Trade License

Trade License in India: Overview, Eligibility and Documents required

Trade license is a must for every business entity that seeks to generate profit through its operation. If you are looking to start a new business and wondering about essential licenses, then trade license is one of the critical documents that you must possess to start a business or a trade. In this article, we shall discuss about eligibility, documents required etc., for trade license in India.

Meaning of Trade License

It is a document/certificate that allows a person to commence a particular trade or a business in a specific location or area. It ensures that the business or trade is done by fulfilling all the standards of safety as prescribed by the State Municipal Corporation^[1]. It protects residents from being affected by any health issues.

It is worth mentioning here that this license doesn’t permit the license holder to carry out any other business or trade other than for what it is issued. Moreover, the license also doesn’t pass on any kind of ownership of the property to the license holder.

What is the significance of Trade License in India?

In the last few years, trade license has been introduced and regulated through municipal corporation acts by the state governments. It helps in making sure that public is not severally affected by the nuisance and health hazard of any trade or business.

This license is made mandatory by the government to carry out any business or trade in a particular area and to make sure that no one carries out any unethical business practices. Hence trade license in India is highly significant.

Further, this license also creates a sense of harmony in the society, considering that every business follows relevant rules and guidelines and obeys the safety protocols. This license was made obligatory in order to ensure that the government can regulate different trade activities in the country.

Authority to issue license

The trade license is issued by licensing department of municipal corporation in different departments such as engineering, health, industries etc. The Indian government authorizes the license in a way to regulate in cities across country.

It gives permission through letters or documents or certificates to carry out business or trade where it’s located. The issuance of this license differs from state to state, depending on the local government agencies rules and regulations.

Trade License in India: Eligibility required

The eligibility conditions for applying this license are as follows:

• The applicant must be more than 18 years of age;
• The applicant shouldn’t have any criminal records;
• The business so desired by the applicant should be legally permissible.

What are the different categories of trade license?

Different categories of this license include the following:

• Industries license– Small, Medium and Large Scale manufacturing factories;
•  Shop license– For trades like sale of firewood, cracker manufacturing, candle manufacturing etc.;
• Food establishment license– For restaurants, hotels, canteen, food stalls, sale of meat and vegetables, bakeries etc.

Documents required for Trade license

The following documents are required:

• Address proof of the business;
• Applicant’s ID proof;
• Aadhaar Card;
• PAN of the individual in case of a proprietorship otherwise PAN of the firm;
• MOA in case of companies;
• Incorporation certification in case of companies;
• Certified layout plan of the office;
• NOC from neighbours;
• In case the premises is owned, latest municipal property tax receipt else lease document or consent letter from of the property’s owner where the business is registered.

Renewal of the Trade License

Trade licenses are valid for 1 year, and it can be further raised by going through the renewal process online. The applicant desiring a renewal should submit an application for renewal within 30 days of the expiry.

The following documents are required in case of renewal:

• Scanned copy of the trade license;
• Challans of previous year;
• Recent tax receipt of the property.

Points to be noted about Trade License

Some essential points should be noted:

• This license is granted by the municipal authority of the area where the said business is registered;
• It can only be used for activities for which it is issued exclusively;
• The rules, standard, time-limit, procedure and the fee structure of a trade license may differ from state to state;
• The business having this license will have better goodwill, brand image and competitive advantage comparatively than the business without this license;
•  The business or trade possessing such license signifies the fact that the business activity being carried out by them is of legal nature.

Difference between Trade Registration and Company Registration

There are certain key differences between these two.

Parameter	Trade License	Company Registration
Structure	It is required by an existing entity to perform business activity.	It is required to start a new business entity.
Eligibility	The applicant must be more than 18 years of age; The applicant shouldn’t have any criminal records; The business so desired by the applicant should be legally permissible.	Directors should not be minor; The company should be registered with a minimum requirement of capital.
Registration	This license is obtained by applying to the respective state municipal corporation.	It should be registered with Registrar of Companies.
Types	Shop License; Industrial License; Food Establishment License.	Private limited; Public Limited; One Person Company.
Validity	Valid for one year; can be renewed afterwards.	Valid for lifetime

Conclusion

Trade license in India can be easily availed online. It is a must for businesses to commence a particular trade or a business in a specific location or area. Therefore apply for trade license today.

Read our article: Why Having a Trade License is Important?