MSME Registration


What is the Difference between Shop Act and Udyog Aadhar?

calendar20 Feb, 2023
timeReading Time: 5 Minutes
What is the Difference between Shop Act and Udyog Aadhar?

Business registration is an essential part of starting and running a business, especially for small-scale businesses. The registration procedure gives the business a legal identity, which can benefit the company, the owners, and society as a whole. Small businesses should consider registering their business in order to reap the various benefits that come with it. The business might be commercial or one that operates in the entertainment sector; it could be involved in the manufacturing and production of certain commodities or in the provision of services. Most small-scale business requires authorization from Shop and Establishments Act and the Micro, Small, and Medium Enterprises Development Act via Udyog Aadhar Registration. In this blog, we will discuss the difference between Shop Act and Udyog Aadhar.

What is the Shop Act and Udyog Aadhar?

Let’s discuss the meaning of Shop Act and Udyog Aadhar:

Shop Act

The Shops and establishments Act, also known as the Shops Act, is a law created by the Indian government to oversee the functioning of shops and commercial establishments. The statute applies to all commercial establishments with ten or more employees, including shops, hotels, restaurants, and other service providers. The Shops Act’s primary goal is to protect the rights of employees working in commercial establishments. This statute establishes various business requirements, such as controlling work hours, leave, overtime and other working conditions. 

It also requires the keeping of certain documents, including attendance registers and wage records, which can assist in protecting workers’ rights and avoiding possible abuse. The Shops Act also promotes worker safety and welfare by requiring employers to take measures to maintain cleanliness, ventilation and illumination. The statute also specifies rest intervals, lunch breaks, and other essential working conditions. The legislation establishes various compliance criteria that must be met by all institutions, fostering workplace justice and equality.

  • Benefits of the Shop Act

Every state has its own shop act in India, and businesses that fall within the purview are required to obtain registration under this law. Here are some benefits of the Shop Act:-

  • Legal Compliance: 

Registration under the Shops Act is a legal obligation for businesses that come within its jurisdiction. Businesses can comply with the Act’s legal responsibilities, avoid penalties and guarantee the smooth running of their activities by acquiring registration. 

  • Brand Establishment:

Registration under the shop act grants businesses a legal identity that can be utilized for brand establishment. It can assist in developing trust and confidence among consumers and suppliers by demonstrating that the business is legally compliant and trustworthy. 

  • Employee Welfare:

The shop act requires the business to offer certain amnesties to its employees, such as a clean working environment, safe workplace and drinking water. Businesses can protect their employees’ well-being and create a decent working environment by adhering to specific standards. 

  • Protection of Rights:

The shop act registration provides a legal framework for protecting employees’ and customers’ rights. 

  • Access to Government Benefits:

Businesses registering under the Shop Act can be eligible for various government initiatives and advantages, such as loans, subsidies and incentives. This can assist businesses in expanding and growing their operations and improving their profitability and sustainability. 

Udyog Aadhar

Udyog Aadhar is a unique identification number issued to India’s small and medium-sized companies. The Ministry of Micro, Small, and Medium Enterprises (MSME)[1] created the scheme to streamline the registration procedure for small and medium-sized companies and boost their growth. Udyog Aadhar’s goal is to create a single platform for small and medium-sized companies to register their business and gain various government advantages such as financial support, subsidies and access to government initiatives. 

The Udyog Aadhar registration procedure is entirely online, and it entails entering basic information about the business, including its name, location, kind of organization, and bank details. One of the significant benefits of Udyog Aadhar is that it gives a variety of benefits to small and medium-sized companies, such as access to funding, which is typically difficult for small businesses. Udyog Aadhar protects small and medium-sized companies through different government initiatives, such as the credit guarantee fund scheme for micro and small enterprises, which assures that small and medium-sized companies’ loans are reimbursed in the case of default.  

Furthermore, small and medium-sized companies with Udyog Aadhar registration are eligible for a variety of tax exemptions and incentives, making it more straightforward for them to expand their operations. Overall the goal of Udyog Aadhar is to help small and medium-sized companies in India to thrive and prosper.

