Starting a Textile and Garments Business in India - Laws, Compliance and Government Initiatives

Starting a Textile and Garments Business in India - Laws, Compliance and Government Initiatives . “Fashion is not just about what we wear, it’s also a business, and art and a career involving science and accounting.” 
- Michelle Obama
In the financial year 2023-24, the Indian textiles and apparel industry contributed more than 12% to export earnings and constituted roughly 2% of India’s GDP. It’s an industry that involves employment of almost 40 lac people. In this post, we analyze the laws applicable, compliances, budget announcements and government initiatives that favorably impact the garments and textiles industries in India. 
Textile & Garments Industry in India - Key statistics

From the time India was an ancient culture, raw materials such as cotton and silk were the primary items of textile exports to other countries. India has a rich flourishing market with good quality hand-spun and handwoven textiles.

India is currently the largest producer of cotton accounting for almost 25% of the world’s output.

India is the second largest producer of man-made fibres, mainly polyester and viscose.

In the modern world, this industry is extremely varied. We not just have hand spun, labour intensive textiles but also large looms with heavy machinery churning out good quality textiles.

Newer forms of textiles such as banana and sugarcane yarns and sustainable fashion companies that use and upcycle textile waste are fast becoming profit-making in India.

Increasing Foreign Direct Investment in the textiles space

In the last 10 years, the industry of dyed and printed textiles has attracted huge foreign direct investment worth more than 3.46 billion US Dollars.

India has also allowed 100 percent FDI in the Indian textile sector under the automatic route.

India’s free trade agreements with several countries would also boost exports in the textile industry.

Production Linked Incentive Scheme - Textile Industry

Announced in Budget 2021-22, the Production linked incentive is an outcome or output oriented scheme. Here, the incentive by the government is paid proportionate to the goods manufactured. It is also linked to incremental sales from such products made in India.

The scheme incentivises both foreign players as well as local industries to apply for benefits worth 10,000 crores in the next five years under the scheme.

Under this scheme, cash incentives would be provided for five to seven years to specified sectors. Textile products and technical textiles are covered under this incentive scheme. A total of 10,600 crores would be given as incentives by the Ministry of Textiles.

Advantages of Production Linked Incentive for the garment industry

Greater access to financing for research and development in newer areas, especially India’s aspirational districts and states with existing handloom clusters

Investment for plant, machinery and upgradation of capital assets, to boost infrastructure in manufacturing of Man Made Fibres and processing of natural fibres.

Promotion of domestic manufacturing, and therefore, reduced import costs.

Promotion of exports, especially of finished garments and technical textiles, where India has competitive advantages and is trying to out-perform neighboring countries like Bangladesh.

The production linked incentives for textiles would cover man made fibers and technical textiles. 
Flagship scheme - Mega Investment Textiles Parks (MITRA)
The scheme is aimed at making the textile industry globally competitive, attract large investments, boost employment generation and add to exports from India. Under this, large industrial parks for textiles are being set up in Telangana, Gujarat, Madhya Pradesh, Tamil Nadu, Karnataka and Uttar Pradesh, with an outlay of 4500 crores. The scheme aims at creating parks to double the industry size to 3 billion dollars by the year 2026.
What are the main features of the Mega Investment Textiles Parks (MITRA)

World-class infrastructure - consisting of effluent treatment plants, heavy capital machinery, common storage and warehousing facilities, connection with industrial towns etc

Plug and play facilities - A plug-in play facility refers to an easy arrangement where a business can access facilities available as per their convenience. Private businesses with limited resources do not have to lock their capital in such heavy investment. The government facility would be available to all players in the textile space.

Textile parks – These parks would be set up covering over 1000 acres of land with the best capital infrastructure. This will give domestic manufacturers a level playing field by improving the quality of the Indian textiles export.

