How to Check Whether Your Manufacturing Business Requires an Industrial License or IEM Filing

Setting up a manufacturing business in India involves several regulatory decisions, but one question frequently creates confusion before investment begins: does the proposed factory require an Industrial License, an Industrial Entrepreneur Memorandum (IEM), or neither? Choosing the wrong compliance route can delay project implementation, create unnecessary paperwork, or leave important statutory obligations unresolved.

The answer depends primarily on the product being manufactured, whether the activity falls under compulsory industrial licensing, and the enterprise's investment and turnover classification. An Industrial License and IEM filing serve different purposes, and neither automatically replaces factory, environmental, or product-specific approvals. Manufacturers should establish their applicability before committing substantial resources to land, machinery, and production infrastructure.

Industrial License vs IEM Filing: What Is the Difference?

An Industrial License is a regulatory permission required for manufacturing activities specifically covered under India's compulsory industrial licensing framework. It is administered through the Department for Promotion of Industry and Internal Trade (DPIIT) under the Industries (Development and Regulation) Act, 1951, alongside relevant provisions governing certain defence-related products.

An Industrial Entrepreneur Memorandum, by contrast, is a filing through which eligible industrial undertakings declare information about proposed manufacturing activities. Its acknowledgement records the submitted information but does not constitute permission to operate.

The first question is what the factory will manufacture, not how much the project costs. A relatively small manufacturer producing a notified licensable item may require an Industrial License, whereas a substantially larger manufacturer producing delicensed goods may instead fall within the IEM framework.

Which Manufacturing Industries Require an Industrial License in India?

India has progressively removed compulsory industrial licensing requirements from most manufacturing sectors. According to DPIIT's current guidance, four broad industry categories remain subject to compulsory licensing:

1. Electronic aerospace and defence equipment: Specified products covered by the relevant defence licensing notifications.

2. Industrial explosives: Products such as industrial explosives, detonating fuses, safety fuses, gunpowder, nitrocellulose and matches.

3. Specified hazardous chemicals: Including notified hydrocyanic acid derivatives, phosgene derivatives, and certain isocyanates and diisocyanates.

4. Cigars, cigarettes and manufactured tobacco substitutes: DPIIT states that fresh licences have not been granted for this category since 1999 on health grounds.

These categories are not an exhaustive description of every regulatory permission applicable to manufacturing. Defence equipment may also involve the Arms Act, 1959, while chemicals and explosives can attract additional safety, storage, environmental and sector-specific controls.

Why exact product classification matters

Consider a manufacturer supplying metal components to an aerospace company. Supplying the aerospace industry does not, by itself, establish that every component requires an Industrial License. The actual product, its technical specifications and the notified licensing list must be examined.

Likewise, a chemical manufacturer should not assume that every hazardous substance falls within DPIIT's compulsory licensing category.

Before applying, manufacturers should prepare a product description containing the proposed manufacturing process, intended use, technical specifications and relevant National Industrial Classification (NIC) code. Where classification remains uncertain, the applicable notification and competent authority should be consulted.

Who Needs to File an IEM in 2026?

IEM filing generally concerns eligible large-scale industrial undertakings operating outside compulsory industrial licensing.

Following India's revised MSME classification, effective from 1 April 2025, the relevant financial thresholds are:

• Plant and machinery investment exceeding ₹125 crore, and/or

• Annual turnover exceeding ₹500 crore.

These thresholds should be evaluated alongside the undertaking's MSME status, proposed manufacturing activity and applicable IEM rules.

Understanding the revised MSME limits

MSME classification uses composite investment and turnover criteria. Businesses should assess the applicable enterprise-level information rather than relying solely on an individual project's machinery budget.

For example, a manufacturer proposing ₹150 crore in plant and machinery for an ordinary delicensed engineering-products facility should examine IEM applicability. However, investment alone should not be used to decide whether a separate Industrial License is required.

Important: An MSME manufacturing a product covered by compulsory industrial licensing may still require the relevant licence. MSME status is not a blanket exemption from product-specific licensing obligations.

How to Determine Your Manufacturing Business's Actual Filing Requirement

A structured assessment can prevent unnecessary applications and reveal compliance obligations before construction or equipment procurement.

Step 1: Identify every proposed manufacturing product

Prepare a complete product list, including secondary products and planned future product lines.

Record the manufacturing process, product specifications, proposed annual capacity and intended industrial applications. This information helps establish whether the activity falls within a notified licensing category.

Step 2: Check compulsory industrial licensing applicability

Compare each product against the latest DPIIT notifications and relevant defence or sector-specific lists.

Do not rely exclusively on the company's name, broad industry category or NIC code. Where a product has multiple applications, its specifications and notified classification may be decisive.

If a compulsory licensing requirement applies, establish the correct authority and application route before proceeding.

Step 3: Verify enterprise classification and financial thresholds

For delicensed activities, review the enterprise's plant and machinery investment, annual turnover and MSME classification.

Use the current statutory basis for calculating investment rather than assuming that total project cost, including land and buildings, is equivalent to plant and machinery investment.

A project costing ₹160 crore overall may have considerably less than ₹125 crore attributable to plant and machinery. Its IEM position cannot be determined from total project cost alone.

Step 4: Examine project location and other approvals

Identify whether the selected industrial location permits the proposed manufacturing activity.

