Introduction to Trade License
Trade License has been made necessary by the government to carry out any particular business or trade in a particular area and also to ensure that no one is carrying out any unethical business practices. This license creates a harmony in the society that every business is following relevant rules, guidelines and obeying the safety measures. This is an obligatory license obtained by the trade by which government can regulate various trade activities in the country.
A trade license is a permission granted to carry on a specific trade and therefore any unauthorized running of trade is an offence which may result in a substantial penalty and subsequent prosecution. The business owners must apply for trade license if required in particular area without any delay. An application must be made before the commencement of the activity. However, some state governments allow 15-3 months time to seek a trade license.
What is Trade License?
Trade License is the legal document issued by the local municipality which gives authorization to a person, or any party, to commence business operations. It is granted only if the business follows all the rules and regulations laid down by the corporation, and safety authorities, of the respective state in which the business is located.
A Trade license is important and requires mandatory registration for every business person to conduct a business. The state government with the task of issuing trade license, grants permission to carry the trade with safety and precautionary measures.
In perspective of this, it is essential for any business establishment to take primary licenses from the License Department before beginning manufacturing, exchange or storage of any activity. The application has to be filed with the Commissioner in the municipal corporation 30 days before the start of business. While filing, the business has to submit all the mandatory documents.
Why Trade License is required?
- The main aim to acquire trade license in India is to control business thriving in the market.
- Trade license is a way to regulate and check the business activities so that no harm or health hazard is caused nor there is any nuisance in the area of the business or locality.
- Trade license proves that the business activities are carried out in the government vigilance.
- It also provides assurance to the people and authorities that proper rules and regulations, and extra care and protection are followed while carrying out the business.
- It is required to control the locations by restricting the people from executing certain types of businesses from their home location and to maintain the business environment and locality environment.
- The standard guidelines must be followed and it is also important not to use any unethical or hazardous substance or materials which can cause problems to other humans.
Who Regulates Trade License?
The state governments regulate the trade license in the state with the support of the Municipal Corporations of the area. In some states, it is mandatory to obtain while it is optional in other states. The fees prescribed for the online trade license also varies from one state to another. In some states, it is charged as the annual fees while in others, it is calculated and charged on the basis of percentage of business turnover. Some states have exempted certain departments from getting a license, e.g. MSME in Delhi.
Eligibility criteria for Trade License
The Government has prescribed certain minimum requirements for obtaining online trade license in various states and cities. Some of the general conditions are as follows:
The applicant must have attained the age of 18 yrs
The applicant must not have any criminal records
Business must be legally permissible
Different Types of Trade License
The different types of Trade License are shown below;
Food Establisment License
- For Hotels, Canteens , Food Stall seller, Grocery shops
- For Factories, Power Looms, Flour MIlls, Other manufacturing units
- For Barber shops, Dry Cleaners shops, Crackers and candle shops, Building Material shops
Process for Obtaining Trade License
Applicant can file an application for licensing in the respective Municipal Corporation
Thereafter, visit to website of state Municipal Corporation and click on to Citizen Services option
Click on to apply for Online Licenses, here the applicant can register and fill up the credentials including all personal details
Once the applicant submits the details, a Registered User ID and Password is generated
Login with the ID and Password to Apply for New License
All credentials mentioned in the form has to be filled up such as Type of business, NOC, Property tax details
Once it is filled, click on to submit button and upload the required documents
The Application and Documents are then verified by the Urban Local Bodies officials
Following the verification, an automatic Unique Application Number is generated
The page will redirect to payment window. The prescribed fees has to be payed by clicking on to Make payment
The license number is issued
Documents required for Trade License
- Address Proof
- Identity Proof
- Certificate of Incorporation, AOA and MOA of the company
- Cancelled Cheque and Bank Statement
- Inome Tax return and Property Tax Receipt
- Documentary proof of establishment of trade
- Legal Occupancy document proof of the establishment or unit or allotment letter provided by the government agency
- Lease Deed of the premises
- No Objection Certificate/ NOC from the land-owning agency
- Documentary proof for the non-existence of unauthorized construction
- Documents required for the renewal of a trade license
- PAN for the entity
Validity for Trade License
The trade license remains valid for the period of one year and after it is renewed from time to time to carry on trade.
Trade License Renewal in India
The license must be renewed on the annual basis after applying for the application renewal. The renewal application is submitted within 30 days from the date of expiry of the license. The delay in fling of the application can cause the payment of late fees which is 50% of the license fees. The documents required for the renewal of the trade license are:
- Original copy of Trade License
- Address and Identity proof
- Previous year Challan
- Old G-8 receipt
- Property tax receipt
How is trade License is different From the Company Registration
The basic difference between Trade License and Company Registrations is as follows:
Basis of Difference
It is required to start a new entity for carrying a business.
It is required by the existing entity to carry the business activity.
The shareholders and Directors shall not be minor. The objectives and goals of the business are set by them; however, to start the business activity, a company requires registration.
The applicant must have attained 18 yrs of age and should have no criminal record. The business must have the object to carry that activity for which the trade license is acquired.
It is to be registered with ROC (Registrar of Companies).
It is obtained from state Municipal Corporation.
Following are the types of Company i.e. Private Limited, Public Limited, One Person Company.
Following are the types of Trade License such as Shop License, Industrial License, Drug License etc.
It is valid for the lifetime.
It requires renewal after a prescribed time.