Scheme for Capacity Building in Textile Sector (Samarth)
This is a flagship skill development programme approved for creating jobs in the organized textile sector. This would cover the entire value chain of textiles, handlooms, handicrafts, silk making and jute and create a large pool of skilled workers and professionals, for employment in textile industries. 
Comprehensive Handloom Cluster Development 
This comprehensive scheme aims to improve the storage conditions, infrastructure in pre-loom and post-loom operations and provides assistance for development of basic and technical common infrastructure. Industries can apply for need based assistance for setting up integrated and holistic development facilities of handloom. The handloom clusters have facilities like dye houses, value addition centers, marketing complex etc. 
Other announcements for promoting the Textile and Garment industry
Deduction of basic custom duty on nylon – The Ministry of Textiles has announced a uniform deduction of basic custom duty rates on caprolactam, nylon chips and nylon fibre and yarn to 5%. Nylon, a synthetic fibre with multiple applications in textiles, fabrics and industrial use has been a contentious issue. Importers of the same had long argued for elimination or a reduction in this basic raw material. Now, with a uniform customs duty on nylon at a minimal rate, importers using it in making finished products would be favorably impacted. 
National Technical Textiles Mission, 2020 - Technical Textiles refer to the non-clothing textiles such as use of fabrics in applications in industrial use, agriculture, firefighting and other sectors.
For this sector, The National Technical Textiles Mission was launched in 2020 to promote development and research in technical textiles. Until the year 2024, this scheme involves an approved outlay of 1480 crores for developing usage of technical textiles. 
Amended Technology Up-gradation Fund Scheme (ATUFS) - In 2015, the government approved the amended technology upgradation fund scheme for providing access to technological upgradation in the textile industry. Funds can be utilized by textile entrepreneurs for upgrading industrial technology for textiles. 
Pre-registration process requirements - Protecting Intellectual Property for your textiles business
Domain Name - In today’s digitized world, securing a domain name for your textile company is of foremost importance. Courts when deciding cases of trademark infringement often look at who began to use a disputed domain name first. Hence, first usage of a name can go a long way in determining ownership rights over it. 
Trademark and Designs Registration 
Illustrations, fashion designs etc are eligible to receive a Graphic Design Copyright in India. In addition, the Designs Act, 2000 and corresponding Design Rules, 2002 extend the registration and protection of industrial designs in India. Securing a trademark can lead to better brand recognition, visibility and also serve as a differentiator for customers. 
Patent Registration on Textile Technology
Patents are the key point of negotiation with investors when it comes to innovative fabrics, technical textiles and novel materials in the textile businesses. A business with a registered patent is viewed more favorably by investors. For inventions of a scientific nature, it is advisable to seek a patent registration at the earliest as the average time taken from filing to the actual grant is about five years in India.
Design and Technology Upgradation Scheme 
Under this scheme, designs and technology, tools, equipment, market intelligence and assistance to exporters and entrepreneurs can be provided for prototype designing. A 100 per cent grant-in-aid can be received by applying to state and central handicrafts corporations. 
Setting up your textile business - Business Registration 
A textile business can be set up through registering your business either as a company or a limited liability partnership. The proposed name of the company along with its registered trademark can be applied to, using the SPICe+ form. 
A duly filled Form INC 32 is to be submitted to the RoC for the incorporation of the company.  The mandatory requirements of DIN, and automatic generation of TAN, PAN along with filing of electronic Memorandum of Association and Articles of Association, should be met. Once the Central Registration Centre verifies all documents, a certificate of incorporation is alloted. 
Financing your textile business 
In addition to beneficial schemes, the Ministry of Micro, Small and Medium enterprises provides the following refinancing schemes:

Refinance for Textile Industry under the Technology Upgradation Fund

Under this scheme, small finance banks, and traditional banks provide concessional refinancing assistance for installation of machinery in a new unit, or replacing existing machinery or expansion of a textile industrial unit.

Additional Grants for Apparel Manufacturing Units for Integrated Textile Parks (SITP)

Under this scheme, industry associations or entrepreneurial groups can apply for a financial grant upto 10 crores per park, for upto 40% of the proposed project cost. This grant can be used for state of the art infrastructure development for textile units, including bringing capital machinery from abroad. 
 
