Past iadvisory Questions and Answers: India

What is the best way to go about setting up a logistics business in India? How should you respond to an interested buyer of your products whom you have yet to meet? Our iadvisors share some tips and advice on these issues faced by members of the iadvisory portal looking to set up a business in India.

We are looking to set up an office in Chennai to manage our customers’ logistics requirements. We do not know how to go about it. We would also like to find out more about the start up cost, government regulations and visa/work permit issues related to a Singaporean employee being attached there.

As per the FDI (Foreign Direct Investment) policy of the Indian government, you are allowed to set-up a logistics company anywhere in India without requiring any permission, provided you do not carry out postal and courier services.

My recommendation to you would be to set up a Private Limited Company incorporated in India. The company can be owned 100% by foreigners. All the directors can also be foreigners though we recommend that you have someone residing in Chennai as a Director or at least an authorised signatory for ease of operations. The minimum capital to be invested in the company is INR.100,000 (approx. S$2,9521). The process of incorporation involves some of the documents to be notarised by a public notary in Singapore and consularised at the Indian Embassy in Singapore (or any other country from where such documents originate). Our experience has been that the incorporation process takes about 4-6 weeks primarily because of this notarisation and consularisation process which you will need to undertake.

Once the company has been incorporated, certain statutory registrations such as income tax, service tax, local municipal registration, etc also need to be carried out. Also, the newly formed Indian company must inform the Reserve Bank of India (RBI) about receipt of foreign capital and issue of shares to foreigners.

The cost of setting-up consists of 2 elements. First is the governmental charge which depends upon the upper limit that you set for the company's capital. For example, a company with US$ 25,000 (S$ 35,000) capital limit will have government charges of approx US$ 1,000 (S$1400). The other element is consultant charges which vary from consultant to consultant, and approximates US$ 3,500 (S$4905).

With regards to visa/work permit, I would advise you to consult a consular official at the Indian Embassy/High Commission in Singapore for authentic advice. I would not recommend relying on any third party agent for this.

My company currently has a business contact in India, looking to purchase our vegetarian products, and is seeking for us to provide them with supplies on a reseller basis.

We are not very sure how to go about doing it as we have yet to meet the buyer in person, and we are not sure if this will work out. We seek your advice on this matter.

It is always advisable to understand the market you are serving in terms of its direction, growth and for how much products are being sold. I am guessing that you serve a niche market with niche products that it is being exported from Singapore and has not been produced in India. My advice to you would be to carry out the export on receiving 100% advance or down-payment basis only. There could be a possibility that the first couple of consignments are paid on time but then the orders become larger and the money gets held up in India. Going through ‘Documents against Payment’ or ‘Letter of Credit’ could be good alternative options to 100% advance.

1. S$1=INR34 approx.
2. S$1=US$1.4 approx.

The above are views represented by iadvisors.

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