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Applicability of Shop and Establishment Registration

Soumya Bajpai

| Updated: May 13, 2020 | Category: Business Registrations

shop and establishment

The Shop and Establishment Act regulates most of the businesses in India that are enacted by each State Legislation in the Country. The primary objective of the Act is to regulate the payment of wages, holidays, terms of service, leaves, hours of work, work conditions, overtime work, maternity leave and benefits, description of labour,  rules for employment of children, etc. for those people who employed in shops and commercial establishments such as hotels, theatres, restaurants, bakeries, charitable trusts, societies, educational institutions, eating houses, premises of business such as brokerage/banking/insurance firms, public places of amusement and entertainment, etc. All the listed places of employment are required to register under the Shop and Establishment Act within 30 days of commencement of its work. Factories are covered under the Factories Act, 1948, instead of the Shop and Establishment Act.

Shop and Establishment Act

Every business which falls under the category of a commercial shop and establishment needs to register itself under the Shop and Establishment Act within 30 days of commencement of work. Under the Act, Shop and Establishment registration is granted, that certifies the hours of work, payment of wages, holidays and leaves, terms of service and other conditions of work of persons employed in commercial establishments, shops, establishments for public entertainment or amusement and any other establishments are regulated by the Act.

The shop and establishment registration is mandatory for continuing the business. Every state has its laws related to Shop and Establishment. The running business has to obtain shop and establishment registration according to the procedure lay down under the state legislation of shop and establishment. The registration done shop and establishment laws are known by different names in different states. For instance, in Maharashtra it is known as the Gumasta License, in Bihar, it is called as the Trade license, in Delhi, Haryana and UP, it is known as the Shop and Establishment license.

Regulations made under the Act

Though all the states have their own shop and establishment laws, the regulations laid down under these laws are very similar in nature. Some of the regulations made under the provisions of the Shop and Establishment Act are:

  • Working hours of work in a day and week
  • Interval for meals and rest
  • Prohibition for employment of children
  • Employment of young persons or women
  • Opening and closing hours, closed days, overtime work
  • Weekly holiday, wages for holidays, national and religious holidays,
  • Deductions made from wages
  • Time and condition, payment of wages, dismissal from employment
  • Cleanliness, lighting and ventilation
  • Fire safety and precautions, accidents,
  • Spread-over, rest interval
  • Maternity leave, Annual leave, sickness and casual leave, other leave policy
  • Employment and termination of service
  • Maintenance of registers, record keeping and display of notices
  • Obligations of employers as well as employees

Why to Register under Shop & Establishment?

The objective is to secure the uniform benefits for employees working in all the establishments, from shops, commercial establishments and residential hotels or restaurants, and other places of public amusement or entertainment. One has to get registered its business under a Shop and Establishment Act. Whether a business is small or big, in the form of a shop or an establishment, it gets registered by visiting the website regarding to it or by going to the State government office to complete the Registration Formality by a method as prescribed by the State Government. Every Indian state has enacted their rules and regulations with regard to the environment of work.     

Applicability of Shop & Establishment Registration

As this is such a basic license, but one needs to get it registered as the proof of a running commercial business. Most of the banks require a copy of the registration certificate if the owner wants to open a current account. To get this license, there is the requirement of the PAN card of the business owner or the business itself, a copy of the rental agreement or sale deed, and all details of the employees. Premises that are governed under this Act are shops, hotels, commercial establishments, clubs, restaurants, eating houses, and other places of public amusement or entertainment, etc. except those who fall under the Factories Act 1948. There is a mandatory requirement to obtain shop and establishment registration in India and it is applicable to:

Establishments

As per the Shops and Establishments Act, the term establishment means a shop or a commercial establishment, including commercial spaces, residential hotels, restaurants, theatres, and places of public amusement or entertainment. In addition to this, the state government also declares establishments for the purpose of this Act.

Commercial Establishment

According to the Act, a commercial establishment means a premise where any trade, business, profession, or any work which is related to it is undertaken. Accordingly, a commercial Establishment could include:

  • A society registered under Societies Registration Act, 1860.
  • Registered or unregistered charitable or other trusts
  • Journalistic and printing establishments
  • Contractors and auditors establishments
  • Quarries and mines not governed by the Mines Act, 1952.
  • Educational or other institutes run for private gain
  • Any premises where the business of banking, insurance, stocks and shares, brokerage or produce exchange is undertaken
  • Theatres and cinemas
  • Restaurants and eating houses
  • Residential hotels, clubs
  • Other places of public amusement or entertainment

Shops

Shop means any premises where:

  • Goods are sold, either by retail, wholesale, or
  • Services are rendered to customers.
  • This could include an office a store-room, gowdown, warehouse, or workplace, whether in the same premises or otherwise, used in connection with such trade/business.

This definition does not include a factory or a commercial establishment under the Factories Act, 1948. It is advised to consult a good business consultant in India to know about the applicability of shop and establishment registration on your business.

