Setting Up A New Manufacturing Factory In India
Starting a manufacturing factory requires huge resources, both financial and material. Considerable time and money must be invested, and in the initial stage, large financial investments are needed to acquire the necessary raw materials, machinery, and equipment.
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Overview Of Setting Up A New Manufacturing Factory
Starting a manufacturing factory requires huge resources, both financial and material. Considerable time and money must be invested, and in the initial stage, large financial investments are needed to acquire the necessary raw materials, machinery, and equipment. You may not be able to pay the seed capital until the production process is complete when your product is finally sold. Also, several registrations, licenses, and permits are required for the establishment of a manufacturing Factory in India. Since 1 July 2020, micro, small and medium enterprises can register online through Udyam Registration, which replaced the Udyog Aadhaar Memorandum (MSME notification S.O. 2119(E), 26 June 2020). This single, self-declared registration records the relevant information about your business unit; an enterprise files only one Udyam Registration, but the other registrations and licences described below are still needed. To achieve long-term success, the establishment of a Manufacturing Factory in India requires rigorous planning. To reduce costs, efficiency, and safety must be maximized from the outset. Despite the opportunities offered by India's rapid economic growth, it takes strategic foresight to navigate the regulatory and cultural complexities. Today, India's manufacturing sector is one of the country's most prominent and fastest-growing economic sectors globally, fueled by the central government's ambitious "Make in India" campaign.
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Manufacturing Businesses in India are governed by various laws, including but not limited to the Companies Act, of 2013, the Occupational Safety, Health and Working Conditions Code, 2020 (which replaced the Factories Act, 1948), the Goods and Services Tax (GST) Act, of 2017, and the Industrial Relations Code, 2020 (which replaced the Industrial Disputes Act, 1947). The labour codes are in force from 21 November 2025. These laws include e.g. such as company registration, factory establishment and operations, taxation, labor rights, environmental regulations, protection of intellectual property rights, and more.
Why Setting Up A New Manufacturing Factory India Is Beneficial
Apart from the central and state incentive schemes set out in the following paragraphs, establishing a manufacturing factory in India offers numerous advantages. As an emerging global economy, India is a regional distribution hub with strategic maritime routes connecting various other countries, such as the Middle East, Japan, etc. In particular, over 200 major and minor ports along the 7500 km coastline support the significant potential for EXIM in cities such as Ahmedabad, Mumbai, Chennai or Kolkata.
- Labor costs: Compared to other countries, India is one country who are relatively low in cost.
- Low taxation levels: Decreased tax rates for companies in India from 30 % to 22%, and the 15% concessional rate for new manufacturing companies was available only to companies set up on or after 1 October 2019 that began manufacturing by 31 March 2024 (section 115BAB of the Income-tax Act, 1961; date extended by the Finance Act, 2022), so a factory starting production now does not qualify.
- Large market size: India has the world's largest population, having overtaken China in April 2023 (UN DESA Policy Brief No. 153), which gives it a large domestic consumer market.
- Educated Workforce: About 1.5 million engineers work in India every year, one of the most common occupations in India.
Several incentive schemes for electronics companies are offered by the Indian Government, which include:
- The Modified Electronics Clusters Scheme, (E.M.C).
- The Production Linked Incentive Scheme (P.L.I)
- The Scheme for Promotion of Manufacturing of Electronics Components and Semiconductors (S.P.E.C.S)
Steps Involved In The Process Of Setting Up A New Manufacturing Factory In India
To set up a manufacturing factory in India, the following steps shall be taken:
Step 1:- Develop a business plan and concept - Entrepreneurs need to have an unambiguous, clear idea of the product they are going to manufacture before starting their manufacturing factory. To this end, comprehensive market research and the identification of customer needs for the proposed product can be carried out: Entrepreneurs can also consider the current technology and operations available, as well as manufacturing costs and sales strategies that they intend to use when designing their product.
Step 2:- Prepare a financial plan - The financial requirements for the establishment of the manufacturing factory, such as the cost of services and production equipment, the cost of premises, energy, etc., and working capital, need to be assessed by the entrepreneurs. When setting up the factory, it is important to ensure that the initial costs and ongoing costs are properly budgeted and accounted for.
