Foreign Direct Investments (FDI) in Food & Beverages Sector in India-2: Lawyers Advice on Foreign Investments in India | Law Firm for Foreign Investments in India | FDI Attorney in India | India Business Entry | Legal Advice for Foreign Investors in India
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Applicable Laws:
• Food Safety and Standards Act, 2006 (FSSAI): This act consolidates the laws relating to food and to establish the Food Safety and Standards Authority of India for laying down science-based standards for articles of food and to regulate their manufacture, storage, distribution, sale and import.
• Legal Metrology Act, 2009: This act establishes and enforces standards of weights and measures, regulate trade and commerce in weights, measures and other goods which are sold or distributed by weight, measure or number and for matters connected therewith or incidental thereto
• Legal Metrology (Packaged Commodities) Rules, 2011: The Rules deal with goods that are packaged and provide how declarations are to be made and contained in a packaged commodity that is meant to be for sale.
Documents and Agreements:
• No Objection Certificate with the fire department is necessary just in case an accident happens because of the fire.
Precautionary Measures:
• It is important for the food to meet the safety requirements under the FSSAI. When a foreign company is operating in the food industry in India, it has to make sure that the food being manufactured is rightly tested and have a FSSAI license. This aspect is mentioned in Food Safety and Standards (Laboratory and Sampling Analysis) Regulation, 2011.
• The statutory labelling requirements have to be met by the foreign company. In India labelling aspects like the ingredients used in the food products and the alcohol content in alcoholic beverages are supposed to be mentioned on the labels of the food products. The labelling requirements are mentioned in Food Safety and Standards (Packaging and Labelling) Regulation, 2011.
Functioning and Management:
• The food and beverage industry in India consist of three sectors- Farming, Processing, and Distribution. Farming sector is involved in the collection and production of raw materials. For example, DuPont India.
• The processing sector is involved in processing the raw materials to create a product with them which can be easily distributed among the customers. For example, Kellogg Company, Coca-Cola Company, Pepsi Co.
• The distribution sector involves distributing the final product to the customers. The medium for distribution of goods under this sector are supermarkets or grocers, quick service restaurants (Taco Bell, KFC, etc.), upscale restaurants.
Taxation Aspects:
• The introduction of the Goods and Services Tax (GST) has attracted a lot of foreign direct investments across sectors due to tax transparency. Since GST is a consumption-based tax, when a foreign company in operating in the food and beverage industry in India, it must charge GST on its products.
• The food and beverage industry is a sector with a lot of potential to grow in the near future. It is a sector which can bring a lot of FDI into India. This is why the Government of India takes many steps to enhance the ease of doing business in India for the foreign companies investing in India. One such step India took is through tax incentives. The government implemented a new GST return filing mechanism which will include simplified return forms for ease of filing across all categories of taxpayers registered under GST.
Export Potential:
• During the years 2011-16, India’s exports of processed food and related products (inclusive of animal products) grew at a CAGR of 11.74 per cent, reaching US$ 16.2 billion.
Recent Developments:
• The Government of India has relaxed FDI norms for the Food and Beverage sector, allowing up to 100% FDI in food product e-commerce through Automatic route.
• Government of India aims to boost growth in food processing sector by leveraging reforms of 100 per cent FDI in marketing of food products.
Authored By: Adv. Anant Sharma