As India positions itself as a leader in supplying textiles to the world (with over 4% share in global textiles), it stands to make a substantial impact on the global stage, through technological advancements made by businesses in this space. Compliance Calendar has helped hundreds of startups and foreign companies in starting business in India. Connect with our experts today to get the best of advice on running a compliant textiles and garments business in India.

“Fashion is not just about what we wear, it’s also a business, and art and a career involving science and accounting.”

- Michelle Obama

In the financial year 2023-24, the Indian textiles and apparel industry contributed more than 12% to export earnings and constituted roughly 2% of India’s GDP. It’s an industry that involves employment of almost 40 lac people. In this post, we analyze the laws applicable, compliances, budget announcements and government initiatives that favorably impact the garments and textiles industries in India.

Textile & Garments Industry in India - Key statistics

From the time India was an ancient culture, raw materials such as cotton and silk were the primary items of textile exports to other countries. India has a rich flourishing market with good quality hand-spun and handwoven textiles.
India is currently the largest producer of cotton accounting for almost 25% of the world’s output.
India is the second largest producer of man-made fibres, mainly polyester and viscose.
In the modern world, this industry is extremely varied. We not just have hand spun, labour intensive textiles but also large looms with heavy machinery churning out good quality textiles.
Newer forms of textiles such as banana and sugarcane yarns and sustainable fashion companies that use and upcycle textile waste are fast becoming profit-making in India.

Increasing Foreign Direct Investment in the textiles space

In the last 10 years, the industry of dyed and printed textiles has attracted huge foreign direct investment worth more than 3.46 billion US Dollars.
India has also allowed 100 percent FDI in the Indian textile sector under the automatic route.
India’s free trade agreements with several countries would also boost exports in the textile industry.

Production Linked Incentive Scheme - Textile Industry

Announced in Budget 2021-22, the Production linked incentive is an outcome or output oriented scheme. Here, the incentive by the government is paid proportionate to the goods manufactured. It is also linked to incremental sales from such products made in India.
The scheme incentivises both foreign players as well as local industries to apply for benefits worth 10,000 crores in the next five years under the scheme.
Under this scheme, cash incentives would be provided for five to seven years to specified sectors. Textile products and technical textiles are covered under this incentive scheme. A total of 10,600 crores would be given as incentives by the Ministry of Textiles.

Advantages of Production Linked Incentive for the garment industry

Greater access to financing for research and development in newer areas, especially India’s aspirational districts and states with existing handloom clusters
Investment for plant, machinery and upgradation of capital assets, to boost infrastructure in manufacturing of Man Made Fibres and processing of natural fibres.
Promotion of domestic manufacturing, and therefore, reduced import costs.
Promotion of exports, especially of finished garments and technical textiles, where India has competitive advantages and is trying to out-perform neighboring countries like Bangladesh.

The production linked incentives for textiles would cover man made fibers and technical textiles.

Flagship scheme - Mega Investment Textiles Parks (MITRA)

The scheme is aimed at making the textile industry globally competitive, attract large investments, boost employment generation and add to exports from India. Under this, large industrial parks for textiles are being set up in Telangana, Gujarat, Madhya Pradesh, Tamil Nadu, Karnataka and Uttar Pradesh, with an outlay of 4500 crores. The scheme aims at creating parks to double the industry size to 3 billion dollars by the year 2026.

What are the main features of the Mega Investment Textiles Parks (MITRA)

World-class infrastructure - consisting of effluent treatment plants, heavy capital machinery, common storage and warehousing facilities, connection with industrial towns etc

Plug and play facilities - A plug-in play facility refers to an easy arrangement where a business can access facilities available as per their convenience. Private businesses with limited resources do not have to lock their capital in such heavy investment. The government facility would be available to all players in the textile space.
Textile parks – These parks would be set up covering over 1000 acres of land with the best capital infrastructure. This will give domestic manufacturers a level playing field by improving the quality of the Indian textiles export.

