By Manu Rao | Updated March 2026
The Scenario
A mid-sized pharmaceutical company headquartered in Basel, Switzerland, with CHF 300 million in annual revenue, specializes in generic formulations — tablets, capsules, and injectables — primarily for European and African markets. They currently contract-manufacture in India through third-party CMOs, but quality control issues and supply disruptions during the past few years have pushed the board to approve an owned manufacturing facility. They have chosen Hyderabad — specifically the Genome Valley/Pharma City area — for the plant. The planned investment is CHF 8 million (about Rs 75 crore) for a GMP-compliant manufacturing unit.
The facility will produce oral solid dosages (tablets and capsules) and will need WHO-GMP certification, European Medicines Agency (EMA) compliance, and eventually US FDA approval for the American market.
Why India?
India is the pharmacy of the world. The country produces over 60% of global vaccines, 20% of global generic medicines, and supplies pharmaceuticals to over 200 countries. India's pharmaceutical industry crossed $50 billion in FY2025 (including $27.9 billion in exports). Hyderabad is the pharma capital — the Bulk Drug Park at Hyderabad Pharma City spans 19,333 acres, and the region hosts over 800 pharmaceutical companies including Dr. Reddy's, Aurobindo, Hetero, and dozens of global MNC subsidiaries.
For a Swiss generic company, manufacturing in India reduces production costs by 40-60% compared to European facilities. Active Pharmaceutical Ingredients (APIs) are sourced locally (India produces over 500 different APIs), regulatory talent is abundant, and the infrastructure for pharma manufacturing (clean rooms, QC labs, utilities) is well-developed.
Switzerland-India economic relations are strong. Over 250 Swiss companies operate in India, with bilateral trade exceeding CHF 20 billion. Swiss pharma giants (Novartis, Roche) have had Indian operations for decades, establishing a well-trodden path.
Entity Choice
A Private Limited Company (Wholly Owned Subsidiary) is the only practical structure. Pharmaceutical manufacturing requires Drug Manufacturing Licenses from the Central Drugs Standard Control Organisation (CDSCO) and the State Drug Control Authority, which can only be issued to Indian entities. The subsidiary will hold the manufacturing licenses, own or lease the factory, hire the manufacturing team, and directly manage the quality systems required for WHO-GMP/EMA/FDA compliance.
No alternative entity works here. A Branch Office cannot manufacture. An LLP would face challenges with banking (pharma manufacturing needs large working capital facilities), and pharmaceutical regulators prefer licensing companies, not partnerships. A joint venture with an Indian pharma company was discussed but rejected — the Swiss firm wants full control over quality systems and processes.
FDI Route and Sector Rules
Pharmaceutical manufacturing (greenfield) is under 100% FDI through the automatic route per DPIIT FDI Policy (Press Note 4 of 2014). Greenfield means setting up a new facility from scratch, which is exactly what this company is doing.
For brownfield investments (acquiring an existing Indian pharma company), FDI up to 74% is under automatic route, and 74-100% requires government approval. This distinction is important — the Swiss company is doing greenfield, so no approval is needed.
Key regulatory bodies for pharma:
- CDSCO — Central Drugs Standard Control Organisation (under the Ministry of Health)
- State Drug Control Authority (Telangana) — Issues manufacturing licenses under the Drugs and Cosmetics Act 1940
- Pollution Control Board (TSPCB) — Consent to Establish and Operate for pharma manufacturing
- DPCO — Drug Prices Control Order 2013 (NPPA) — some formulations are price-controlled; the company must check if its products fall under the National List of Essential Medicines (NLEM)
Switzerland is a Hague Apostille Convention member. Documents are apostilled through Swiss cantonal authorities (typically the Staatskanzlei of the canton where the document was issued). Basel-Stadt canton processing is fast — usually 2-3 business days.
Registration Process
- Board Resolution (Switzerland) — The Verwaltungsrat (Board of Directors) of the Swiss parent approves the Indian subsidiary.
- Apostille — Swiss corporate documents (Handelsregister extract from the canton), directors' passports, and board resolution apostilled through the cantonal Staatskanzlei. Documents in German, French, or Italian must be translated into English.
- DSC and DIN — For directors.
- SPICe+ Filing — Incorporation through MCA.
- Post-Incorporation (Phase 1 — Corporate Setup) — Bank account, PAN, TAN, GST, IEC (for importing APIs and excipients if needed).
- Post-Incorporation (Phase 2 — Pharma Licensing) — This is the long pole in the timeline:
- Drug Manufacturing License — Applied to the Telangana State Drug Control Authority under the Drugs and Cosmetics Rules 1945. Requires factory premises to be ready, equipment installed, and a qualified Approved Analyst and Approved Chemist appointed.
- Manufacturing License for each drug — Each formulation requires a separate product-specific manufacturing license. For a facility producing 20 products, this means 20 license applications.
- WHO-GMP Certification — Required for exporting to most countries. Applied through CDSCO after the facility is operational and has produced test batches.
- EMA GMP Certification — For European market access, the EMA conducts its own inspection. This is typically applied for 6-12 months after commercial production begins.
