Selling in India

European companies should know about BIS registration in India

 

Before you start importing or manufacturing your product in India, it is wise to check whether you need a mandatory BIS registration. This is a hallmark issued by the Indian government to guarantee the quality of specific products. There are registration options for around 900 products, but for more than 300 products BIS registration is actually mandatory. For example, foodstuffs, household electrical products chemicals, cement and steel. In this article, we explain what a BIS registration is and how you can obtain one.

Bis registration for foreign companies

What does BIS stand for?

The 'BIS' in BIS certification stands for the Bureau of Indian Standards, which is the national certification body of India. The bureau was established in 1986 with the aim of: 

  • offer consumers safe goods of reliable quality

  • minimising health risks for the consumer

  • human, plant and animal safety

  • environmental safety

  • prevention of misleading commercial practices

  • promotion of a culture of quality through the application of good manufacturing practice

  • educating the industry in various aspects of standardisation and testing

  • promotion of exports and encouragement of import substitution

  • monitoring the distribution of plant species

  • minimising waste

The BIS Product Certification System is one of the largest in the world, with over 26500 licence holders for more than 900 products. BIS certification allows licensees to use the popular ISI mark on their product, which in India is synonymous with a quality product. Within the BIS Product Certification System, there are four different ways or 'schemes' by which producers can apply for registration depending on their product.

The four different BIS Certification Schemes

1. The normal procedure for domestic manufacturers 

The applicant must submit the BIS certification application with the required documents and the required fee. After submitting the application, a preliminary factory assessment is carried out by a BIS employee. Subsequently, samples are tested at the factory and samples are also taken for independent testing in an external laboratory. BIS certification is granted if the samples meet the standards. Under this method, BIS certification is expected to be granted within 4 months of the application being submitted.

2. Simplified procedure for domestic manufacturers 

In the simplified procedure, in addition to the documentation required for the BIS registration, the applicant must also enclose a test report of a sample by a laboratory recognised by the BIS. If the test report is satisfactory, an inspection of the factory site is carried out by a BIS employee. The BIS certification is granted if the verification by the BIS officer is sufficient. With this method, it is expected that the licence will be granted within 30 days after submitting the BIS certification application with the required documents and the test report.

3. ECO Mark Scheme 

BIS license for environmentally friendly products is granted under a scheme separate from the normal BIS certification process. Eco-friendly products must meet additional requirements to qualify for the ECO mark. However, the licensing procedure is similar to that of the scheme for domestic producers.

4. Foreign Manufacturers' Certification Scheme (FMCS).

Foreign manufacturers should apply for their BIS registration, if mandatory, through the FMCS. In addition, it is also possible to obtain the registration as a foreign manufacturer if it is not mandatory for your product. 

Applying for a BIS registration through the Foreign Manufacturers' Certification Scheme (FMCS)

Over 300 products, ranging from air conditioners to aluminium foil, require foreign producers to apply for BIS certification. In addition, a mandatory registration is required for 49 electronic & IT products that are not on the standard list, because the application for that certification does not go through the FMCS. More about this specific application can be found here.  

To obtain the BIS registration, you first need to apply to the BIS and pay the application fee for registration. Please be aware that a separate application is required for each product. The application to the BIS can be done by two entities:

  • Your Indian liaison or branch office (as long as it has all the rights of the Reserve Bank of India to file an application) 

  • A legally appointed agent in India

It is highly recommended to choose the second option. The process starts with a lot of paperwork in which you have to demonstrate how the quality of the product is guaranteed. It has to be explained on paper exactly how the production processes work, from the purchase of the raw materials to the ways in which the final product is tested. Only a local expert with specific experience in applying for BIS certification for international companies will understand how everything needs to be documented and submitted. If you place this task with your local entity and they start without experience, you are bound to experience a delay of several months.

