Setting Up Retail Operations for Imported Cosmetic Products in India - Legal & Regulatory Overview 2025

India has emerged as one of the fastest-growing markets for global skincare, personal care, and cosmetic products. With the rise of beauty influencers, e-commerce platforms, and K-beauty trends, foreign cosmetic brands, especially from countries like South Korea, have shown increasing interest in entering the Indian retail space. However, establishing a compliant retail operation in India for imported cosmetics involves navigating a range of regulatory, tax, and operational frameworks.

This blog post outlines the essential legal, regulatory, and compliance requirements for retailing foreign-manufactured cosmetic products in India, aimed at importers, investors, and foreign brands.

Structuring the Business in India

To retail cosmetics in India, foreign businesses can choose from several legal structures:

1. Private Limited Company

• Separate legal entity with limited liability.
• Suitable for businesses seeking PE/VC funding.
• More robust compliance regime under the Companies Act, 2013.

2. Limited Liability Partnership (LLP)

• Hybrid between a partnership and company.
• Lower compliance burden.
• Ideal for smaller operations or testing the market.

3. Branch or Liaison Office of a Foreign Company

• Regulated by RBI and subject to FEMA norms.
• Retail trading is not permitted through such offices.

For retail trading, establishing an Indian subsidiary or entering into a joint venture with an Indian partner is typically preferred.

Import & Customs Compliance

1. Import Export Code (IEC)

• Mandatory for any entity engaged in importing goods into India.
• Issued by DGFT via online application through the IEC Portal.

2. Customs Duty Structure (Indicative for Cosmetics):

• Basic Customs Duty: ~10%
• Landing Charges: 1% of CIF value
• Countervailing Duty (CVD) & Additional Cess (where applicable).

3. Import Registration for Cosmetics (CDSCO)

• Governed under the Drugs and Cosmetics Act, 1940 and Rules of 1945, and updated under the Cosmetic Rules, 2020, and
• All imported cosmetic products must be registered with the CDSCO before import as per Rule 12(1).
• Application to be made in Form COS-1/COS-2, supported by testing documentation, ingredients, and manufacturing details.
• Registration may involve technical presentations, and CDSCO has recently cancelled licenses for non-compliance (e.g., unsafe ingredients).
• From 2025, online registration for additional product variants is also enabled.
• License is valid for 3 years; approval may take up to 6 months.

FDI Regulations in Retail Trading

Single Brand vs Multi-Brand Retail

• Single Brand: 100% FDI allowed under automatic route (subject to conditions).

• Multi-Brand: Up to 51% FDI allowed under government route only, with restrictions:

  • Minimum investment of USD 100 million
  • 50% of investment must go to backend infrastructure
  • 30% local sourcing requirement from Indian MSMEs
  • Operations permitted only in states that allow MBRT

Refer to the DPIIT FDI Policy Circular 2020 and FDI FAQs for further guidance.

Alternative Models:

• Contract with existing Indian e-commerce platforms.
• Enter through PE investment and set up a fully Indian-owned retail entity.

Taxation & GST

• Cosmetics fall under HSN Chapter 33, and most attract 18% GST under the standard slab (as of 2025).
• IGST is payable at the time of customs clearance.
• Cess may apply for luxury cosmetic items.

Compliance under Drugs and Cosmetics Law

Under Section 3(aaa) of the Drugs and Cosmetics Act, cosmetics include any article applied to the human body for cleansing, beautifying, or altering appearance.

Imported cosmetics must:

• Comply with Cosmetic Rules, 2020, Ninth Schedule standards, or equivalent international standards.
• Bear compliant labels (ingredients, MRP, expiry, importer, batch number, etc.).
• Avoid banned ingredients: non-compliance has led to registration cancellations (example).
• Ensure CDSCO registration for each SKU, with variant extensions now facilitated digitally.

Labour & Employment Laws

If setting up retail outlets or warehouses:

• Shops and Establishment Act (State-specific)
• Minimum Wages Act, Payment of Wages Act
• ESI, EPF, Gratuity and Bonus Act
• Maternity Benefit Act & Contract Labour Regulations (as applicable)

Compliance depends on employee count, nature of establishment, and state laws.

Intellectual Property Considerations

• Trademark registration for brand names and logos in India.
• Parallel import protection strategies.
• Enforcement of IP rights under Indian Trademark Act, 1999.

Contracting & Dispute Resolution

• Indian contract law aligns with English common law principles.
• Arbitration-friendly jurisdiction.
• Foreign brands may opt for arbitration clauses with international seats.

2025 Regulatory Update – Snapshot

Entering the Indian cosmetics retail market can be a lucrative opportunity for global brands - but it requires meticulous legal planning, regulatory navigation, and risk structuring. From CDSCO registration and FDI restrictions to customs, GST, and labour law compliance, each step must be carefully managed.

Disclaimer: This article is based on publicly available information as of July 2025. It does not constitute legal advice. For tailored assistance, contact KTB Law Offices for regulatory, transactional, and strategic advisory support.