CAN A BUSINESS WITH FOREIGN OWNERSHIP GET UDYAM REGISTERED?

Can a Business with Foreign Ownership Get Udyam Registered?

Can a Business with Foreign Ownership Get Udyam Registered?

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Udyam Registration is an important government initiative designed to support Micro, Small, and Medium Enterprises (MSMEs) in India. It provides various benefits, including tax exemptions, subsidies, and easier access to business loans. Many entrepreneurs and investors from foreign countries are interested in setting up businesses in India and taking advantage of the benefits provided to MSMEs. However, a common question arises: Can foreign-owned businesses apply for Udyam Registration in India?

The answer depends on several factors, including business structure, ownership percentage, and compliance with Indian laws. In this article, we will explore whether foreign-owned businesses can apply for Udyam Registration, the eligibility criteria, and the process of setting up an MSME in India as a foreign entity.

What is Udyam Registration?


Udyam Registration is an online certification process introduced by the Ministry of Micro, Small, and Medium Enterprises (MSME), Government of India. It provides a unique identification number and official recognition to businesses that qualify as MSMEs.

The registration helps MSMEs access government schemes, financial support, and business development programs.

MSME Classification for Udyam Registration


Udyam Registration is available for both manufacturing and service-based businesses. Any business that falls under the MSME category can apply. The classification is based on investment in plant & machinery or equipment and annual turnover:

  • Micro Enterprises: Investment up to Rs. 2.5 crore and turnover up to Rs.10 crore.

  • Small Enterprises: Investment up to Rs. 25 crore and turnover up to Rs. 100 crore.

  • Medium Enterprises: Investment up to Rs.125 crore and turnover up to Rs. 500 crore.


Can Foreign-Owned Businesses Apply for Udyam Registration?


Foreign-owned businesses can apply for Udyam Registration, but they must meet specific conditions set by the Indian government. The eligibility depends on the following factors:

1. Type of Business Structure


Foreign investors can set up different types of businesses in India, including:

  • Private Limited Company (PLC)

  • Limited Liability Partnership (LLP)

  • Wholly Owned Subsidiary (WOS)

  • Joint Venture (JV)

  • Branch Office, Liaison Office, or Project Office


Among these, Private Limited Companies and LLPs are eligible for Udyam Registration if they meet MSME criteria. However, branch offices and liaison offices of foreign companies cannot apply for Udyam Registration, as they are considered extensions of their parent company and not independent businesses.

2. Indian vs. Foreign Ownership Percentage


For a business to qualify as an MSME under Udyam Registration, it must be registered in India.

  • If the company is partially foreign-owned but registered in India, it can apply for Udyam Registration.

  • If the company is 100% foreign-owned but registered as a Private Limited Company or LLP in India, it may still qualify as an MSME.

  • If the company is only a foreign branch without an Indian business registration, it cannot apply.


3. Compliance with Indian Business Laws


Foreign investors must comply with:

  • Foreign Exchange Management Act (FEMA) regulations.

  • Reserve Bank of India (RBI) guidelines on foreign investment.

  • Companies Act, 2013 for business incorporation.

  • GST and tax regulations for operating an MSME in India.


If the business is registered under Indian laws and falls within MSME investment and turnover limits, it can apply for Udyam Registration.

Benefits of Udyam Registration for Foreign-Owned MSMEs


Once a foreign-owned business qualifies for Udyam Registration, it can access several government benefits:

1. Tax Benefits



  • Udyam-registered businesses can avail of income tax exemptions, GST benefits, and depreciation benefits.

  • Certain startups and MSMEs enjoy tax holidays and deductions under government policies.


2. Easy Access to Business Loans



  • Registered MSMEs can apply for collateral-free loans under government schemes.

  • Interest rates on business loans are lower for MSMEs with Udyam Registration.


3. Subsidies and Incentives



  • Subsidies on patent registration, technology upgradation, and quality certification.

  • Reimbursement of ISO certification costs.


4. Priority in Government Tenders



  • Many government contracts are reserved for MSMEs, giving registered businesses a competitive advantage.

  • Foreign-owned MSMEs registered in India can participate in government projects.


5. Protection Against Late Payments



  • MSMEs registered under Udyam receive protection under the MSME Development Act, ensuring payments are made within 45 days.


How to Register a Foreign-Owned MSME for Udyam Registration



  1. Visit Udyam Portal – Open the official website.

  2. Enter Business Details – Fill in name, type, address, and bank details.

  3. Submit Form – Review and apply.

  4. Pay Fee – Complete the payment.

  5. Verify OTP – Enter OTP from your Aadhaar-linked mobile.

  6. Complete Registration – Details will be verified.

  7. Get Udyam Certificate – Received via email after approval.


Challenges for Foreign-Owned Businesses Applying for Udyam Registration


While Udyam Registration offers many benefits, foreign-owned MSMEs may face some challenges:

1. Aadhaar Requirement



  • The Udyam portal requires the Aadhaar number of an Indian citizen (director/partner).

  • Foreigners without an Indian Aadhaar card cannot complete the registration.


2. Restrictions on Foreign Investment in Certain Sectors



  • Some industries have foreign investment restrictions, limiting ownership control.

  • Businesses must comply with FDI (Foreign Direct Investment) policies.


3. Compliance with Multiple Regulations



  • Foreign businesses must comply with RBI, FEMA, and GST laws while registering as an MSME.

  • They may need additional approvals from SEBI and other regulatory bodies.


Note: Now easily update udyam certificate through the udyam portal

Conclusion


Foreign-owned businesses can apply for Udyam Registration if they are registered in India and meet MSME criteria. While branch offices and liaison offices do not qualify, companies structured as Private Limited Companies or LLPs can benefit from Udyam Registration advantages like tax exemptions, government loans, and subsidies.

Foreign investors planning to establish an MSME in India should follow proper registration procedures, comply with legal requirements, and ensure they have an Indian partner or director to complete Udyam Registration successfully.

 

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