Check the applicability of pollution control consents, factory registration or licensing, building approvals, fire safety permissions and sector-specific registrations.

A business may need none of the central Industrial License or IEM procedures while still requiring several other approvals.

Step 5: Document the final applicability decision

Prepare a written assessment showing the products reviewed, applicable notifications, enterprise classification, financial criteria and remaining statutory requirements.

This creates a reference for management, lenders, project consultants and compliance teams if the project scope changes.

Practical Examples: Industrial License, IEM or Neither?

The following hypothetical examples demonstrate how different manufacturing projects may be assessed.

These are illustrative assessments, not final legal determinations.

The practical lesson is that two factories with similar investment values may have completely different licensing obligations because their products, activities and regulatory classifications differ.

Speak With An Expert: https://www.imarcengineering.com/contact?service=industrial-licensing-incentive-advisory

How to File IEM Part-A and Part-B Through NSWS

Eligible manufacturers can use the National Single Window System (NSWS) for IEM-related filings.

IEM Part-A: Declaring the proposed industrial project

Part-A captures information about the proposed undertaking before commercial production.

Manufacturers should prepare accurate details concerning company identity, manufacturing location, products, NIC codes, proposed capacity, investment, employment and expected commencement.

Once submitted, the system generally generates an acknowledgement electronically. However, certain sector-specific cases, including sugar and non-hazardous chemicals, may involve additional processing.

An acknowledgement must not be treated as permission to begin operations without other applicable statutory clearances.

IEM Part-B: Reporting commencement of production

After commercial production begins, undertakings that filed IEM Part-A must report commencement through Part-B.

Information generally includes the actual commencement date, installed capacity, investment incurred, production details and employment generated.

The submitted information should reflect operational reality rather than outdated project estimates.

What if the project changes?

Manufacturers may need to amend IEM information when there are changes involving products, manufacturing capacity, location, company particulars or investment.

An existing IEM should therefore be reviewed whenever the project undergoes material changes.

What If Neither an Industrial License Nor IEM Is Required?

A finding that neither central filing applies does not mean the manufacturing project is free from regulation.

Depending on its location, operations and products, a factory may still require:

• Consent to Establish and Consent to Operate from the relevant Pollution Control Board, where applicable.

• Factory-related registration, licensing and safety compliance.

• Building plan, land-use and fire safety permissions.

• Electricity, water and industrial utility approvals.

• Product-specific registrations, certifications or authorisations.

For instance, a food-processing facility may need applicable FSSAI authorisation, while a medical-device manufacturer must separately examine the relevant medical-device regulatory framework.

The most effective approach is to maintain an approval register identifying each requirement, responsible authority, application stage and dependency before commissioning.

Common Mistakes That Create Industrial Licensing Problems

Manufacturers often encounter avoidable difficulties because they treat industrial registration as a single procedure.

Confusing project value with IEM investment criteria: Total capital expenditure may include components that are not counted as plant and machinery investment under the relevant rules.

Assuming an IEM acknowledgement authorises production: It does not replace statutory clearances required for construction, installation or operation.

Using outdated MSME thresholds: The April 2025 revision materially changed the classification limits relevant to industrial undertakings.

Ignoring additional product lines: A factory initially producing delicensed products may introduce a new product requiring a separate licensing assessment.

Failing to update existing filings: Changes in production capacity, location or company particulars can make earlier declarations inaccurate.

Depending on outdated portal instructions: Manufacturers should use current NSWS guidance rather than assuming older application workflows remain unchanged.

These mistakes can create delays, inconsistent regulatory records and uncertainty during investment or commissioning reviews.

When Should a Manufacturer Recheck Licensing Applicability?

The assessment should not be treated as a one-time exercise.

Manufacturers should reconsider applicability before introducing new products, substantially expanding capacity, relocating a factory, changing manufacturing processes or undertaking major investment.

For existing facilities, reviewing previous licences and IEM acknowledgements alongside proposed changes can identify whether amendments, fresh permissions or additional statutory approvals are necessary.

The review is particularly important before machinery purchase commitments or commissioning deadlines make regulatory changes expensive.

How IMARC Engineering Can Help

IMARC Engineering supports manufacturing businesses in identifying industrial licensing obligations and evaluating IEM filing requirements before project implementation. Its Industrial Licensing and Incentive Advisory services can assist with product classification reviews, regulatory applicability assessments, documentation planning and coordination of relevant approval processes. For new manufacturing facilities and expansion projects, the focus is on establishing a clear compliance roadmap, identifying potential regulatory gaps and helping management make informed investment decisions without assuming that a single registration satisfies every statutory requirement.

Conclusion

Determining whether a manufacturing business requires an Industrial License or IEM filing begins with understanding the proposed products, applicable licensing notifications and enterprise classification. Manufacturers should verify these factors before committing to major investments or starting production. Where neither central requirement applies, other statutory approvals may still be necessary. A documented, project-specific assessment helps avoid incorrect filings, regulatory delays and compliance gaps.

Contact Us:

IMARC Engineering

Phone: +91-120-433-0800

Email: sales@imarcengineering.com

India: C-130, Sector 2, Noida, Uttar Pradesh 201301

LinkedIn: https://www.linkedin.com/showcase/imarc-engineering/