Benefits of Udyog Aadhar

Some of the critical benefits of Udyog Aadhar are:-

  • Access to schemes and subsidies:

Small and medium-sized companies with Udyog Aadhar are eligible for a variety of government schemes and subsidies. For example, they can seek loans at cheaper interest rates, receive financial help for business development and take advantage of tax exemptions.

  • Protection against delay in payment:

The government has implemented a delayed payment protection plan for small and medium-sized companies, which offers security against buyer payment delays. This initiative is available to small and medium-sized companies registered with Udyog Aadhar.

  • Easier access to credit:

Small and medium-sized companies sometimes need more collateral to obtain finance. However, Udyog Aadhar registration offers official recognition to the business, making it easier to access credit.

  • Priority sector lending:

Bank and financial institutions have been obliged to lend small and medium-sized companies to the priority sector. The registration of Udyog Aadhar enables medium-sized companies to get loans under the priority lending sector.

  • Recognition in international trade:

Udyog Aadhar registration is regarded as a valid business identity in international commerce, enabling small and medium-sized companies to access to global markets.

  • Facilitation of obtaining license and approvals:

Registration for Udyog Aadhar makes it easier for small and medium-sized companies to secure different licenses and permissions for running a business, such as industry licenses and pollution control clearances.

Difference between Shop Act and Udyog Aadhar

Now let’s discuss the difference between Shop Act and Udyog Aadhar:

  • Applicability 
    • Shops Act: Registration under this Act is required for all shops and commercial establishments like clubs, hotels and other places of entertainment and amusement.
    • Udyog Aadhar: Udyog Aadhar is voluntary and available exclusively to micro, small and medium enterprises. 
  • Registration process
    • Shops Act: The registration process in the Shops Act is state-specific; because each state in India has a different shops act. And it entails submitting papers like a PAN Card, a leasing agreement, and a NOC from the local municipal body etc.
    • Udyog Aadhar: The Udyog Aadhar registration procedure, on the other hand, is straightforward and involves just the basic information such as Aadhar card number, business details and bank details.
  • Jurisdiction/Authority 
    • Shops Act: The State Government has the authority as there are state-specific laws and regulations in the Shops Act.
    • Udyog Aadhar: The Central Government has the authority.
  • Renewal process
    • Shops Act:The shop act registration must be renewed yearly.
    • Udyog Aadhar:The Udyog Aadhar is valid for a lifetime and does not require any renewal.
  • Compliance objectives 
    • Shops Act: registration under the Shops Act obligates the business to follow specific labour laws, such as minimum wages, working hours, and employee benefits.
    • Udyog Aadhar: Udyog Aadhar, on the other hand, has no such compliance duties, while businesses are encouraged to follow MSME Development Act.
  • Tax concession 
    • Shops Act: The businesses registered under the Shops Act do not get any tax concession.
    • Udyog Aadhar:Udyog Aadhar gives certain tax benefits under the Goods and Services Tax Act and Income Tax.
  • Cost 
    • Shops Act: The cost of registering under the Act varies by state and is determined by criteria such as the size of the business, the number of employees, and the registration period.
    • Udyog Aadhar:on the other hand, the registration process in Udyog Aadhar is entirely free.


Both the Shop Act and Udyog Aadhar have advantages and disadvantages, and which one to choose depends on the kind and size of the business. Registration under the shop act gives benefits such as eligibility for government tenders and legal protection, whilst Udyog Aadhar provides perks such as easy access to finance and subsidies. As a result, a business should carefully assess its needs and select the appropriate registration to reap the benefits, comply with regulations, and expand its operations. As previously stated, the acts serve fundamentally different objectives and are as distinct as night and day.

To avoid legal ramifications, firms should obtain expert assistance in navigating the complex registration procedure and meeting their compliance duties. The correct registration may help firms properly accomplish their objectives. 

Read Our Article: What Are The Key Features Of MSME Registration And Udyog Aadhaar? Let’s Understand These Concepts In Brief!

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