Tamil Nadu has taken giant leaps forward in the entrepreneurship space in the last few years. Not so long ago, the state only had a handful of players like TCS, Polaris and Pentafour setting up their first campuses around the Sholinganallur area on the Old Mahabalipuram Road (OMR). Today the OMR has become the IT highway, dotted with technology parks, campuses, colleges as well as townships and shopping malls.
Tamil Nadu boasts of one of the largest automotive component industries in India: International auto giants like Ford and Hyundai have set up their manufacturing units here with an investment of over Rs.4,500 crore. In fact, Chennai is referred to as the ‘Detroit of India’ now. Tamil Nadu is also one of the first states to formulate an ITeS and biotech policy.
If you are looking to start a business in Tamil Nadu, there are certain procedures and costs which you will need to incur. You have to first fill up and submit Form DIN-1 (Director Identification Number) to obtain the provisional DIN. You can source this form online on the Ministry of Corporate Affairs 21st Century (MCA 21) portal (www.mca.gov.in). The provisional DIN is usually issued immediately. You have to pay Rs.100 as application fee; this can also be done online.
The printed application form must then be signed and sent for approval to the Ministry of Corporate Affairs by courier, along with proof of payment, identity proof and proof of residence within 60 days of the date of generation of the provisional DIN.
After the documents are verified and approved, a permanent DIN is issued. The status of the DIN approval process can be checked online on the MCA portal.
To use the new electronic filing system under MCA 21, you must obtain a Class-II Digital Signature Certificate (DSC). The DSC can be obtained from six private agencies authorized by the MCA 21. Each certifying agency has its own fee structure, ranging from Rs.400-Rs.2,600, depending on factors like validity period, delivery time and cost structure. Company directors submit the prescribed application form along with proof of identity and address. After the DSC is obtained, it must be registered on the MCA portal before it can be affixed on any e-form.
Once the Director has obtained the provisional DIN online, DSC may be obtained while the provisional DIN is being registered. Thereafter, you must reserve the company name online with the Registrar of Companies (ROC) (National). This procedure takes two days and costs Rs.500. You can submit a maximum of six suggested names; these will be checked by ROC staff for any similarities with all other names in India.
You have to also stamp the company documents at the State Treasury, a procedure which usually takes one day. The total cost for this is Rs.520.
You must then get the Certificate of Incorporation from the ROC, Ministry of Corporate Affairs (National). The forms to be electronically filed on the website of the Ministry of Corporate Affairs using digital signatures are:
(a) e-form 1;
(b) e-form 18; and
(c) e-form 32.
Along with these forms, signed and scanned copies of the Memorandum and Articles of Association (MOA and AOA) and duly executed Power of Attorney (POA) must be attached to Form 1. This takes six days and costs Rs.13,225 (filing fee on MOA: Rs.12,400 plus filing fee on AOA: Rs.200 plus filing fee on Form 1: Rs.200 plus filling fee on Form 18: Rs.200 plus filling fee on Form 32: Rs.200 plus POA from five subscribers: Rs.25)
After this, you must make a seal (private). This is not a legal requirement for the company to be incorporated, but you need a seal to issue share certificates and other documents. The cost depends on the number of words to be engraved, the number of seals required and the time period for delivery. You must then obtain a Permanent Account Number (PAN) from an authorized franchise or agent appointed by the National Securities Depository Ltd. (NSDL) or the Unit Trust of India (UTI) Investors Services Ltd. as outsourced by the Income Tax Department (National). It takes 15 days to complete this procedure and costs Rs.67.
You should also get a Tax Account Number (TAN) for income taxes deducted at the source from an authorized franchise or agent appointed by the NSDL, as outsourced by the Income Tax Department (National). This takes 14 days to complete and costs Rs.57. Next, you should register with the Office of Inspector, Shops, and Establishment Act (State/Municipal), a procedure which usually takes around five days to complete.
Though there is no separate registration required under the Tamil Nadu Shops and Establishments Act, a company should declare the number of employees and their particulars on Forms 1, 2, 5 and S and submit these to the Assistant Inspector of Labor for the designated region where the office is located.
The company should also register for Value-Added Tax (VAT) at the Commercial Tax Office (State). This procedure usually takes around 17 days to complete and costs Rs.500 (for principal place of business).
Under the Tamil Nadu VAT Act, (2006), every dealer is required to register within 30 days of opening a business. New dealers are also requested to fill out Form A available online (www.tnvat.gov.in) and send the filled-in application with the necessary enclosures, including two passport-sized photographs of the applicant and a stamped self-addressed envelope along with proof of payment of registration fee, to the registering authority of the area in which the principle place of business is situated.
You must also register for Profession Tax at the Profession Tax Office (State/Municipal). This takes seven days to complete. Your company should be registered as an ‘employer’ under the Tamil Nadu Tax on Professions, Trades, Callings, and Employment Act. The application form, along with the certificate from the Registrar of Trades, is to be submitted within 60 days of the company becoming liable to taxation.
Your company must also be registered with the Employees’ Provident Fund Organization (EPFO) (National). This takes 14 days to complete. If you employ more than 20 employees, then it is mandatory to register with the EPFO and a code number will be allotted to the company. Once the employer is registered with the EPFO, it will register his employees with the office and open Provident Fund accounts in the name of each employee.
You must also register for medical insurance at the regional office of the Employees’ State Insurance Corporation (National). This takes 14 days to complete.
Once you have completed the above procedures and duly cleared all the costs which need to be incurred, you will be set for your entrepreneurial journey in Tamil Nadu.
©Entrepreneur November 2010