Food Processing Business Setup in India
India is the world's second-largest producer of food and holds the potential to become the food factory of the world. The food processing sector is a priority sector under the 'Make in India' initiative, with the government targeting to increase processing levels from the current 10% to 25% by 2025.
This comprehensive guide covers the complete setup process for food processing businesses in India, including FSSAI licensing, government schemes, tax benefits, and export opportunities.
Industry Overview and Growth Potential
Market Statistics
- • Food processing market: $535 billion by 2025
- • Sector growth: 11% CAGR
- • Employment: 12+ million workers
- • Share in GVA: 8.80%
- • Export potential: $55 billion by 2025
Key Advantages
- • Abundant raw material availability
- • Large domestic consumer base
- • Favorable climate for agriculture
- • Low production costs
- • 100% FDI under automatic route
FSSAI License Requirements
The Food Safety and Standards Authority of India (FSSAI) is the apex food regulator. All food business operators must obtain FSSAI registration or license before commencing operations.
FSSAI Registration
- • Turnover: Up to ₹12 lakhs
- • Petty food manufacturers
- • Small retailers
- • Fee: ₹100/year
State License
- • Turnover: ₹12 lakhs - ₹20 crores
- • Medium manufacturers
- • Distributors/wholesalers
- • Fee: ₹2,000-7,500/year
Central License
- • Turnover: Above ₹20 crores
- • Large manufacturers
- • Import/export businesses
- • Fee: ₹7,500/year
Step-by-Step Registration Process
Company Registration
Register as Private Limited Company or LLP based on scale. Pvt Ltd recommended for larger operations and easier access to institutional funding. 100% FDI allowed in food processing.
FSSAI License
Apply for appropriate FSSAI license based on turnover and scale. Central license for multi-state operations or large scale, State license for medium scale. Include food safety management plan.
GST Registration
Mandatory GST registration for food businesses. Most food products attract 5% GST (concessional rate). Registration required in each state of operation for multi-state businesses.
Udyam Registration
Register under Udyam portal to obtain MSME status. Enables access to PM FME scheme benefits, priority sector lending, and credit guarantee schemes. Essential for small food processing units.
Factory License
Apply for factory license under Factories Act if employing 10+ workers with power or 20+ workers without power. Ensure premises comply with food safety and hygiene standards.
PM FME Scheme Benefits
The Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PM FME) scheme provides a 35% subsidy (up to ₹10 lakh) for micro food processing units. This is a game-changer for small entrepreneurs.
Eligibility Criteria
- • Existing unorganized food processing units
- • FSSAI registration/license
- • Not availed similar subsidy earlier
- • Willing to formalize operations
Eligible Activities
- • Machinery and equipment
- • Quality control/food testing
- • Packaging and branding
- • Marketing and promotion
Tax Benefits for Food Processing
Concessional GST Rates
- • 0%: Fresh fruits, vegetables, unprocessed food grains
- • 5%: Most processed food items, edible oils
- • 12%: Frozen foods, processed meats
- • 18%: Ice cream, aerated beverages
Income Tax Benefits
- • 100% deduction for first 5 years (Section 80-IB)
- • 25% deduction for next 5 years
- • Applies to new food processing units
- • Must commence operations before March 2024
Export Opportunities
India is among the top 5 exporters of agricultural commodities. The government has set a target of $55 billion in food processing exports by 2025.
Top Export Products
- • Processed fruits and vegetables
- • Rice and cereals
- • Marine products
- • Spices and spice powders
Export Incentives
- • Duty drawback schemes
- • MEIS/SEIS benefits
- • EPCG scheme
- • Export promotion capital goods
Key Markets
- • USA, UAE, UK
- • Southeast Asia
- • European Union
- • Middle East
Infrastructure Support
Mega Food Parks
Integrated food processing facilities with common infrastructure including cold storage, warehousing, and quality control labs.
Cold Chain
Government subsidy up to 50% for setting up cold chain infrastructure including pack houses and reefer vehicles.
Agro Processing
Agro Processing Clusters scheme provides subsidy for cluster development near producing areas.
Key Takeaways
Essential Registrations
- ✓ Company registration (Pvt Ltd/LLP)
- ✓ FSSAI license (State/Central based on scale)
- ✓ GST registration for food products
- ✓ Udyam registration for MSME benefits
Key Incentives
- ✓ PM FME scheme (35% subsidy)
- ✓ 100% income tax exemption (5 years)
- ✓ Concessional 5% GST on most foods
- ✓ 100% FDI under automatic route