Benefits of the Shop & Establishment Registration

1. Legal Entity Proof – Every shop or business required to prove its legal entity of proprietorship firm and partnership firm. The legal entity proof also gives the right to do the business in a particular area or state for the same.

2. Business Bank Account –Every bank required an entity proof in order to open a current bank account. Every shop & Establishment has to open a separate bank account to maintain the daily transactions according to the RBI Compliance. On the basis of a shop certificate, one can easily open a current bank account for the business transaction.

3. Smooth inspections – The State government and local municipality conduct regular inspection visits for checking the proper working of shop and establishment along with a license. If one has the Shop Act license, then they can quickly get over with the inspections.

4. Government Benefits – Each state has the DIC Department that creates a policy in the respective state for all the running small businesses. On the basis of a Shop License Registration Certificate, one can easily avail of the government benefits.

Registration procedure under the Shop and Establishment Act

The Shop and Establishment Act registration regulates the working hours, payment of wages, holidays and leaves, terms of service, and other conditions of workers employed in shops, commercial establishments, establishments for public entertainment and amusement, and any other establishments to provide for certain matters connected therewith. Therefore, registration is compulsory for every business place of work except those businesses which fall under the Factories Act, 1948. This is a state regulation, and each state has a separate shop & establishment regulation.     

The process of obtaining shop and establishment registration is similar in almost all the states; however, certain requisites may differ. A business advisor in India can help in understanding the requirements for obtaining the shop and establishment registration license in the State where you are conducting your business. The certificate for shop and establishment registration can be obtained by filing an application with the Chief Inspector of Shops and Establishment Act, or from other inspectors delegated to the area where the business is established. The application must be filed in the format prescribed under the state law, along with the requisite documents. Once the application is received, the inspector performs a verification process to check the details, makes a visit to the establishment, and provides a registration certificate to the business. The shop and establishment registration certificate must be displayed in a prominent place in the place of business.

Documents Required for Shop & Establishment Registration

The shop and establishment Act registration is a compulsory requirement of all businesses which operate from a commercial establishment or shop in India. Obtaining the shop and establishment registration gives the legal status of the business and verifies that the business is following all the regulations set under the Act relating to the employment of individuals in the business.

  • Photograph of the Shop or Establishment with the Name Board in local language
  • Certificate of Incorporation, MOA and AOA of Company or LLP Agreement of a Company or LLP
  • Copy of the PAN card
  • List of the Directors or Partners and their ID & Address proof
  • Copy of Board Resolution or Partners Consent
  • Address proof of Company/LLP/Partnership/Proprietorship
  • Details of all the employees, if any.

Shop and Establishment Act Licence

Any commercial establishment or shop shall apply to Chief Inspector for the Shops and Establishment Act License within the prescribed time period that is 30 days from the commencement of operations or business. The application form for obtaining the license must contain all the mentioned particulars: Name of an employer, name and address of an establishment, the category of establishment, number of employees, rental agreement or sale deed, details of all the employees, PAN card of the business owner/business itself and other relevant details. The Chief Inspector thereafter verifies the application, and if approved, he issues a registration certificate to the applicant (occupier). The certificate must prominently display at the shop or establishment for the customer satisfaction. The license has to be renewed periodically as per the provisions of the Shop and Establishment Act. The registration fee is based on the number of employees hired by the shop or establishment.

For any shop or commercial establishment going to shut down or stop business, the occupier must notify the Chief Inspector within 15 days of closing (in writing). The inspector then reviews the request for closure, followed by cancelling the registration certificate and removal of the same from the register.

Amendment in Shop & Establishment Registration

The amendment made to the Shop and Establishment registration has to be intimated to the concerned officer within the prescribed time. In case of the closure of an establishment, the employer is required to intimate the respective officer and also apply to surrender the registration. The officer, after being satisfied with the correctness of the application, will pass an order for cancelation of the existing registration and then issue a fresh Registration Certificate.                          

Records maintained under Shop & Establishment Registration

Under the Shop and Establishment Act, the business has to seek approval from the Department of Labour and maintain up-to-date registers regarding details of the employment, deductions, fines and advances, salary, and leaves. The requirements can vary from state to state. Files regarding the annual holidays and number of employees must be submitted to the office of the Municipal Corporation annually; further, no Regular return needs to be filed under this Act.            

Conclusion

The Shop and Establishment Act has applicability nationwide, and all commercial establishments like hotels, and eateries, amusement parks, theatres, and other entertainment houses, as well as any other such public amusement places, come under the purview of the Act. This registration is mandatory for several reasons, including the opening of the current account in a bank. This Shop and Establishment Act license is a basic license that is proof for the business activities and is required to run a business in India.  

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Soumya Bajpai

Soumya has done LLB (Hons) and has a 2+years experience in writing. Her main interest is in reading judgments, new enactments and amendments taking around in law. She always strives to bring the best to work that she does.

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