Once your representative has submitted everything, your application will be examined by the BIS. If it is found to be complete, your application will be officially registered. A visit to your production facility is then scheduled with your Indian representative. The costs for this visit are at your expense and include working days, travel and accommodation expenses and the BIS employee's daily allowance. During the visit, the inspector will check the following items:

  • Whether your production process and your testing facilities meet Indian standards

  • The competence of your permanent test staff

  • Whether samples of your product meet the requirements of the Indian standard.

The BIS inspector does not only carry out tests on site, but also takes samples which you must have tested by an external BIS-approved laboratory in India. The costs for these tests are also for you.

If the BIS considers the results of the inspection sufficient and the independently tested samples also meet the Indian standard, you will receive your BIS registration. Your representative must then sign the terms of the BIS agreement. This means that you are willing to comply with the Scheme of Testing and Inspection (STI) and will pay the annual minimum marking fee and the licence fee. 

Minimum marking fee and licence fee 

You have to pay the annual minimum marking fee (amount depends on your product) and the licence fee (₹1000) once the BIS registration is granted. Thereafter, you may pay the marking fee either quarterly or annually. A BIS licence is normally granted for the duration of one year, but extension options of up to 5 years are available for most products.

The renewal process is much simpler than the initial BIS registration as it does not require a visit to your facility. When applying for a renewal, you must submit the following documents:

  1. Renewal form

  2. Production details of products marked ISI

  3. Extended bank guarantee (six months longer than the validity of the licence)

  4. Proof of payment of the marking fees

No Objection Certificate

It sometimes happens that the code of your product indicates to customs that a BIS registration is required, but this is not the case. It also happens regularly that customs confuses products that are "similar" to your product and fall under the "mandatory certification". Your product is then detained by the authorities, leading to considerable delays, and you may even be fined.  

In order to prevent this, a special "No Objection Certificate" (NOC) can be requested from BIS, which proves that the material is not subject to "compulsory certification". BIS checks on a case-by-case basis, using test reports, product specifications, declarations and other evidence, whether a NOC is applicable. However, the fee for this certificate is limited. It takes approximately two months to obtain an NOC. A NOC is issued for every import of the same product and must be presented together with the cargo documents. 

 

German wholesaler METRO: 'In India, you are only as successful as the partners you work with'.

 

German wholesaler METRO, known in the Netherlands for Makro, has set up 27 branches in India in 17 years. In addition, METRO is initiator of a special program that modernizes local neighborhood supermarkets, kiranas, in order to survive competition with the big chains and e-commerce platforms. "Our first steps into the Indian market did not go very smoothly at all," explains Mark Alexander Friedrich, Head of International Affairs for METRO. "We had considerably underestimated the differences with Europe and our concept did not quite fit in with the Indian market."

A modernized Kirana by METRO

A modernized Kirana by METRO

Mark Alexander Friedrich - Head of International Affairs for METRO

Mark Alexander Friedrich - Head of International Affairs for METRO

METRO began its India adventure optimistically, when the company was the first foreign wholesaler to enter the market in 2003. "We saw a huge potential for our concept in India, specifically because the middle class in the country is growing so fast, and decided to take the plunge for that reason. But we hadn't taken into account the large regional differences in the country, the obstacles in the supply chains and the challenges in terms of infrastructure. In addition, the Indian government was concerned that we might pose a threat to the small supermarkets in the country. So we quickly came to the conclusion that we needed to prove that we were going to support the small independent stores, not undermine them, by investing heavily in them. Only by helping our partners grow could we ourselves become successful in India."

Building your own Indian supply chain

One of the first steps METRO took was to adjust the offerings in its various stores. "We focused in our early years on opening stores in different Indian states, says Friedrich. "That involved a carefully curated assortment, as customer demand varies considerably from region to region and people like to buy local. We therefore had to expand our list of suppliers in a short period of time."

Here, too, METRO was faced with a different system than we know in Europe. "Farmers here are used to selling their produce to a middleman, who then resells it to different stores and supermarkets. But that often does not improve the quality. Since we have the hospitality industry and other large companies as customers, we want to make sure we can offer the best of the best, and that means taking matters into your own hands."

