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Shalini Singh
| Updated: 13 Dec, 2019 | Category: Shop and Establishment, Trade

Differences Between Trade License And Shop and Establishment License

Trade License

Many individuals dream of setting up their own business or trade. However, to start a particular business or trade you need to obtain a trade License or the Shop and Establishment License. But many of you get confused about the procedure and permits of such licenses. Here we will have a look at the difference between the Shops and Establishment License and trade License so that you can choose the right license according to your business needs.

What is a Trade License?

Any person who wishes to commence a particular trade or business in a specific location needs to obtain the Trade License. Also, the license restricts the applicant to start any other business or trade other than it is issued for.

What is Shop and Establishment license?

Shop and Establishment license is an Act to amend and consolidate the law relating to the payment of wages, regulations of working hours, leaves, holidays, terms of services and other conditions. This act is regulated by the Indian Labor Law to protect the interest of the employees under the organised sector.

According to the Shop and Establishment Act, the applicant needs to make the following declarations:

  • Total working hours of the employees in the establishment.
  • Opening and closing time of the shop or establishment.
  • The number of breaks an employee can take.
  • The number of national holidays in a year.
  • Health and safety measures of the employees (like cleanliness and accidental remedies).
  • Extra wages paid for working overtime.
  • Leave policies of the employees.
  • Proper record-keeping of employees.

Let’s see the difference between Shops and Establishment:

According to the Shop and Establishment Act, a Shop is a place where you can sell goods and offer services to its customers. For example, offices, warehouses or storerooms.

Whereas, an establishment includes hotels, restaurants, theaters and other amusement parks.

Key differences between trade license and Shops and Establishment License:

  • Any individual who wishes to start a particular business or trade needs to obtain the Trade license. While any individual who intends to start a shop requires to get the Shop and Establishment License.
  • Trade License applies to the commercial entities while the Shop and Establishment License applies to the shops or businesses.
  • Shop Establishments such as canteen, hotels, restaurants, canteen, manufacturing industries etc. need to obtain the Trade Licenses whereas the shops or establishments who are carrying on the business or provide any services need to get the Shop and Establishment Act.
  • The rules and regulations of the Shops and Establishment license are somehow lenient in comparison to the Shop and Establishment License, whereas strict regulations apply to the Shop and Establishment License. The companies under this act cannot perform any unethical practices.
  • The primary purpose of the Shops and Establishment act us that it aims to provide proper working conditions to the labours working in these shops. This includes the number of working hours, wage payments, leaves etc. But no such directions go with the Trade License.
  • The fee for obtaining the Shop and Establishment License and trade licenses varies from state to state.
  • Within 30 days after the commencement of the business, you need to obtain the trade license.  Any individual who violates the condition of the license, then the license will be cancelled by the government.
  • Under the Trade License Act, it is mandatory to obtain the trade License because it ensures that the concerned business person is not carrying out any unethical practices. They must follow the rules and safety guidelines issued by the government from time to time. At the same time, the small shop owners and traders must obtain the Shop and Establishment License to carry out the commercial activities.

Read our article: Wondering why Shop and Establishment License is Required for Business?

Documents required for obtaining Trade License –

  • Application in the prescribed Form
  • PAN Card details along with the Certificate of Incorporation – In case the applicant is Company.
  •  Aadhaar Card is mandatory for the individual.
  •  Latest Municipality Property Tax Payment Receipt.
  •  Consent letter from the property owner.
  •  NOC from your immediate neighbour
  • A certified layout plan of your trade building showing the business, working or washing or resting areas
  •  Katha extracts
  • Katha certificate
  • Sanction plan
  • Occupancy certificate (OC)

Documents required for obtaining Shop and Establishment license –

  • Id proofs such as Aadhar card[1] or PAN card.
  •  A Passport size photograph of the owner of the shop/establishment.
  • A photo of the shop or establishment with the employer in the photograph.
  • Rent agreement (for rented apartments).
  • Utility bills such as the electricity or water bill of the working premises
  • A list of number of trustees – for a trust
  • ROC
  • MOA (Memorandum of Association).
  • Number of members and chairman in the co-operative societies
  • Address Proof of the Shop or Establishment.
  • Partnership deed containing all the vital information such as the name of the Company, share a percentage of partners and the signature of the respective partner
  • A Copy of the RBI permission
  • Certificate of Incorporation as per the Companies Act, 2013
  • A permit for transportation from the RTO (Regional Transport Office).
  • FSSAI License
  • Food and Drug License
  • Copy of the collect or permission.
  • A No Objection Certificate (NOC) by the respective police department for a Cybercafe.
  • Excise license
  • Share broker Certificate by Securities and Exchange Board of India.


The final words suggest that you need to obtain a trade license or the Shops and Establishment license before setting a small scale business or commencing any trade. It will be a wiser option to contact any reputed and trustful organisation like Corpbiz for obtaining the government license. Also, our team of expert will clarify all your doubts and bring out the differences between the Trade License and Shops and Establishment License.

Read our article: A Complete Overview of Shop and Establishment Act And How to Obtain its License?

Shalini Singh

Shalini is a B.tech graduate but her keen interest in writing impelled her to continue as a content writer. Further, She has a rich experience in Companies Act and Ammendment related topics.

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