Scheme for Capacity Building in Textile Sector (Samarth)

This is a flagship skill development programme approved for creating jobs in the organized textile sector. This would cover the entire value chain of textiles, handlooms, handicrafts, silk making and jute and create a large pool of skilled workers and professionals, for employment in textile industries.

Comprehensive Handloom Cluster Development

This comprehensive scheme aims to improve the storage conditions, infrastructure in pre-loom and post-loom operations and provides assistance for development of basic and technical common infrastructure. Industries can apply for need based assistance for setting up integrated and holistic development facilities of handloom. The handloom clusters have facilities like dye houses, value addition centers, marketing complex etc.

Other announcements for promoting the Textile and Garment industry

Deduction of basic custom duty on nylon – The Ministry of Textiles has announced a uniform deduction of basic custom duty rates on caprolactam, nylon chips and nylon fibre and yarn to 5%. Nylon, a synthetic fibre with multiple applications in textiles, fabrics and industrial use has been a contentious issue. Importers of the same had long argued for elimination or a reduction in this basic raw material. Now, with a uniform customs duty on nylon at a minimal rate, importers using it in making finished products would be favorably impacted.

National Technical Textiles Mission, 2020 - Technical Textiles refer to the non-clothing textiles such as use of fabrics in applications in industrial use, agriculture, firefighting and other sectors.

For this sector, The National Technical Textiles Mission was launched in 2020 to promote development and research in technical textiles. Until the year 2024, this scheme involves an approved outlay of 1480 crores for developing usage of technical textiles.

Amended Technology Up-gradation Fund Scheme (ATUFS) - In 2015, the government approved the amended technology upgradation fund scheme for providing access to technological upgradation in the textile industry. Funds can be utilized by textile entrepreneurs for upgrading industrial technology for textiles.

Pre-registration process requirements - Protecting Intellectual Property for your textiles business

Domain Name - In today’s digitized world, securing a domain name for your textile company is of foremost importance. Courts when deciding cases of trademark infringement often look at who began to use a disputed domain name first. Hence, first usage of a name can go a long way in determining ownership rights over it.

Trademark and Designs Registration

Illustrations, fashion designs etc are eligible to receive a Graphic Design Copyright in India. In addition, the Designs Act, 2000 and corresponding Design Rules, 2002 extend the registration and protection of industrial designs in India. Securing a trademark can lead to better brand recognition, visibility and also serve as a differentiator for customers.

Patent Registration on Textile Technology

Patents are the key point of negotiation with investors when it comes to innovative fabrics, technical textiles and novel materials in the textile businesses. A business with a registered patent is viewed more favorably by investors. For inventions of a scientific nature, it is advisable to seek a patent registration at the earliest as the average time taken from filing to the actual grant is about five years in India.

Design and Technology Upgradation Scheme

Under this scheme, designs and technology, tools, equipment, market intelligence and assistance to exporters and entrepreneurs can be provided for prototype designing. A 100 per cent grant-in-aid can be received by applying to state and central handicrafts corporations.

Setting up your textile business - Business Registration

A textile business can be set up through registering your business either as a company or a limited liability partnership. The proposed name of the company along with its registered trademark can be applied to, using the SPICe+ form.

A duly filled Form INC 32 is to be submitted to the RoC for the incorporation of the company. The mandatory requirements of DIN, and automatic generation of TAN, PAN along with filing of electronic Memorandum of Association and Articles of Association, should be met. Once the Central Registration Centre verifies all documents, a certificate of incorporation is alloted.

Financing your textile business

In addition to beneficial schemes, the Ministry of Micro, Small and Medium enterprises provides the following refinancing schemes:

Refinance for Textile Industry under the Technology Upgradation Fund

Additional Grants for Apparel Manufacturing Units for Integrated Textile Parks (SITP)

As India positions itself as a leader in supplying textiles to the world (with over 4% share in global textiles), it stands to make a substantial impact on the global stage, through technological advancements made by businesses in this space. Compliance Calendar has helped hundreds of startups and foreign companies in starting business in India. Connect with our experts today to get the best of advice on running a compliant textiles and garments business in India.