want to get Govt subsidies)
  11. Employee Provident Fund (PF) Registration (mandatory for companies employing more than 20 employees)
  12. Fire Department NOC: (Mandatory)
  13. Environmental Clearance: (Mandatory)
  14. Registrations under Income Tax Act, 1861 compliances (Mandatory)
  15. Registrations under Customs Act, 1962 (in case of import/export of food products)
  16. Registration under the Central Excise (in case of import/export of food products)
  17. Register for VAT / Sales Tax(Mandatory) 

Service Industry Business Licenses / Permits

  1. Food License (Mandatory)
  2. Trademark Registration ( as per your business requirement)
  3. Shop and Establishment Registration (Mandatory)
  4. Trade License (in case if you are into food trade)
  5. Import/Export Code (IEC) (in case of import / export of food products within or outside India)
  6. GST Registration (Mandatory)
  7. Employee’s State Insurance (ESI) Registration (Mandatory)
  8. Drug License (In case if you are into drug manufacturing business)
  9. Ayush Herbal Product License (In case if you are into herbal product manufacturing business)
  10. MSME / SSI registration (in case if you want to get Govt subsidies)
  11. Employee Provident Fund (PF) Registration (mandatory for companies employing more than 20 employees)
  12. Fire Department NOC: (Mandatory)
  13. Environmental Clearance: (Mandatory)
  14. Eating House License Registration (Mandatory)
  15. License for playing music in restaurant (In case if you want to play music in your premises)
  16. Registrations under Income Tax Act, 1861 compliances (Mandatory)
  17. Registrations under Customs Act, 1962 (in case of import/export of food products)
  18. Registration under the Central Excise (in case of import/export of food products)
  19. Register for VAT / Sales Tax(Mandatory)
  20. Register for VAT / Sales Tax(Mandatory)

Now lets see the importance of each type of Licenses

Food License (FSSAI)

As mentioned under the act, every food business operator (FBO) shall get its business registered or obtain a license under FSSAI. There ae three types FSSAI Licenses, Basic, State & Central. These categories are based on the type of operations & turnover of the business.

Trademark Registration: - Trademark registration is to protect your businessname/logo/tagline, so that nobody can use it.

Shop and Establishment Registration

The workers of a food operating business are safeguard by the Shop and Establishment Act, which regulates the terms and conditions of employment in commercial business. Its mandatory to get shop & establishment registration within 30 days of starting your food business.

Trade License

A trade license authorized individual/business to carry on trade or business at the premises for which it has been issued. Any unauthorized trade between two parties is an offence and may result in a significant penalty to the business. The business owners must apply for trade license before carrying out any trade activity.

Import/Export Code (IEC)

Import/export code (IEC) as the name suggests, is a 10-digit code issued by the Directorate General of Foreign Trade (DGFT), Ministry of Commerce and Industries, Government of India to carry out import of goods/services in India and export of goods/Services from India. Getting IE code is the first step to start trading internationally. IE code is also mandatory to pay and receive international financial transactions. In short, one cannot legally trade in international market without IE code.

GST Registration

GST stands for goods and service tax, introduced in India on 1st July 2017. GST registration is compulsory for all businesses involved in the buying / selling of food products or providing services or both within India

Employee’s State Insurance (ESI) Registration

Employee’s State Insurance (ESI) Registration is mandatory for all business units with more than 10 employees “In some states, its more than 20 employees”. ESI contribution is must for all employees earning less than ?21,000 per month. The employer must register within 15 days from the Incorporation date

Drug License

As per Drugs & Cosmetics Act, 1940, Drug License is mandatory throughout India for carrying out the business related to pharmaceutical industries that deal with drugs, medications and cosmetics. To do business in pharma industry including Ayurvedic & Unani drugs, one must get a Drug license to operate legally. There are more than 10 different types of drug licenses. However, a business unit may require a particular license based on their business requirement. Drug license is issued subject to certain conditions attached to premises and the competent person who shall be dealing with drugs. 

Ayush Herbal Product License

The Ministry of AYUSH was formed in 9th November 2014 to insure the optimal development and propagation of AYUSH systems of health care. Earlier it was known as the Department of Indian System of Medicine and Homeopathy (ISM&H) which was created in March 1995 and renamed as Department of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homeopathy (AYUSH) in November 2003, which focused attention for development of Education and Research in Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homeopathy. If you are interested in ayurvedic medicine manufacturing, you have to take license from AYUSH, but if you are only dealing with selling of ayurvedic medicine you don’t AYUSH licence, also, for setting-up ayurvedic clinic and panchkarma centre, you need to be a registered ayurvedic practitioner. 

MSME / SSI Registration

MSME / SSI registration is required for micro, small and medium sized enterprises to avail various incentives, subsidies etc. provided under the MSME / SSID Act by Govt of India.Although getting MSME / SSI online registration is not mandatory but it’s always suggested to get registered under MSME / SSI for various benefits provided by government.

Employee Provident Fund (PF) Registration

Registration withEmployees' Provident Fund Organizationis a necessary step for all businesses with more than 20 employees. Employee includes contract, housekeeping, security or other contractual. However, one can also register on a voluntary basis with the consent of its employees to get benefit from this scheme. PF is a way of saving for all private, public or Government employees. Delay in registration might result in penalties.

