Opening a Textile Unit in India

Narendra Kumar

07 Jun, 2019

Opening a textile unit firm means supply different types of fabrics for the fashion and apparel industry. There are two methods of working in this case – either opening a factory that produces textiles or fabrics or a shop that sells textile products. In both cases it is important that.

1. The location of the unit is strategic. The shop should be in an area where there is demand and the factory should be in an area that is well connected and has no water and electricity related issues.
2. Close to source of raw materials in case of a factory and vendors in case of a retailer store.
3. Transportation is crucial in both the types of entities.
4. Ample storage space that is well-ventilated because textiles leave toxic materials and dust behind.

Both the options require a good amount of investment. In the latter case taking the franchise of a reputed brand may cost a little less, but proper accounting is a necessity in both the types of business entities mentioned above.

What does the Market Trends Speak about the Textile Business in India?

The textile industry is currently contributing 2% to India’s GDP and 15% to the export earnings of the country. The Indian textile industry is one of the largest in the world with the largest area of land marked for cotton cultivation. Some facts about India:-

• Is the largest producer of cotton in the world
• Is the largest producer of jute and jute products in the world?
• Is the second largest producer of silk in the world.

There are reasons why the textile business has good prospects in India:-

1. The government of India has introduced lots of favorable policies and incentives for textile manufacturers.
2. There is abundant raw material available in the form of cotton, jute, silk, wool etc.
3. India has a good base of skilled manpower in the country for the entire value chain of textile production.

What are the Necessary Registrations and Licenses Required to Start a textile unit in India?

Whether starting a manufacturing unit or a retail shop, the following registrations are mandatory to start any type of business:-

1. Registering the business either as a partnership firm, LLP, Private Limited Company or One Person Company

For Company Registration the Ministry of Corporate Affairs has introduced the Spice Form wherein checking and registering the Name, applying for the Director Identification Number and Incorporation Certificate can be clubbed into one simple process.

1. Applying and obtaining the Digital Signature Certificate (DSC) on behalf of the directors/partners/proprietor.
2. Apply for an appropriate name and trademark registration after it.
3. Trade License from the local municipal corporation
4. Udyog Aadhaar MSME registration – for a Microenterprise, the investment in plant and machinery should not exceed Rs .25 lakh; for a Small enterprise the investment needs to be between Rs. 25 lakhs and 5 crore; for a Medium scale enterprise the investment should be in the range of Rs. 5 crore and Rs. 10 crores. The Udyog Aadhaar application can be submitted online.
5. GST registration to obtain the GTIN This is a mandatory registration for all business entities that have an annual turnover of more than Rs. 20 lakh per annum as well as indulge in inter-state business and e-commerce activities. This can be applied online.
6. ESIC registration for units with 10 or more employees earning Rs. 15000 monthly wage and EPFO registrations for entities with a minimum of 10 employees are

In case of starting a textile manufacturing unit, the following additional licenses are required:-

1. Pollution License from the State Pollution Control Board – the consent to establish before setting up the plant and consent to operate before commencing production.
2. Factory License for registering the entity premise with the local authority pertaining to implementing safety and health management system in the premises and taking care of risk management factors.

In case of starting a textile unit retail shop:-

1. Shop & Establishment Act License from the Department of Labor or the State Government. The Act regulates wage payments, hours of work, leave policy, holidays and other terms of service for people employed in the shop or the commercial unit.