- Pollution Control consents — Pharma manufacturing generates effluent and emissions. TSPCB Consent to Establish must be obtained before construction, and Consent to Operate before production begins.
- Factory License — Under the Factories Act 1948.
- Hazardous waste authorization — If the manufacturing process generates hazardous waste (solvents, chemical residues).
Timeline: Company incorporation takes 3-4 weeks. Factory construction and equipment installation takes 12-18 months. Drug manufacturing license takes 2-4 months after factory readiness. WHO-GMP certification takes 3-6 months after production begins. EMA inspection scheduling can take 12+ months. Total time from start to WHO-GMP certified production: 18-30 months.
Tax Structure
The India-Switzerland DTAA has been in force since 1994 (revised protocol 2010). Key rates:
| Income Type | DTAA Rate | Domestic Rate |
|---|---|---|
| Dividends | 10% | 20% |
| Interest | 10% | 20% |
| Royalties | 10% | 20% |
| FTS | 10% | 20% |
The Indian subsidiary can opt for the 15% concessional tax rate under Section 115BAB as a new manufacturing company (subject to commencing production before the applicable deadline — check for current extensions). This is one of the lowest effective corporate tax rates globally for manufacturing.
Technology transfer payments from the Indian subsidiary to the Swiss parent (process know-how, formulation technology, quality systems) attract 10% withholding under the DTAA. These are legitimate costs that reduce the Indian subsidiary's taxable income, but transfer pricing scrutiny is intense in the pharma sector. Indian TP officers compare against independent pharma companies and may challenge royalty rates above 2-4% of net sales.
Switzerland taxes worldwide income. Swiss federal corporate tax is approximately 8.5%, and cantonal taxes vary (Basel-Stadt total effective rate is about 22%). Credit for Indian taxes is available. The Swiss parent will include the subsidiary's dividends in its Swiss consolidated accounts.
Customs duties on pharmaceutical raw materials (APIs, excipients) range from 0-10% depending on the HS code. Many APIs attract nil or nominal duty under the Pharmaceutical Export Promotion Council (Pharmexcil) recommendations. Capital goods for the factory may be imported under the Export Promotion Capital Goods (EPCG) scheme at zero duty, subject to export obligations.
Ongoing Compliance
- MCA filings — Board meetings, AGM, MGT-7A, AOC-4
- Tax — Corporate tax (with 115BAB if applicable), advance tax, TDS returns, transfer pricing (annual report for payments to Swiss parent)
- GST — Monthly returns. Pharma products attract 5% GST (most medicines) or 12% GST (some formulations). Export of medicines is zero-rated.
- Drug regulatory compliance — Annual renewal of manufacturing licenses, drug sample testing and reporting, adverse event reporting (pharmacovigilance), batch recall procedures
- DPCO/NPPA compliance — If any product is on the NLEM, prices must be within the ceiling set by NPPA. Quarterly reporting of production and sales data to NPPA.
- Pollution Control — Quarterly returns to TSPCB, annual renewal of consents, effluent treatment monitoring
- Quality audits — Annual internal audits, WHO-GMP renewal inspections (every 3 years), EMA inspections
- RBI FLA Return — Annual filing
Common Pitfalls
- Underestimating the regulatory timeline — From incorporation to WHO-GMP certified production, the timeline is 18-30 months. Many MNCs budget 12 months and then face costly delays. Start drug regulatory filings in parallel with construction, not sequentially.
- Not hiring qualified regulatory staff early — Indian pharma regulations require an Approved Analyst (with specific pharmacist qualifications) and an Approved Chemist to be named on the manufacturing license. Recruit these roles 6-9 months before planned production start. They are in demand, and the approval process for naming them on the license takes time.
- Ignoring DPCO pricing constraints — If any of the company's generic products are on the NLEM, the MRP is capped by NPPA. Launching a product without checking DPCO applicability can result in penalties for overcharging. Check the NLEM list for every product in the India portfolio.
- Transfer pricing challenges in pharma — Indian tax authorities closely scrutinize pharma transfer pricing — especially royalties paid for technology, brand names, and management fees. Keep royalty rates within the 2-4% range that Indian TP officers consider arm's-length for generics. Higher rates require substantial justification.
- Effluent treatment non-compliance — Pharma manufacturing generates significant liquid and solid waste. Hyderabad's Patancheru-Bollaram area has a history of pollution issues that have led to court-ordered shutdowns. Invest in a proper Effluent Treatment Plant (ETP) and Zero Liquid Discharge (ZLD) system from the start.
How Beacon Filing Helps
Beacon Filing assists Swiss pharmaceutical companies with subsidiary setup in India, including apostille coordination, SPICe+ incorporation, and the complex web of post-incorporation pharma-specific licensing. We work with pharmaceutical regulatory consultants in Hyderabad to manage drug manufacturing license applications and WHO-GMP preparation.
Our compliance packages for pharma manufacturing subsidiaries cover MCA filings, tax, GST, DPCO reporting, and drug regulatory renewals — with quarterly reporting aligned to Swiss statutory audit timelines.