Overview of Warehouse License
Warehousing is a process of physically storing goods till they are sold or distributed to any other location. It ensures that the goods are stored safely in an organised manner in order to track the location, date of arrival and time of their storage in the warehouse and also the quantity of those goods. Warehouses are an essential aspect of businesses and are used by importers, producers, wholesalers, transport companies, etc. Warehousing is a supply chain it impacts the storage and management of inventory. It ensures that the businesses are receiving their orders on time.
Functions of Warehouse:
Warehouses are used for multiple things; some of them are as follows:
- Warehouse Management: It means the day-to-day operations that occur in the centre of a warehouse to ensure operational efficiency. Such operations include the management of staff, stock and equipment. Tasks like ensuring that correct security gear is used in the warehouse and that the staff have relevant licenses and certifications for using certain working equipment.
- Warehouse Operations: It includes the role of ensuring that the warehouse is efficient. Part of these operations includes keeping warehouse costs low, checking that one needs a correct number of items, and ensuring that there is enough space in the warehouse.
- Warehouse Management Software: It is a system that ensures all activities in the warehouse are being appropriately managed. It also assists in improving stock management.
As per the Warehousing (Development and Regulation) Act, 2007 and Warehousing (Development and Regulation) Registration of Warehouse Rules, 2017, a person commencing or carrying on a warehouse business has to mandatorily get the warehouse registered and obtain a Warehouse License with the Warehousing Development and Regulatory Authority and also comply with other legal requirements. If the procedure to obtain such License and registration is not complied with as per the applicable provisions of the Warehousing (Development and Regulation) Act, 2007, or not fulfilling any of the warehouse legal requirements will attract penal provisions in the form of fines or imprisonment or both.
Types of Warehouses
The following are different types of warehouses, depending on their size and form, which require a warehouse license:
- Private Warehouse
The private warehouse is owned and managed by suppliers and resellers to fulfil their distribution activities. Examples of such warehouses are retailers renting out warehouses to store their goods or other items, warehouses used by a producer near to its place of work and warehouses either owned or leased by a wholesaler where they store or distribute their inventory.
- Public warehouse
Warehouses owned by the Government and used by private entities for storing goods, as long as they are paying rent, fall under this type of warehouse. Such warehouses are sometimes of assistance to small companies that need storage facilities but cannot afford to have their own.
- Bonded storage
This refers to a warehouse that is owned and managed by both the Government and private entities. Such a warehouse is used to store imported products where an import duty has not been paid, and private entities receive a license from Government for the same.
- Co-operative warehouse
The co-operative warehouse is owned by co-operative societies. Such warehouse is meant to be accessible storage facilities as the rates charged by them are not so high as other types of warehouses. The co-operative warehouse is not established to make a profit but to assist those members who are unable to afford to rent a warehouse at a usual rate.
- Distribution centres
Distribution centres are storage facilities to keep large amounts of inventories for a short period of time. The main purpose of these distribution centres is to be used as a distribution system where the goods are moved quickly from a supplier and then to the consumer.
- Special Warehouse
It is a site or building where dutiable goods are deposited.
Conditions to be fulfilled for Warehouse License
Conditions to be fulfilled by an applicant while obtaining the Warehouse License, where after inspection of premises, evaluation of compliances and conducting enquiries, the Principal Commissioner of Customs or Commissioner of Customs is satisfied that the License should be granted are as follows:
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Benefits of Warehouse License
Operating a warehouse is only possible with a proper warehouse license, and apart from storing products or goods, a warehouse has the following benefits, which can be enjoyed only after having a proper license for the warehouse:
- Better inventory accuracy
Warehouses ensure that all inventories are in one place.
- Protection of goods
The warehouse ensures that all inventories are safely stored, especially the perishable goods. It ensures that they are stored in the appropriate conditions.
- Decrease in overhead costs
Warehouse assists in improving inventory management and a warehouse's daily operations, which means one can reuse their costs.
- Central location
Warehouses near manufacturing units or consumers assist in having better transportation of goods and so less time is required in moving the goods or products.
Eligibility Criteria to obtain Warehouse License
An application is made for a warehouse license to the Principal Commissioner of Customs or Commissioner of Customs, and such licence is only issued to an applicant who fulfils the following eligibility criteria:
The prescribed Principal Commissioner of Customs or Commissioner of Customs, as the case may be, must not issue any license to an applicant if they fall under the following criteria:
Principal Commissioner, or the Commissioner, as the case may be, is satisfied that the following conditions are fulfilled:
There are three more eligibility criteria for a special warehouse:
Documents Required for Warehouse License
Applying for a warehouse license usually requires completing the following list of forms and documentation:
Other documents that are also required are as follows:
Procedure for Warehouse License
A complete procedure for obtaining a warehouse license is as follows:
This License is valid till its surrender by the applicant or cancellation, and so there is no requirement for renewal of such License.
Frequently Asked Questions
A licensee surrenders the License by making a request in writing to the Principal Commissioner of Customs or Commissioner of Customs, as case may be. On receipt of such request, the Principal Commissioner of Customs or Commissioner of Customs cancels the License in case the following conditions are fulfilled:
- the licensee has paid all the monies due to Central Government
- no warehoused goods remain deposited in the warehouse or are deposited in the warehouse from the date of request
- no proceedings are pending against the licensee
The insurance coverage requirements for having a warehouse license in India related to the goods stored or deposited in the warehouse must be against any of the following:
- SFSP Policy
- Riots and strikes