Step 3:- Apply for licenses and registrations - register a company under the correct legal structure, and comply with all relevant labor and business requirements. After that register the company with all the authorities and agencies like Registrar of Companies (ROC), Goods and Services Registration (GST), and many more. The following list of registrations must be submitted:
- Goods and Services Tax (GST) Registration: A business must obtain GST registration once its aggregate turnover in a financial year exceeds Rs. 20 lakh (Rs. 10 lakh in Manipur, Mizoram, Nagaland and Tripura), or Rs. 40 lakh if it supplies only goods; the Rs. 40 lakh limit does not apply in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand, or to certain goods such as ice cream, pan masala and tobacco (sections 22 and 23 of the Central Goods and Services Tax Act, 2017 and Notification No. 10/2019-Central Tax). Registration is compulsory whatever the turnover for, among others, a business making an inter-State taxable supply of goods, such as selling goods to a buyer in another State (section 24). A separate registration is needed in each State or Union territory from which taxable supplies are made, applied for within thirty days of becoming liable (section 25(1)), not in each State where the goods are sold. Registration is carried out online on the GST portal (gst.gov.in), with the relevant documents uploaded; GST is administered by the Central Board of Indirect Taxes and Customs (CBIC) and the State tax departments.
- Obtain Import Export Code (IEC): All manufacturing factories that are involved in either the import or export of goods require an IEC code. An IEC is a 10-character alphanumeric code, the same as the business's Permanent Account Number (PAN), issued by the Directorate General of Foreign Trade (DGFT); no goods may be imported or exported without one unless specifically exempted (Foreign Trade Policy 2023, para 2.05). An IEC does not exempt goods from customs duty, which is levied on goods imported into or exported from India at the rates in the Customs Tariff Act, 1975 (section 12 of the Customs Act, 1962). You may also apply online for this registration.
- Factory Registration: Factories are regulated by the State Government, not the Ministry of Micro, Small and Medium Enterprises (section 2(1)(d)(ii) of the Occupational Safety, Health and Working Conditions Code, 2020). The application for factory registration is made electronically to the registering officer appointed by the State Government (section 3 of the Code), and the factory also needs a factory licence from the authority designated by the State Government under the State's rules (sections 79 and 119 of the Code); the licence is issued electronically within forty-five days of the application, failing which it is deemed issued (section 119(4)).
- Building Plans and Building Permit: Building plans must be submitted to the local Urban Development Authority (UDA) or Municipal Corporation for necessary approvals.
- Udyam Registration (formerly Udyog Aadhaar): Udyam Registration replaced the Udyog Aadhaar Memorandum from 1 July 2020, and enterprises registered under Udyog Aadhaar had to register again (MSME notification S.O. 2119(E), 26 June 2020). A micro, small or medium enterprise may file it online, with no fee, on the Udyam Registration portal of the Ministry of MSME, and receives a permanent Udyam Registration Number and an e-certificate.
- Register for Employees Provident Fund: Establishments with 20 or more employees must acquire the Employees Provident Fund (EPF) registration under the Code on Social Security, 2020, which replaced the EPF & MP Act, 1952 from 21 November 2025; the Employees' Provident Funds Scheme, 2026 replaced the 1952 Scheme on 29 June 2026. Under paragraph 24 of the 2026 Scheme, the employer must send a consolidated return in Form V within fifteen days of the Scheme applying to the establishment, and must upload details of employees who become members for the first time within fifteen days of the close of each month.
- Register for Employees State Insurance Corporation: Establishments with 10 or more employees must register with the Employees State Insurance Corporation (ESIC) under the Code on Social Security, 2020, which replaced the Employees' State Insurance Act, 1948 from 21 November 2025. The employer must register within 15 days after the law becomes applicable to the factory, and must send each new employee's declaration to ESIC within ten days of the employee furnishing the particulars (regulations 10-B and 14 of the Employees' State Insurance (General) Regulations, 1950, which continue under section 164(2)(b) of the Code, to the extent consistent with it, until about 20 November 2026 unless replaced sooner); the registration application is made electronically in the common Form-I on the Shram Suvidha Portal (rule 5 of the Social Security (Central) Rules, 2026).