The company started special collection centers where farmers themselves could sell their produce to wholesalers. "We now have 5 of these centers in 4 different states and it makes a significant difference in the quality and freshness of the fruits and vegetables that are in our stores," Friedrich explains. "It is also a better deal for the farmers, they earn more from their produce because there is no longer a middleman and they have our payment in the same day."

Still, farmers had to get used to METRO's methods at first. "It took a while for the influx to get going properly. The farmers were used to working with specific middlemen and didn't want to let go of that right away to engage with us. But once one or two farmers joined us and the rest of the community saw for themselves the benefits of working together, they were converted. Indians can adapt at lightning speed."

One of the 27 METRO stores in India, this branch is in Ahmedabad

One of the 27 METRO stores in India, this branch is in Ahmedabad

Strong Indian partners are key to success 

At the same time, METRO had to convince the Indian government that they didn't want to dominate the Indian market and thereby shut out all the local convenience stores, the kiranas. "Besides the hospitality industry, the kiranas are one of the three most important customers for METRO in India," Friedrich says. "We therefore have absolutely no interest in pricing them out of the market. As with our suppliers, we started looking for ways to support them and make their operations more efficient."

Meanwhile, with the "Smart Kirana" program, the company has already modernized some 2,000 kiranas in various ways. "We remodel the stores so that they have a more modern look and feel and consumers can see the products better, but also help with digitalization of accounting, inventory and payments. Thus, these neighborhood grocery stores are better adapted to the rapid digitization of Indian life."

According to Friedrich, these initiatives have allowed METRO to prove to the Indian government that they do what they promise. "Through these initiatives we have been able to build a good relationship with the Indian government over the years. Society and certainly politics in India is very hierarchical, so you don't just suddenly sit down with everyone. The local politicians are very involved in their constituencies and know what's going on, so they heard about our initiatives and how they positively influenced the communities. Of course, as politicians they wanted to be part of that and that opened the door for us."

Without e-commerce branch, you don't compete in India

Meanwhile, the company is an established name in India with over a million customers and focuses on the changing needs of the Indian consumer. "In India, you can't make a long term plan for the next ten years. Developments in this country are so rapid and we have learned to adapt to that as a company," Friedrich says. "Many of our current customers are busy entrepreneurs who want tasks such as sourcing products for their company to take up less time. To meet this desire, we built an e-commerce platform, which has been in successful use for almost a year now."

Setting up METRO's e-commerce platform in India went very smoothly. "We are not affected by strict legislation because we do not sell directly to the end customer," Friedrich explains.

In fact, currently in India it is not allowed to sell online b2c as a foreign company. Nevertheless, Friedrich recommends every sales company in India to have an online presence. "We see that the omnichannel approach is very successful in India. So give your Indian customers the option to already be able to browse the products online and then make the actual purchase in the physical store. So we introduced our new app 'METRO Wholesale', which allows our customers to order anytime, anywhere. They then pick up their groceries at one of our locations. It shows that if you can't be found online in India, you are out of the game."


The guide to setting up successful sales in India

In this free guide we offer you insight into the steps that you need to take to successfully start and grow your sales in India. From preparing your first export shipment to India to setting up a solid after sales service.


 

Market focus: e-commerce legislation in India

 

E-commerce is booming in India and there are great opportunities for international companies in this market. However, in recent years, the Indian government has imposed various restrictions on foreign companies wishing to sell online in India. What do you need to comply with if you want to profit from one of the world's largest online markets? How do you go about it?

ecommerce in India

Indian e-commerce market grows explosively

With more than 759 million Internet users, India is the world's second-largest online market. It is estimated that there will be more than 900 million Internet users in the country by 2025. During the pandemic, Indians switched en masse to e-commerce platforms for their daily purchases. This further boosted the country's e-commerce market.

Consultancy Bain & Company expects the market size of the Indian e-commerce market to increase from about $30 billion in 2020 to $350 billion in 2030

Not for nothing are retail giants such as Amazon and Walmart betting heavily on India. Jeff Bezos recently promised to invest another billion dollars in India, and Walmart further expanded its majority 60% stake in Indian e-commerce market leader Flipkart, with a $1.2 billion investment.

