Preventing businesses from doing any activity which results in any unethical practices, it has been made a mandate to acquire a valid Trade Licence in India before the start of any business or any trade activity. All business individual who engage in business activity shall acquire a Trade Licence.
Legal Framework
All Business have to acquire a Licence under the Shop and Establishment Act, 1953. It outlines the requirements which shall be followed for guaranteeing an enhanced operation of the business.
Trade Licence
It is issued by the licensing department of a municipal corporation in the form of a document/certificate. Trade Licence allows the business owners for setting a particular trade/business in a particular area.
The Significance Of Trade Licence In India?
The state government control the trade Licence by municipal corporation statutes. It helps in making sure that the public is not affected in multiple ways by any sort of annoyance and dangers of any type from any business or trade.
This Licence makes it mandatory from the government for carrying out the business or trade in particular area and makes sure that not any unethical business practice is being carried out. So, trade Licence in India are highly significant.
Also, each firm follows the appropriate regulations and related norms which is adhering to the safety protocols, this Licence provides a sense of harmony in the society. It was made mandatory so the government can regulate the diverse commercial activity in the country.
Requirements for a Trade Licence:-
- Applicant shall be more than 18 years of age
- The applicant shall not have any criminal record
- The nature of the business shall be legal
Purpose of a Trade Licence:-
The main function of a Licence is controlling and monitoring the business activity in a particular area. It holds importance as it guarantees that the firm is adhering to the various local governmental regulations. This includes zoning requirement, Infrastructure, environmental and health laws and standards. Trade Licence also required the companies in meeting the financial allegiance by paying the required taxes and fees.
Who Needs to Obtain a Trade Licence ?
Below Mentioned Entities are in mandate to obtain a Licence from the Municipal Corporation before it starts the business:-
- Local commercial
- CSC (Commercial Shopping Complex)
- Community Center
- LSC (Local Shopping Complex)
- Metropolitan City Center
- Service market/ Service Center
- Pedestrian Shopping Streets
- District Center
- Commercial Areas
- MLU (Mixed Land Use)
Importance of a Trade Licence:-
It holds importance due to following reasons:
1. Regulation and Monitoring: It’s Important for overseeing and controlling the trading activities in a specific area or locality.
2. Public Health: It ensures that business operation does not affect or threatens the health of the general public by enforcing the proper practices and preventing improper conduct.
3. Compliance with Rules: Trade Licences guarantee that businesses adhere to established rules, regulations, and standards, promoting ethical and lawful operations.
4. Restrictions: All these Licences limit particular commercial activities which help in maintaining a safe and balanced business environment.
5. Responsibility Oversight: It oversees obligations of the business owners about the trading activities which ensures accountability.
6. Evidence of Legitimacy: Having a Trade Licence provides that the owner of the business is engaged in a required formalities and ethical business practice of trading which is free from any unlawful or unethical practice of any type.
Business Requiring Trade Licence Registration:-
Here are some common types of business Licence that are typically required in India:
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Shops and Establishments:
:- All the business which involve trading or any commercial activity be it retail stores, restaurants, hotels, theaters, amusement parks and other similar type of establishment usually require a trade Licence from local municipal corporation.
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Food Establishments:
:- Businesses which are dealing in preparation, sale or distribution of food or beverages which include restaurants, cafes, food stall, food processing unit and catering service require a trade Licence from the Food Safety and Standards Authority of India (FSSAI).
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Manufacturing Units:
:- Industry which involve manufacturing and production be it factories, workshops and industrial plants are generally required for obtaining a trade Licence which ensures an adherence for safety and environmental regulations.
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Healthcare Facilities:
:- Hospitals, Clinics, Nursing Homes, Diagnostic Centers and other medical establishments require a trade Licence for ensuring that the required standards and regulations are met for providing healthcare services.
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Entertainment and Leisure Activities:
:- Businesses which are related to entertainment and leisure be it cinema hall, multiplexes, video games, parlors, gyms, spas and health club need to require a trade Licence for public safety and compliance with the local regulations.
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Transport Services:
:- Business which offer transportation service like auto rickshaw, taxi, can and goods carrier require a trade Licence for operating legally.
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Construction and Real Estate:
:- Real Estate developers, construction companies and contractors require a trade Licence for carrying out their activities within particular municipal limits.
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Fireworks and Explosives:
:- Businesses which manufacture, store, sale or use fireworks and explosive materials are subjected to strict regulations and generally require a trade Licence.
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Liquor Establishments:
:- Business which sell alcoholic product and distribution of these alcoholic beverages be it liquor shops, bars and pubs require a trade Licence with the necessary permit from the required authorities.
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Street Vendors and Hawkers:
:- People and the groups which are engaged in street vending or hawking activity require a Licence or particular vendor Licence from the local bodies.
Trade Licence Registration Fee:-
As the trade Licences are given by the local government, the registration cost can differ between the states. This fee is determined according to the laws and regulations of different states. Licence fee is calculated annually in different states. While on the other hand, other states have their fees according to a portion of a company’s yearly revenue. For ensuring complete compliance during the registration procedure, it is very important of being aware of the unique pricing structure which is relevant in the state.
Why it’s Important to Apply for Trade Licence before Starting Business:-
Its much important to apply for a Licence before conducting any business because it acts as an evidence that the applicant’s activities won’t have any negative effects on health. Also, it guarantees that the applicant will not engage in any act which could be viewed as unethical.
Also, the state in which the applicant has applied for a Licence regulates the fees structure. All states have different taxes to pay. It could be a certain range of figures or it could be determined by yearly sales.
Penal Provision For Violation of Trade Licence:-
If a person starts a business without obtaining a Licence, the government imposes sanctions in form of fees and heavy penalties. It can result in the shutdown of business. So, if a person starts the business and fails in complying with rules and regulations which are provided by the government, the said person will be liable for the penalty.
Individuals who start a business without acquiring a Trade Licence could face consequences in form of fines and penalties. It can also result in closure.
- If the entity is violating provisions of the Licence a specified penalty will be imposed on it.
- If renewal of Trade Licence is delayed, a penalty of 50% of Licence fee will be imposed.
- There could be situations in which the defaulter is target of the appropriate legal action.
Consequences of Breach:-
There are some consequences of breach of Trade Licence:-
- Once an application has been given a Licence, the applicant shall ensure that legal compliance is followed and maintained.
- If the applicant is unsuccessful in acquiring Licence, the authorities can place variety of penalties.
- If any is launched and continues operating without any required business Licences, fine and charges will be imposed.
Validity :-
The validity of a Trade Licence which is issued by Municipal Authorities in India is for 1 year and is required to be renewed every year.
Renewal:-
The Licence can be renewed subject to the following conditions:
- Generally renewed between 1st january to 31 March of the financial year.
- Valid for 1 Year
- The candidate shall submit an application for trading Licence in India.
- The application could be submitted thirty days before expiration of the certificate
- Documents shall be submitted to the appropriate authority for renewing the certificate.
Procedure:-
Submitting the Application:-
For Registration for Certification of Licence, the applicants require to apply in the applicable state government, corporation or municipality with all the specified registration documents. The procedure could differ slightly depending on which state the application is submitted.
Verification:-
Depending on the State, the procedure of state Licence is provided after the completion of evaluation of documents which are submitted in person with the authority.
Duration of Issuance of Certificate:-
The duration for successful completion of evaluation of documents which are submitted is approximately ten to fifteen days.