- Register with the State Department of Labour: All manufacturing factories are required to register with the State Department of Labour in their area. If all the necessary documents are in order, registration will be easy and fast. Registration is compulsory: under section 3 of the Occupational Safety, Health and Working Conditions Code, 2020, the employer must apply electronically for registration within sixty days from the date the Code applies to the establishment (a later application may be accepted on payment of a late fee), and an establishment that is not registered may not employ any employee.
- Acquisition of Trademarks: A company must register with the Indian Trademark Registry for trademarks/trademarks for its products/services.
- Boiler registration: The Boiler Inspector's Department of the local State shall first issue a Boiler Operation Certificate to a manufacturing factory that uses boiler-operated processes.
- Fire Safety Certificate: Where the State's fire service law requires one for the building or the process, a fire safety certificate must be obtained from the local fire service before starting production operations; the rules differ from State to State.
- Industrial License: Most manufacturing factories do not need an industrial licence. Under the Industries (Development and Regulation) Act, 1951, a licence from the Department for Promotion of Industry and Internal Trade (DPIIT), which was called the Department of Industrial Policy and Promotion (DIPP) until January 2019, is needed only for the four industries still under compulsory licensing: cigars and cigarettes of tobacco and manufactured tobacco substitutes (no new licences are being issued for these), electronic aerospace and defence equipment, industrial explosives, and specified hazardous chemicals (DPIIT Annual Report 2025-26, paras 1.24.1 and 2.8.1).
Step 4:- Apply for legal and environmental approval - Before starting the production process, entrepreneurs must meet all legal requirements and official approvals. Obtaining consent from the State Pollution Control Board (SPCB): Any manufacturing factory that is likely to discharge effluent or emit air pollutants must obtain the SPCB's consent to establish before it takes any step to set up the unit, and its consent to operate before it starts production (section 25 of the Water (Prevention and Control of Pollution) Act, 1974 and section 21 of the Air (Prevention and Control of Pollution) Act, 1981); sectors on the Central Government's white-category list are exempt from both.
Step 5:- Source raw materials and equipment - To begin production operations, entrepreneurs can focus their efforts on purchasing raw materials and machinery after all the necessary legal and environmental authorizations are in place. To operate efficiently, they should consider selecting the best equipment, infrastructure, and service providers.
Step 6:- Training and hiring staff - join the team, and manage business development, operations, financial management, etc. Provide them with adequate training to improve their skills, so that they are aware of their tasks and responsibilities.
Step 7:- Start the production - entrepreneurs will be able to begin manufacturing quality products as soon as all training and recruitment have been completed.
Step 8:- Start Marketing & Distribution - To boost sales, emphasis should be placed on marketing and promoting the products. Potential distributors and distribution channels for the marketing and distribution of products can also be identified by entrepreneurs.
Conclusion
Finally, several registrations, licenses, and permits are needed to set up the manufacturing factory in India. Udyam Registration, which replaced the Udyog Aadhaar Memorandum from 1 July 2020 (MSME notification S.O. 2119(E)), gives micro, small and medium enterprises a single online registration to facilitate this process. In addition, to obtain the registration of relevant brands and trademarks for its products or services, undertakings are required to acquire them. Entrepreneurs can be sure of their ability to deal with the complexity of laws, regulations, and logistical arrangements when they use the comprehensive guide on offer. India is an increasingly attractive investment destination for manufacturing, thanks to a skilled labor market and government support. Taking advantage of this resource will provide businesses with the expertise and resources needed to make a successful transition to a prosperous manufacturing presence in India's dynamic and evolving economic culture. Starting a new manufacturing factory is difficult. To register a manufacturing company, several criteria such as product range, market, and location must be considered.
About the Author
Tanya Sharma
Content WriterAn experienced legal researcher with a robust academic foundation in BBA LLB and LLM (Corporate Law), I have distinguished myself through extensive contributions to the field of legal research. My work has been widely published, including research papers, articles, and blogs featured in Hon'ble Justice Publications and various esteemed legal websites. My dedication to excellence in research has earned me multiple awards in research paper presentations and content writing competitions.
In addition to my legal expertise, I am committed to staying informed about the latest trends in content marketing and regulatory changes, ensuring that my writing remains relevant, impactful, and aligned with current industry standards. My work is characterized by a deep understanding of corporate law, a passion for thorough research, and a commitment to producing high-quality, insightful content.
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