Fire Department NOC:

The NOC for Fire Department is issued by the respective states fire service that verifies and checks the resistance of the building or that the building can observe any fire-related accidents. As soon as all the guidelines are covered, the fire department will issue the NOC for the residential/commercial building of the applicant. The guidelines may vary from state to state.

Fire NOC Means              

No Objection Certificate regarding Fire Safety Equipments installation in Building as per National Building Code (NBC) norms. Fire rules are different for all types of buildings, means different rules as per types, height, area of constructed building.

Environmental Clearance:

When it comes to developmental work on land there are various activities associated with the land which should be carried out before starting construction on land. These activities are called pre-construction activity & include land title verification, land surveying, land demarcation, land contouring & Fencing. These activities play an important role for land, the project going to be started on the land.

Eating House License Registration

Eating house license is to be obtained for operating a shop / restaurant / dhaba / bar / club /café and so on with the Eating facility. Eating House is a place to which the public are admitted, and where different kind of food or drink is supplied for consumption. For Eating House License, an applicant has to apply to the State Police Headquarters and the Police Commissioner of that city.

License for Playing Music in Restaurant

Playing music at public places whether it is a restaurant, cafés, hotels, pubs, bars, or any other such places requires permission in the form of a Music License. It is a crime to play music in private, public or commercial place without proper copyrights or license. Subject to the Copyright Act of 1957, it is mandatory for all those who play Pre-recorded music in the form of Gramophone Records, Music cassettes or CDs or Radio or TV or Audio-visual etc. for non-private purpose or in public places and/or commercial establishments and/or non-commercial establishments, to take license before playing music. Accordingly, any communication or presentation of Indian or International music for non-Private purposes or in Public Places or Commercial Establishments such as Restaurants, Hotels, Discotheques, Cinema Halls, Mall etc., or non-commercial establishments such as campus etc. have to obtain a License. Any activity where the music is played without a license constitutes an Infringement of copyright under The Copyright Act of 1957. Such violation of copyright is Cognizable & Non-billable offense, attracting heavy Penalties.

Then here are few mandatory steps to follow before setup your business and the very first step is to get a food license from FSSAI (Food Safety and Standard Authority of India, Ministry of Family Health & Welfare, Government of India). FSSAI license is mandatory before starting any food business. Without FSSAI license, no genuine wholesaler or retailer would sell your products.

All the manufacturers, traders, restaurants who are into food business must obtain a license number or 14-digit registration which must be printed on food packages

Benefits of FSSAI License

FSSAI license is a permit to operate a food related business in India. Its checks that products sell by are genuine and safe to consume. Food license can be a great tool to boost your brand trust. Entrepreneurs like you can use it as an excellent marketing tool to boost revenues and profits. Although there are many benefits in having an FSSAI license, few are described below.

  1. Authority to use FSSAI Logo:
  2. Once you have the license, you can skillfully use the FSSAI logo in your product packing, menu cards and also in the pamphlets to publicize your product quality and to create your brand visibility over your competitors. This will help you to get an edge over other food operators operation in your locality but not having the license. Now a day’s consumer behavior is changing, consumers are more brand conscious and want to use/ eat branded and certified products. FSSCI License gives you an opportunity to use their logo on your product so that you can showcase your brand with more trust and reliability. 
  3. Expand Your Business:
  4. In case of expending your business in other states or with more outlets in same state, you can easily do so with the use of your FSSAI license. The license will help you to establish your reputation and gives you an access to grow your business in a new direction with ease and comfort. Moreover, the license can help you in getting bank loans / investor funding so that you can expend your business and your dream.
  5.  
  6. Legal Advantage:
  7. Food Business operators thinks getting an FSSAI License is expensive and requires lots of time to complete documentation, which diverts their mind not to enroll for FSSAI License. Really getting FSSCI License is not difficult, also good part is, there are consultancies which helps entrepreneurs to get FSSAI License with reasonable charges. BeMNC is a loyal brand to start with your FSSCAI Licensing part. We care for your journey and don’t want you to take step which would not be fruitful in future. We must say that the actual cost which is required in order to get a new FSSAI license is very much less than what you will have to pay for in as the penalties if you found guilty. It is thus wise for any businessman to firstly get the license before officially starting food related business.
  1. Quality and Consumers Behavior:
  2. we are in the arena of digital world, consumers are more concern about quality and health of food they eat. Consumers had started keeping hawk eye on food quality, food composition, packing and food nutrients. Thus, working with FSSAI guidelines and having FSSAI license will help you in improving your current business process / standards and will definitely provide you an edge over competitors, which will directly help you in acquiring more customer base.

The importance of the quality standard is growing very high and it is really beneficial in short as well as in long run for your business to get an FSSAI license.

BOOK A FREE CONSULTATION

Get help from an experienced legal adviser. Schedule your consultation at a time that works for you and it's absolutely FREE.

Author
Shamshad Alam
Experienced Digital Marketer with a demonstrated history of working in the internet industry. He likes to write about the latest technology trends, Skilled in Digital Marketing likes. Search Engine Optimization, SMO, SEM, PPC, Content Writing, and, Designing, etc.