Foreign manufacturing company setup in India

Foreign Manufacturing
Setup in India

15% Tax, PLI Cashback, State Subsidies — Make-in-India Has Real Teeth Now

The combination of Section 115BAB\'s concessional 15% corporate tax for new manufacturing, the Production Linked Incentive (PLI) scheme\'s 4–6% cashback on incremental sales across 14 sectors, and state-level capital subsidies has materially changed the economics of Indian manufacturing for foreign investors. Apple\'s iPhone manufacturing scaling, Foxconn\'s India expansion, Samsung\'s ongoing investment, and a wave of German auto-component, US electronics, and Korean battery investments are evidence the policy mix is working. This page covers the structuring, incentive layering, customs and supply-chain considerations for a foreign manufacturer entering India.

The Three-Layer Incentive Stack
1. Section 115BAB — Tax
  • 15% corporate tax (effective ~17%).
  • For new manufacturing companies incorporated 1 Oct 2019 onward.
  • Compare with 22% standard rate.
2. PLI — Operating
  • 4–6% cashback on incremental sales.
  • 14 sectors covered.
  • Sector-specific minimum capex and sales thresholds.
3. State Subsidies — Capex
  • 5–25% capital investment subsidy.
  • Stamp-duty waiver, electricity duty exemption.
  • GST refund for first 5–10 years for mega projects.
PLI Sectors and Indicative Outlays
  • Mobile phones & components: INR 40,995 crore outlay.
  • Advanced chemistry cell (ACC) batteries: INR 18,100 crore.
  • Auto & auto components: INR 25,938 crore.
  • Pharmaceutical APIs & KSMs: INR 6,940 crore.
  • Telecom equipment: INR 12,195 crore.
  • Electronics components & semiconductors: INR 76,000 crore (semi PLI).
  • Specialty steel, white goods, textiles, food products, drones, solar PV modules: sector-specific outlays.
Customs & Supply-Chain Planning
  • Phased Manufacturing Programme (PMP): for mobile phones, components import duty differentials encourage localisation.
  • FTAs: India-EFTA (effective 2024), India-ASEAN, India-Japan CEPA, India-Korea CEPA, India-UAE CEPA; preferential duty rates on inputs from these regions.
  • FTWZ (Free Trade and Warehousing Zones): duty-deferred warehousing for re-export models.
  • Bonded manufacturing under Section 65 of Customs Act: deferred duty on imported capital goods and raw materials used in manufacture for export.
  • Customs Authority Rulings: for classification or valuation certainty on high-value imports, advance rulings available.
Setup Roadmap — Foreign Manufacturer to Operational Indian Plant
  1. Pre-investment (Weeks 1–6): incentive modelling (PLI fit, state-subsidy quantification, tax projection), state shortlisting based on labour, logistics, raw material proximity.
  2. WOS incorporation (Weeks 6–14): SPICe+, capital infusion, FC-GPR, Section 115BAB opt-in via Form 10-ID.
  3. Land acquisition / industrial plot allotment (Months 3–9): state-board allocation, environmental clearances, factory licence.
  4. PLI application & state incentive MoU (parallel to plant build): sector-ministry PLI registration, state incentive MoU.
  5. Capital equipment import: customs structuring, bonded warehousing if applicable, GST on imports.
  6. Commercial production start (Months 12–18 for greenfield): PLI claim cycle begins; ongoing compliance under FEMA + tax + GST + state pollution control board + labour laws.

A foreign manufacturer\'s India decision is increasingly an economics decision, not a "should we" decision. Engage us to model the all-in landed economics with PLI, Section 115BAB, and state incentives layered — before you sign the JV term sheet or lease the plot.