Shop and EstablishmentTrade

How do Trade and shop and establishment registration differ from each other?

calendar07 Aug, 2021
timeReading Time: 3 Minutes
Trade and shop and establishment registration differ from each other

Every commercial establishment and entity need to align themselves with underlying legal implications for the seamless continuation of their business journey. There are various legal frameworks in place that oversee the functioning of the working entities and commercial establishments in India. Trade and shop establishment registration are the two fundamental government registrations that regulate the working of such entities. They may sound identical on the surface, but in reality, they serve different purposes. If you are about to engage in commercial activities, you must understand the basic differences between these two registrations.

What is a State Establishment License?

Shop Establishment license refers to legal consent to carry on a particular trade or business. This license comes under the ambit of the Shop and Establishment Act.  It is issued by the Labour department of the respective state.

The aforesaid Act has essentially enacted to safeguard the interest of individuals working in the commercial establishment. It aims to administer the following aspects;

State Establishment License

What is a Trade License?

Entities with trade licenses are not allowed to engaged with any trade practices that is illicit in nature. Also, such establishments are mandated to operate without hindering the interest of the general public. The issuance of the trade license is done by the Municipal Corporation[1] of the respective state.

Further, the entities registered under trade license need to align themselves with underlying norms and regulations related to work ethics and safety protocols.

Read our article:Know the Procedure for availing Shop and Establishment License

Key Differences between Trade and Shop Establishment License

The following points will let you know the basic differences between trade & establishment license

  • Shop and establishment license encompasses commercial establishments, mainly small shop owners and traders. It is issued by the labor department of the respective state and its validity differs state-wise. Meanwhile, a Trade license is conferred by the Municipal Corporation to an individual to carry out a particular trade or business in a specific location. Please note that the Trade license needs to get renewed on yearly basis.
  • Shop and Establishment license is a legal mandate for every commercial establishment including small shop owners situated in commercial or residential areas. Meanwhile, the applicability of trade license is only confined to establishments situated in a commercial area.
  • It is a legal compulsion to avail trade license to ensure that the individual is not performing anything detrimental to the interest of the government and the general public. A shop and establishment license, on the other hand, is mainly required for a shop owner or small trader who is performing any commercial activities.
  • Trade license is usually required by establishments such as eating houses, hotels, canteen, restaurants, food stall, canteen, internet cafe, etc, While Shop and Establishment is opted by every shop and commercial establishment who is conducting business or rendering any services.
  • Shop establishment license safeguards the employee’s working norms as the act underpins the working hours, wage rate, working hours, holiday, etc. it also employs norms related to child laborand working hours for women.
  • Regulations for Trade and shop establishment licenses differ state-wise. The same is true for fee structure as well.
  • Trade license needs to be obtained by the concerned establishment within 30 days of commencement of business activities. If any person breaches the norms of the license or hinders the interest of the public, then the license shall be subjected to cancellation or revocation.
  • Shop and Establishment Act primarily governs the rights and working norms of the worker involved with the organized sector. This includes work hours, wage payment, & holidays, etc.

Henceforth, it is fair to say that trade and shop & establishment license differs on the following grounds

  • Issuing Authority
  • Validity period
  • License fee
  • Post-compliance


It is of paramount importance to understand the applicability of trade and shop establishment licenses if you seek to operate in a legalized way. Keep in mind that both of these registrations serve different purposes and regulate a different aspects of the business.

Where trade license deals with the legality aspect of the business on account of its activities, shop and establishment license revolve around the welfare of employees serving the specific establishment.

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

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