What is Trade License?
Trade License is a certificate through which an entity is permitted or allowed to open the business and commence a particular trade in a particular area. Through Trade License, State Government regulates the operation of the specific business from a particular locality. It regulates and ensures there is no harm to the living or the health of citizens through activities carried out through trade.
Trade License is issued with standards, safety guidelines, and relevant laws to ensure how business is being done and to protect the community within the state. Trade License is monitored and issued by the State Government for regulating trade and business within the city.
Business entities not adhering to the rules of trade license can face a heavy penalty. Therefore business owners must apply for trade license to the specific state authority without subsequent delay. Trade license registration is time consuming and an expensive process which is discussed henceforth.
Categories of Trade License
Following are three categories under which a trade license is issued:
- Industrial License
This license is applied by a business engaged in manufacturing industries operating in small, medium and large scale.
- Shop License
This license is issued to a business involved in carrying out dangerous and offensive activities such as cracker manufacturer, candle manufacturer, firewood shop, etc.
- Food & Shop Establishment License
This license is obtained by the business engaged in food business such as restaurants, hotels, canteen, food stall, etc.
Importance of Trade License
Trade license is a permission to carry out business within the particular locality issued by municipal authority. Trade License is crucial because of the following reasons:
- Monitors the business operating in a particular locality
- To ensure there is no harm to the health of the general public due to improper conduct of business.
- It ensures the applicable rules, regulations, and standards set are duly adhered to.
- It regulates the business by putting restrictions on certain commercial activities.
- Monitor the responsibilities of an entrepreneur in connection with the business.
- A trade license holder is assumed to be certified that there is no unethical or illegal activity or trade is conducted.
Trade License Renewal in India
Trade License is issued with one year of validity by municipal authority and is required to be renewed every year before the date of its expiry. Generally, the license is renewed from 1st January to 31st March of every year. The renewal application is made thirty days before its expiry with the following documents attached:
- Original copy of trade license issued
- Challan copies of the previous year
- The property tax paid up to the date of the renewal application
What are the Key-Points for Trade License in India?
Following key-points for better understanding of trade license:
- Trade license is issued by a municipal authority that can be used exclusively for the trade and business it is issued for.
- Rules, procedure, time-limit, and fee structure for trade license is different from state to state.
- The registered business has better goodwill and competitive advantage than the one with no trade license.
- Business having such license depicts an image of being ethical and carrying legal business activity.
How to Get Trade License in India?
Trade License can be obtained online and offline. However, official websites for applying online can vary as per the state; to apply online follow below-mentioned steps these are similar throughout the states:
- The applicant shall apply to the licensing authority of a particular municipal limit where the business is situated.
- The applicant shall submit the application form containing complete information such as:
1. Trade license details
2. Applicant name and address
3. Business name and address
4. Type of licenses already issued
- Once the form is submitted along with the necessary documents, the applicant needs to submit the applicable fees for registration.
- After completion of the registration process, the applicant will get the transaction number on its registered mobile number for future reference.
What are the Documents Required for Registration?
Following are the different types of documents need to be attached with an application for registration of trademark:
- Application as per the prescribed format
- In case the applicant is Company, LLP, or firm: COI, MOA & AOA is required
- PAN of the company
- An individual applicant must submit their Aadhar and PAN
- NOC from an immediate neighbour regarding no objection for carrying such trade or business.
- Evidence of latest Municipality tax paid such as a receipt, tax invoice, etc
- Katha Certificate and extracts
- Plan layout of sanction plan
What are the Eligible Entities to Obtain Trade License in India
Following is the eligibility to obtain trade license to carry on the business:
- Applicant must be of age 18 years or more
- There shall be no criminal record of the applicant
- Business for which trade license is applied must be legally permitted under other laws and statutory provisions
- Trade License can only be allotted if the business is conducted in a permissible area such as:
2. Local commercial
3. Notified commercial
- Residential area with small shops of maximum area 20 sq.m. on the ground floor.
Frequently Asked Questions
Trade License is a state-specific application and procedure varies as per state. Some state has made it compulsory to get a trade license while some state has made it an optional choice for business. Depending upon the state, rules relating to fees also vary as per the state such as few states are charging a monthly fee while others charge as a particular percentage of their total turnover.
Generally, the processing time is different for different states. In general, it takes 7-10 days to process in metro cities, and the time is taken in small cities, or rural areas is quite longer than in urban cities.
In case any person starts the business without getting a trade license in such state where it is mandatory to obtain, or it violates the guidelines and standards set to be followed by the trader will be liable to pay hefty penalty as prescribed in a particular city and furthermore is liable for legal actions as well.