20 May 2011
What exactly do you mean by Foreign Investment in India in Textiles & Garments. Whether the foreign Company intends to do trading or manufacturing . Whether the same is multi brand or single brand operation.
Foreign Company will form in India WOS and Main object of subsidiary will be to Manufacturing, wholesaling, retailing and trading in Textiles and Garments.
In case of single/multi brand, pls let me known provisions in both situation.
24 July 2024
To obtain approval for foreign investment in India in the textiles and garments sector through a Wholly Owned Subsidiary (WOS), you would typically need to follow the guidelines set by the Foreign Investment Promotion Board (FIPB), which has been replaced by the Foreign Investment Facilitation Portal (FIFP) under the Department for Promotion of Industry and Internal Trade (DPIIT) since 2017. Here’s a general outline of the procedure and provisions for both single-brand and multi-brand retail scenarios:
### Procedure for Foreign Investment Approval:
1. **Determine Eligibility:** - Ensure that the proposed foreign investment complies with the sectoral caps and conditions prescribed by the government for the textiles and garments sector.
2. **Formulate Business Plan:** - Prepare a detailed business plan outlining the nature of activities (manufacturing, wholesaling, retailing, trading), investment amounts, employment generation, technology transfer, etc.
3. **Incorporate Wholly Owned Subsidiary (WOS):** - Incorporate the subsidiary company in India under the Companies Act, 2013. This WOS will have the main objective of engaging in textiles and garments activities.
4. **Submit Application to DPIIT:** - Apply for approval through the FIFP portal (previously through FIPB) operated by DPIIT. - Fill out the application form with details such as the nature of the business, proposed investment amount, source of funds, and any other relevant information.
5. **Review and Approval Process:** - DPIIT will review the application along with relevant ministries/departments (such as Ministry of Textiles, Ministry of Commerce, etc., depending on the nature of activities). - Clearance from other regulatory bodies like Reserve Bank of India (RBI) may also be required for compliance with foreign exchange regulations.
6. **Obtain Approval:** - Once the application is reviewed and all necessary clearances are obtained, DPIIT will issue the approval for foreign investment in the specified sectors.
### Single Brand Retail Trading (SBRT):
- **Definition:** Single Brand Retail Trading refers to selling products under a single brand through retail outlets.
- **Conditions:** - For SBRT, FDI up to 100% is allowed under the automatic route (no prior approval required). - Compliance with local sourcing norms (mandatory sourcing of 30% from India for goods sold). - Meeting other conditions like minimum investment thresholds, brand ownership, etc.
### Multi Brand Retail Trading (MBRT):
- **Definition:** Multi Brand Retail Trading involves selling multiple brands under one roof.
- **Conditions:** - FDI up to 51% is allowed under government approval route (approval from FIFP/DPIIT required). - States have the discretion to allow MBRT within their jurisdiction. - Compliance with sourcing norms and other conditions prescribed by the government.
### Important Considerations:
- **Sectoral Caps and Conditions:** Ensure compliance with sector-specific conditions, if any, set by the government for textiles and garments.
- **Documentation:** Prepare all required documents including board resolutions, incorporation certificate of WOS, business plan, etc., for submission along with the application.
- **Legal and Regulatory Compliance:** Adhere to all legal and regulatory requirements related to foreign investment, taxation, labor laws, etc.
It’s advisable to consult with legal experts or a specialized consultant familiar with foreign investment regulations in India to navigate through the approval process smoothly and ensure compliance with all applicable laws.
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