Exporting to India vs Setting Up an Indian Subsidiary: A Guide for US Companies

A US company does not always need to incorporate in India before serving Indian customers. Depending on the product and commercial plan, it may export from the US, appoint a distributor, use a contract manufacturer or establish its own Indian entity. The right route depends on the customer relationship, product rules, local activities, investment and the level of control the company needs.

Prepared by AU Corporate's CA-led advisory team · Published 12 October 2026 · General guidance; assess the actual contracts and activities before choosing a model.

1. Start with what the business needs to do in India

The right model depends on the activity, not simply the country where the parent is incorporated. Before selecting a structure, list what the company expects to do during the next 12–24 months.

• Sell goods to Indian customers from the US.
• Use an Indian distributor, reseller, agent or marketplace.
• Import and hold inventory in India.
• Hire local employees or maintain a sales, support or engineering team.
• Sign local customer contracts, invoice in India or provide after-sales support.
• Manufacture, assemble, source or perform other activities in India.

Several models can operate together, but each one changes the legal, tax and operating questions. A distributor contract, for example, is not a substitute for assessing what happens if the US company itself maintains people, premises or other business activities in India.

2. Compare the main entry options

No single option is best for every US company. Compare the full cost and responsibility of the model rather than only the cost of incorporation or the distributor margin.

3. Check product, customs and import requirements

If goods will be shipped to India, identify the importer of record and confirm the customs classification, valuation, duty, shipping terms, product standards, labelling and any licence or restriction that applies to the product. The requirements can differ widely by category.

An Importer Exporter Code may be required for import or export activity, subject to the applicable rules and exemptions. Review the current DGFT guidance and confirm any product-specific requirements before dispatch. Also determine who will handle customs documents, product registration, warranty claims, returns and after-sales support.

For a business planning local manufacturing, assembly or sourcing, see our guide to setting up an Indian subsidiary for a US manufacturer.

4. Understand the role of a distributor

A distributor can provide local sales coverage, relationships and fulfilment without the US company immediately building its own team. The commercial contract should clearly state which party buys and owns the goods, who sets resale prices where legally permitted, who bears inventory and credit risk, and who is responsible for customer service and warranties.

• Define products, territory, sales channels and any exclusivity.
• Set out order acceptance, payment terms, delivery, title and risk of loss.
• Clarify who handles product approvals, labels, marketing claims and customer complaints.
• Address use of trademarks, technical materials, confidential information and customer data.
• Agree on sales reporting, forecasts, minimum commitments and termination arrangements.

Review the actual working relationship as it develops. If the US company starts maintaining personnel, premises, dependent agents or other sustained activities in India, the tax and legal position may differ from a simple cross-border sale.

5. Assess Indian tax and permanent-establishment exposure

Whether the US company has Indian tax or registration obligations depends on the applicable law and the facts, including the nature of activities, contracts, personnel, premises and agent relationships. A distributor arrangement does not automatically eliminate every tax risk, and a subsidiary does not automatically resolve every question about the US parent.

Map which entity negotiates and signs contracts, who performs services, who owns inventory, where decisions are made and how the parties are paid. Review the India–US tax treaty and domestic rules with a qualified tax adviser before relying on a conclusion about permanent establishment, business profits or withholding.

If the group establishes an Indian subsidiary, cross-border transactions with the US parent may also need intercompany agreements and transfer-pricing review. See our permanent-establishment guide and transfer-pricing guide.

6. Know when a subsidiary may be the better fit

An Indian subsidiary is worth assessing when the company needs a stable local presence, direct employment, its own contracts and operations, local inventory or a longer-term investment in the market. A separate Indian entity may also make it easier to separate local accounts and responsibilities, but it creates ongoing obligations that need an owner and budget.

Before incorporating, confirm the proposed activity and ownership under current FDI policy, agree on the parent’s funding plan, prepare parent-company and director documents, identify a registered office and plan banking, tax, payroll and post-incorporation compliance.

Use our company registration guide for US businesses for the main incorporation route, and our cost and timeline guide to understand the factors that affect setup.

7. Compare the full cost, not only the first step

A fair comparison should include more than incorporation fees. Estimate the cost of products landed in India, distributor margins, warehousing, customer support, staffing, professional advice, taxes, banking, accounting and recurring filings. The answer may change as sales grow or the company adds employees and assets.

For a subsidiary, include both setup and operating costs. For an export or distributor model, include customs and logistics, contractual oversight, product compliance and the commercial margin retained by the local partner. Build scenarios using expected sales and activities rather than relying on a generic online estimate.

Decision checklist for US businesses

• What products or services will be sold, and are there product-specific rules?
• Who will import goods, own inventory, contract with customers and handle returns?
• Will the business need local employees, premises, inventory or customer support?
• Does the planned activity create FDI, licensing, tax, GST or other registration questions?
• What contracts, warranties, IP protections and data arrangements are needed?
• How will the model scale if sales, staffing or investment grows over the next two years?

Choose a model that matches the India plan

Exporting, using a distributor and incorporating a subsidiary solve different problems. A clear view of the customer model, products, local activities and expected growth helps the US parent choose a route that can be maintained as the business develops.

For the wider market-entry picture, visit our India entry guide for US companies. AU Corporate can help assess the India-side incorporation, tax and compliance questions alongside your commercial plan.