To curb the influence of these American mega-corporations and provide as much transparency to consumers as possible, the Indian government has introduced special regulations that you, as a foreign investor, must consider.

The rules for foreign companies in the Indian e-commerce market 

Since 2015, 100% Foreign Direct Investment has been allowed in the Indian e-commerce market, but that does not mean that every foreign company can open its own webshop and start selling to Indian consumers. The Indian government applies two different models within the e-commerce market with specific rules and restrictions for foreign investors:

The inventory model

In the inventory model, which we know from companies like Amazon or Bol.com, goods and services are owned by the e-commerce company and then sold directly to the customer. The e-commerce company thus owns the inventory and the platform on which the goods are sold. 

Current Indian regulations do not allow Foreign Direct Investment in the inventory model. This means that a foreign company cannot run a web shop in India on which it sells goods and services from its own inventory, because the regulations do not allow a foreign company to own 100% of the sales platform and of this inventory. 

However, there are exceptions to this rule. A foreign entity may hold up to 49% of the shares of an Indian e-commerce platform with an inventory model if: 

  • Made in India productsare sold on the platform;

  • The founder is an Indian national;

  • The company is run by Indian management;

  • The company raises funds domestically, allowing large Indian companies to reinvest in new start-ups in the sector.

The marketplace model

In the marketplace model, the e-commerce entity only owns the online platform and is therefore the facilitator between sellers and buyers. In addition, the e-commerce company may provide support services to its sellers such as logistics, warehousing, call centre and payment collection.

In the marketplace model, 100% Foreign Direct Investment is allowed and foreign companies are thus allowed to fully own an e-commerce platform, as long as they do not own the inventory. But more rules apply to foreign-owned e-commerce platforms:

  • E-commerce platforms are not allowed to sell products from companies in which they have shares; 

  • The e-commerce entity may not exercise any influence or ownership over the goods/services sold on the platform. For example, an e-commerce platform cannot take the initiative to offer products at deep discounts; the company is then automatically seen as an e-commerce entity with the inventory model, with all its consequences.

  • A company selling through an Indian e-commerce platform may not contribute more than 25% of the platform's total sales.

  • Online exclusive brands are not allowed. It is prohibited for an e-commerce entity to make exclusive arrangements with a seller to sell its products exclusively on one platform. 

  • The seller's name & contact details must be on the website.

  • After-sales activities are the sole responsibility of the seller. The entity operating the e-commerce platform may not offer this service.

Consumer Protection Act 2019

In late July 2020, the Indian government presented a new law with obligations for e-commerce retailers. The Consumer Protection Act 2019 should provide consumers with more transparency into the company and its products so they can make informed decisions.

E-retailers will therefore be required to include details about returns, refunds, exchanges, warranty, delivery and shipping, payment methods and complaint mechanisms, and the "country of origin" on their platform starting in 2020. The indication of the country of origin must also appear on the products themselves. 

International companies offering their goods and services in the marketplace of an Indian e-commerce entity must provide the above information to that entity.

E-commerce platforms are required, starting in 2020, to provide consumers with as much data as possible about the sellers on their platform. Such as the company's name, address, customer service number and any reviews or other feedback about the seller or products.

Finally, the product must state the "total price" along with any hidden additional costs such as shipping costs, and platforms must not "manipulate" the price of the goods and services offered to make unreasonable profits.

The e-commerce rules are enforced by the Central Consumer Protection Authority (CCPA) in India, and violations of the new act carry hefty fines. Therefore, make sure your entity in India is always compliant with the latest regulations.

Not sure if you are fully compliant? Our experts will run a check for you and give you clear next steps so you are back up to date.


Praveen Singal

Financial advisor - IndiaConnected

This article was written in collaboration with IndiaConnected's financial advisor, Praveen Singal.

Singal has over 25 years of experience in establishing successful business strategies for European companies looking to start up in India, corporate financial analysis and compliance.

He is also a qualified Chartered Accountant with a specialization in Indian taxation.