Penalty for Violating the Trade license in India

calendar11 Feb, 2020
timeReading Time: 5 Minutes
Trade license in India

The government to ensure that no one is carrying out any unethical business practices and no one is getting affected with the same, i.e. unethical practices made it necessary to obtain a trade license in India before starting the business or trade. Every business person must obtain a trade license for dealing in trade activities.

In the topic we will discuss the reason for obtaining the trade license, The Role of trade license is reducing the unethical practices, who can issue the trade license, its eligibility criteria and what are the penalties for violating the trade license.

What is a Trade License in India?

A trade license is issued by the licensing department of the municipal corporation in the form of a document/certificate. Trade License permits the business person to set up a particular trade or business in a distinct area.

Note:The Trade license in India allows the holder to do that particular trade or business for which it has been issued. Furthermore, Trade license does not offer any kind of property ownership to the person holding the license.

Trade license in India is issued by the Authority to keep a check on the areas by restricting the people from dealing in certain types of businesses from their places.

Why Trade License is important to carry out the business activity?

Trade license is playing a vital role in balancing the society and to keep a check that all the businesses are following the respective rules and regulations by adopting the safety measures. It protects the owners from the uncalled liabilities. Trade license attracts the customers as well as the investors. It helps the person in doing ethical business practices by assuring safety measures.

The main purpose of a trade license in India is as follows-

  • To ensure that the customers shall not adversely be affected by the health issues due to improper trade of business.
  • To maintain the higher goodwill.
  • To attract more and more customer base and investor organization.
  • To ascertain the government as well as the customers that the business practices are being carried reasonably and by following the prescribed rules and regulations.

Key points to be kept in mind before Issuing Trade License in India

Before issuing the trade license and to carry out the legal business activities, the Licensing department of Municipal corporation[1] will ensure that the-

  • The Applicant has attained the age of 18 years,
  • No criminal records of the Applicant,
  • Permissibility of business on a legal basis.

Trade license in India provides a permit to carry the business activities for which it was issued by the Authority. A Trade license validates business activities.

Issuing Authority of Trade license in India

The Issuing Authority for the trade license is the licensing department of the Municipal Corporation. However, the rules and regulations for the issuance of trade license in India vary from state to state. A registered business, i.e. a business with trade license enjoys more benefits in terms of customers and investors as compared to unregistered business.

Why before starting any business activity it is important to apply for Trade License?

Before commencing any business activity, it is of the utmost importance to apply for a trade license as it acts as proof that the activities to be carried out by the Applicant will not result in any type of health problems. Further, it also assures that the applicant company is not going to perform any such activity that would be considered unethical.

Furthermore, the fee structure to get a trade license is regulated by the state in which the Applicant has applied for. The fees vary from state to state. It can be in the form of a certain set of amounts, or they may be calculated by the annual sales.

Departments where Trade license is issued by the Authority

Trade License is issued by the Municipal Corporation’s License Department in different departments like Shop and Establishment license, Industrial License and also Food establishment License-

Trade license

Conclusively, three types of licenses are issued, i.e. Shop License, Industry License and Food establishment license in various departments. In metro cities, it takes approx. 7-10 days to execute the process of Trade license and in the case of rural and small cities, it takes a longer time to process the same.

Read our article:Step By Step Guide For How to Apply Trade License Online

How to get a Trade License in India?

Obtaining a trade license in India is a simple process.

The Applicant is required to follow the required steps to get the trade license-

  1. Submission of simple questionnaire along with the requisite documents.
  2. Registering the trade license with the requisite documents. It takes approx. 12 working days to register the trade license
  3. Submission of the documents to the respective Authority. Once granted by the Authority, the same shall be sent to the Applicant through courier.

Documents required as an attachment-

  • Id proof of the Applicant.
  • In case of rental premise, Lease document.
  • Address proof of the Applicant.
  • Cancelled cheque.
  • Certificate incorporation
  • PAN of the entity
  • Certificate of Occupation

Penal provision for violating the Trade License in India

Without obtaining a Trade License if a person starts a business, the government imposes penal provisions in the form of fees and penalties on such person. Additionally, it also results in the shutdown of the business. In layman, if the person starts the business and fails to comply with the rules and regulations set by the government and respective Authority, the said person will be liable for the penalty as prescribed by the government.

How long a Trade License can be used by the Applicant?

A trade license is valid for a period of 1 year. Renewal is required once the license gets expired. Every business needs a trade license and are required to comply with the rules and regulations.

Renewal of Trade License in India

Trade license issued by the municipal Authority remains valid for one year and required to be renewed every year. Though, In India trade license is renewed between January 1st to March 31st

The renewal application for the trade license is to be made within 30 days from the date of its expiry. In case of delay in filing the renewal, application attracts fine depending upon the rules and regulation of the issuing Authority.

Documents required at the time of renewal of trade license-

  • Original copy of the trade License;
  • Challan of the previous year;
  • The Updated property tax paid receipt.


Trade license is a license that provides approval to carry out the business activity. Any existing business involved in the trading activity can apply for a trade license, provided it shall be in the national limits. In case of denial of a trade license in India, the Applicant can appeal to the Standing committee. Violating the provisions of trade license results in the penal provision and the government can also seize or lock the business.

Read our article:Planning Business set up in Local Municipal Area; Trade License Should be the First Requirement

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