Trade License

What is a Trade License?

A person seeking to open a business requires a trade license. A trade license is a certificate that permits a person to start a specific trade or business in a specific region. The trade license is regulated through the respective Municipal corporations by the state governments.

Trade license ensures that no one is carrying out any unethical business practices. It prohibits the health hazards and nuisances by the improper carrying of trade. The license is made mandatory to conduct the trade to ensure that the government can regulate the trade activities.

The trade license allows the licensee only to carry out the trade for it is issued. The applicant does not have the right to use it for other trade purposes. The license will not provide any property ownership to the holder. All the trade activities conducted without the possession of the trade license will be considered as illegal and are liable to penalties according to the type and nature of the business.

For applying for a trade license the applicant must be above 18 years of age. It is necessary that the applicant do not have any criminal backgrounds and the business activities must be legally permissible.

Every trader engaged in a general trading activity within the territorial limit of any municipal corporation is required to obtain a trade license. The trade license differs from state to state and is based on the nature of the business. The kind of license and license fee also varies from state to state. Some states charge a monthly fee while others charge a percentage of turnover.

The validity of the trade license is for one year and it is required to renew the license before its expiry. This renewal process is to be started within thirty days from the date of expiry.

The trade license is regulated under Shop and Establishment Act. The regulations under the trade license are as follows.

  • The working hours per day and week.
  • Guidelines for rest interval, closed days, opening and closing hours, overtime work, national and religious holidays.
  • Rules for the employment of children, young persons, and women.
  • Rules for annual leave, sick leave, maternity leave, and casual leave, etc.
  • Maintenance of registers and records and display notices.
  • Obligations of employers as well as employees.

Trade License Vs Shop and Establishment License

The person who wants to start a specific business or trade is required to obtain the Trade license. However, a person who wishes to start a shop must obtain the Shop and Establishment License.

Trade license applies to commercial entities while the Shop and Establishment License applies to the shops and other establishments.

The primary intention of the Shop and Establishment act is to ensure the benefits of the employees working in the shops. There are no such regulations associated with the Trade license.

Different types of Trade Licenses?

There are three different types of trade licenses. They are;

  • Industrial license
  • Shop license
  • Food establishment license

Industrial license:

Industrial license is required for small, medium, and large scale manufacturing companies.

Shop license:

A shop license is required for a person who wishes to open a shop. This covers the licenses for the trades including the sale of firewood, candle manufacturing, dhobi shop, barbershop, cracker manufacturing, etc.

Food establishment license:

A food establishment license is required for the operation of food and beverage businesses which includes restaurants, canteens, hotels, food stalls, meat shops, vegetable shops, bakeries, etc.

Forms required for the Trade License application

The enterprises have to register with the respective Municipal corporations controlled by the state governments. The forms required for this differ state by state. It is possible to download those forms from the respective websites of the state competent authorities

Documents required for applying for Trade License

The documents required for applying for trade license varies from state to state. The following are the general documents required for the application of a trade license.

Documents required for Trade License registration:

  • Application form in the prescribed format.
  • PAN card of the entity in case of company, LLP, or firm.
  • Aadhar card for the individual applicant.
  • Latest Municipality property tax payment receipt.
  • Canceled cheque and bank statements of the establishment.
  • Certificate of incorporation, Memorandum of Association (MOA), Articles of Association (AOA) of the company or LLP, or partnership agreement as the case may be.
  • Premises proof of the establishment in the form of sale deed, electricity bill or water bill, and a NOC from the owner.
  • Lease documents or consent letter from the owner of the entity.
  • Color photograph of all directors or partners.
  • Address proof of all directors or partners.
  • PAN card of all directors or partners.
  • ID proof of all directors or partners.
  • Front-fascia photograph of the establishment with the display of goods trades from the premises.
  • Site or key plan showing the area under the occupation of the applicant earmarking the neighborhood of the site.
  • NOC from the immediate neighbor.
  • Katha extracts.
  • Katha certificate.
  • Sanction plan.
  • Occupancy certificate

          Documents required for Trade License renewal:

  • Original copy of trade license.
  • Previous year challans.
  • Up to date property tax paid receipt

Procedure for Trade License registration?

  • Log in to the official portal of the municipal corporation and fill the application form.
  • Upload the required documents.
  • The application will be sent to the Sanitary Inspector of the concerned division.
  • The details of the inspection will be received through SMS and email.
  • A date will be given and the inspector will visit the place. An inspection report will be prepared by him. The application fee will be decided according to the nature and function of the industry.
  • The report will be forwarded to the concerned Municipal Health Officer or Sanitary Officer.
  • The prepared report will be analyzed and another inspection is carried out if necessary.
  • After the verification of documents, if no fault is there, the application will be approved. It is possible to download the demand notice through the citizen portal.
  • A trade license number will be generated.
  • After making the payment, it is possible for the applicant to directly download the trade license using the trade license number.

What if you violate the law?

There are specific rules and regulations to be followed by traders under the registered entity. Failing to comply with these rules will lead to legal penalties under the concerned authorities.

  • The license of the trading entity that violates the conditions of the license or causes disturbance in the surroundings may be canceled or abrogated.
  • The violations of any regulations under the law will be liable to a prescribed penalty.
  • On the failure of renewal of trade license a fine of 50% of the license fee may be levied.

Conclusion

For being the owner of a trading entity, one must possess a trade license. It is required for them to strictly follow the rules and regulations of the law. Failing to comply with these may lead to punishable offenses under the act.

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