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A Legal Roadmap to Setup Wood based Industry in India

calendar03 Sep, 2021
timeReading Time: 4 Minutes
A Legal Roadmap to Setup Wood based Industry in India

The wood based industry is now gaining required momentum under the influence of various government-based initiatives and policies. Forestry & logging contributed about INR 1.95 trillion of agricultural gross value in FY 2019. There was a surging trend in the contribution from this sector since FY 2013. Considering the prevailing market scenario, wood based industry can serve as reliable sector for startups and aspiring entrepreneurs. Hence, if you intend to jump into this venture, then it might be the perfect time for you. This write-up will talk about the legalities related to the establishment of this industry in India.

Casting light on the Scope of Wood based industry in India

  • India is one of the fastest-growing wood-based industries in the world. The ever-rising knowledge base paired with indispensable contribution from the growth-driven of the government. Wood-based industry includes paper factory, lac industry, handicraft, match industry so on and so forth. India leads from the front when it comes to lac production, which accounts for 60% of the global output. India is the prominent exporter of the lac in the world right now.
  • The panel industry in India is worth more than Rs 28,000 crore, and it’s thriving at a rate of 12% annually. This growth is credited to the ever-increasing demand for wood panels in the real estate domain.
  • Plywood is a valuable commodity, and its sales figures have continued to touch new heights every year. Presently, the valuation of the plywood industry stood at INR 18,000 crore and is likely to escalate further in the near future. This sector has witnessed monumental growth in the last five years, posting a CAGR of 6-7%. More than 70% of entities engaged in the plywood Industry belong to the unorganized sector.
  • India has a vast resource of diverse tree species & there is a great demand for the same in the wooden furniture industry. India is considered one of the prominent importers of timber globally. Rapid urbanization and an increase in the no of nuclear families in India is also stimulating the demand for wooden furniture product.
  • The demand for the veneer sheet is surging rapidly in India owing to changing lifestyles and tastes of people. Since Veneer sheet is being prominently utilized for home decor purposes, it has remained the primary choice for end-users who are more inclined towards modernized furniture.

Read our article:Fundraising for Startups in India: Key Documentations

Definitive Roadmap to Setup Wood based industry in India

This section entails a detailed roadmap that consolidates all relevant information, outlined in chronological order, for the establishment of wood based industry in India.

Select an Apt Niche

Presently, the wood-based industry is broadly categorized into four major heads as shown as;

  • Sawmill
  • Plywood 
  • Veneer
  • Pulp

Depending on your investment potential, you can choose one of the above niches that offer a better fit for your business goal.

Avail Incorporation Certificate

To operate as a legal entity in India, every start-up needs to avail incorporation certificate from the concerned authority. Start-ups can opt for one of the following legal structures to operate as a legalized entity in India.

  • Partnership firms
  • Limited Liability Partnership
  • One Person Company
  • Private Limited company            
  • Public Limited Company

Key parameters to consider while selecting a business structure 

  • A public or Private limited company is ideally suited to businesses with a sizeable management structure and bigger scope of operation. 
  • Meanwhile, structures like OPC and LLP are suitable for start-ups intending to operate at a moderate level and have fewer staff to cater to business undertakings. 
  • Applicants seeking partnership firm registration must draw a partnership deed enclosing relevant clauses, including insolvency and profit distribution. After the incorporation of relevant clauses, the partner must submit the deed before the ROFs of the respective state.
  • In the case of rest of the business structures, the applicant has to visit the official portal of the Ministry of Corporate Affairs[1] (aka MCA) and fill the relevant e-form accompanied by the requested document and registration fee.

Secure No objection certificate of the District Magistrate

Procuring NOC from the District Magistrate is an absolute mandate for the start-ups intending to commence the wood based industry. NOC is nothing but a brief declaration about the proposed business activities you are willing to undertake in a particular area.  

Obtain GSTIN

An entity dealing with the inter-state supply of goods, including raw material, is mandated to register under the GST registration. The applicant can visit the GST portal to avail this registration by providing the following information.  

  • Taxpayer Type
  • State
  • Firm name
  • Permanent Account Number detail of the firm

Consent from the State Forest Department

Consent from the State Forest Department is a must-have requisite for wood based Industry in India. The applicant needs to submit an application, viz; Form 1 to the Divisional Forest Officer to avail such permission.

Upon receiving the application under rule 4, the said officer may inquire the same against the pre-determined standards and guidelines underpinned by the State Government. After a successful inquiry of the application, the officer may grant the licence in Form- II. Keep in mind that the Application fees, validity period, and renewal norms would differ state-wise.

Typical details to be provided by the applicant in Form 1 

Typical details to be provided by the applicant in Form 1

Some Additional Registrations for Wood based industry

Conclusion

Keep in mind that the wood based industry is subjected to moderate compliances and legalities. Any infringement to such compliances would shift the business owner to the zone of penalty. Thus, it is essential to comply with these legalities and follow every order issued by the concerned authorities.

Read our article:Tyre Retreading Business: A Perfect Ventures for Startups

Pankaj Tyagi

Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.

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