7 Challenges Foreign Firms Face While Setting Up A Business In India

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For those businesses that are looking forward to expand their regime abroad, India is certainly going to be one of the most prominent destinations. It is one of the rapidly rising economies across the globe and one of the primary reasons for a large number of companies trying to consider business setup in India. No wonder continuous growth of the economy contributes to this mindset. Despite the surge of success, there are various companies that fail to make their stay in this country permanent.

The following are the challenges the foreign firms face when setting up a business in India.

1.Legal issues

The intricate legal system in this country along with the crowded courts is one of the basic challenges for the foreign companies as they need to go through several procedural hassles for procuring the approvals and licenses that are mandatory for doing business in this country. At times, they need to wait for months and years to collect the necessary approvals. Unfortunately, the red flags of bureaucracy often outweigh the success outcomes these companies project for doing business in India. Quite naturally, the foreign companies may not enjoy the experience of dealing with the same old complexities.

2.Land acquisition and permits of construction

For setting up LLC in India, the issues of land acquisition is complex due to the challenges of establishing a transparent holding for the purchase and the absence of proper rules related to its legal ownership. When the companies try to establish true ownership of the land, they are likely to face umpteen difficulties. The ranking of India is poor when it comes to the time it takes to receive the construction permit after filing the application. While the time taken for this procedure was 162 days, it has come down to sixty days now. However, proper guidance is needed to make the process less complicated.

3.Complicated tax structure

The sources close to the World Bank reveal that it takes about two hundred and fourteen hours every year for the preparation and the payment of taxes, and this demonstrates the intricacy of the tax structure of this country. In fact, the regulations surrounding the tax structure is so complicated that the foreign companies often end up paying the wrong tax amount without the intervention of professionals in the field of tax. The GST that came into effect in India about a couple of years back is one of the most complicated structures and has received the highest rating in Asia and the second among the countries that implement this system. However, it is believed that the Goods and Services Tax or the GST is going to streamline the process of tax payment so the companies who have already created an India entry strategy must go through the new tax structure and reconsider their decision to do business in India.

4.Intellectual property

For setting up LLP in India or if you have already acquired an experience of trading in this country, it is necessary to know the rules that exist when it comes to the protection and the implementation of the rights to the name of your company. India is one of the signatories to GATT or the General Agreement on Trade and Tariff and TRIPs or the Trade Related Aspects of the Intellectual Property Rights and complies with the regulations of these bodies with the following statutes.

  • Trademarks
  • Industrial designs
  • Copyrights and the other rights related to it
  • Patents
  • Geographical indications

The copyright laws in India are adequate although the enforcement of these laws is still poor and it is not uncommon to find the piracy of the materials that have already undergone copyright. For companies facing hassles or infringement related to this law, it is essential to collect as much evidence as possible. Consulting the lawyers in India may provide the right solutions when it comes to taking a suitable action for the protection of intellectual property rights.

5.Electricity and infrastructure

The government of India has already implemented several programs to rev up the rural electricity and its ranking has certainly improved. If you are not aware, the time taken to obtain electric connection has also dropped substantially. However, the current demand of electricity surpasses the supply with a boom in the economy and the possibility of power outages cannot be ruled out. Apart from this, the country has undergone massive infrastructural development that has led to a surge in the road transport, the creation of modernized railways, and the development of adequate power supply. The truth is that it can take about several years for the plans to come to reality and the current challenges can be difficult in terms of logistics and distribution.

6.Registration of property

The process of property registration can take up a lot of time in India and to ensure that the foreign companies are aware of the legislation that prevails in the states, professional help may be needed. A legal firm in India can set things right for a foreign company facing difficulties with property registration.

7.Export and import

The investors and exporters also face tariff and regulatory tax regime that lacks transparency and are often unpredictable. Even though the government legislations have been devised to improve foreign trade, companies looking forward to do business in India still face challenges in the area of export and import.

The final word

Doing business in India is not going to be easy, and there are plenty of challenges and complications for the foreign companies to do business in this country. It is essential to get local help to obtain a proper guideline to make way through the financial, regulatory, cultural, and bureaucratic complications.

Author Bio

Amy Jones is the lead legal expert at Ahlawat & Associates- one of the best law firms in India. She is a passionate writer and loves to help people in all aspects of insolvency and bankruptcy law.