What is a Trade License?
A trade license is simply a license or a certificate required for a business or individual to carry out operations. Usually, this license is provided by the respective state government for a particular municipal limit. This license will allow the applicant to open a business in a particular region. The applicant will have to ensure that the business is carried out as per the requirements of the license.
This license doesn't allow the applicant to run any other business than the one which it is issued for. Apart from this, the license does not allow the individual to secure the property or any form of legal entitlement of the property where the business is carried on.
Why is a trade license required to be taken?
Going back to 40 years, the government brought out regulations for carrying out particular businesses. Hence this form of license is only used by a business to carry out a specific activity. These licenses would only be issued by the government to the individual to carry out particular activities within a defined locality.
The government of a particular municipality or a state would issue these licenses for businesses to carry out their activities. Securing a trade license is mandatory for a specific individual.
This license is an essential and compulsory document issued by a particular municipality. Businesses are permitted to carry out specific activities in a particular area.
These licenses are also provided to check on the business to see if they act according to the requirements of the law.
What are the main objectives of a trade license?
The government issues such as license to fulfil the requirements of the business. Apart from this, the trade license is issued for the following reasons:
- To regulate businesses within a particular locality or municipality.
- Ensure that anti-competitive practices are not followed within a particular locality or municipality.
- To monitor the activities of a business. Apart from this, local authorities can keep a constant check on the activities conducted by a business.
- Issuing such a license would indicate that a business is following compliance with respect to the government.
- A local authority can check if the business is breaching any law or causing any nuisance in the society through this license.
- Businesses with such license are more reputed in the eyes of consumers. Consumers would have more confidence in their services.
- By securing a license, businesses would not use their residential premises to conduct any business. Hence, this form of regulation ensures that businesses are regulated.
- This form of license also regulates the use of environment-friendly substances to conduct activities within a particular locality. Hazardous and other chemical substances are not allowed when it comes to residential and municipal limits.
- Businesses having this form of license would take the necessary precautions while carrying out a particular activity. Businesses having this license would also follow the guidelines issued by the municipal or state government from time to time.
Types of Business that Require a Trade License
Food business will include any establishment which deals with food. This will also include an establishment that caters food and serves food. The following businesses would require trade licenses to operate:
- Hotels, Restaurants, Canteens
- Malls, Theaters and Clubs
- Bakeries, Confectionery Shops and Snack Shops
- Dairy needs store, Retailers, and any other premises which serve food
Trade and Other Related Services Business
Any trade or profession which includes services for individuals would also require securing a specific form of license. The following trades require to secure this license:
- Barber Shops and Salons
- Cyber Cafes and Internet Parlors
- Small Manufacturing Units
- Medium Manufacturing Units
- Small Scale Industries
Any form of industries which is involved in manufacturing products would also require this license. The following industries would require this license:
- Medium Based Manufacturing Industries
- Large Manufacturing Units and Industries
Classification of Trade Licenses
Based on the amount of risk posed by the business, licenses are classified into the following:
Low Risk Based License
This form of license would involve any form of business that does not have a high risk. Usually, restaurants and other forms of eateries consider this license.
Medium Risk Based License
This type of license would be usually issued to establishments such as small scale industries and medium-sized industries.
High Risk Based License
This type of license is usually issued to industries and large scale establishments. Usually, this form of establishments would have higher risk of dealing with different form of materials and substances. Normally, on these premises, the standards of monitoring would be higher when compared to low and medium risk license.
Main Regulatory Authority or Body for Trade License
As mentioned earlier, this form of license is regulated by the particular state authority or the municipal body. Hence an applicant will have to make an application to the relevant authority of a particular state to secure the trade license.
Only government and municipal bodies are regulated to issue this form of license. For example, if an applicant has to make a trade license application for starting a restaurant business in Bangalore, then the applicant would have to make an application to the Bruhat Bangalore Mahanagara Palike (BBMP). This application would have to be made online.
Hence depending on where the applicant wants to start the business, an application has to be made accordingly. Trade License application can be made across more than 28 states in India and Union Territories.
Eligibility Criteria for Trade License Application
To be eligible to apply for the above license, the applicant has to ensure the following criteria are satisfied:
- The applicant or individual must be a major. This means the applicant must be more than 18 years of age.
- The applicant should not have a form of convictions or criminal records.
- The business of the applicant must not be against any provisions of law in force.
Procedure for applying for a Trade License
Depending on where the applicant is located, the following requirements have to be complied with:
- The applicant has to either apply online or offline for the trade license certification. For the online method, the applicant has to make an application and attach the prescribed documents. For the offline method (in-person) the applicant has to take all the documents to the relevant authority. With this, the applicant has to fill in the application form with the respective details for the license.
- As per the requirement of the applicant, different states would have different processes to make an application for the license. However, the government has brought out initiatives to make systems in every state electronic.
- The applicant has to go to the prescribed webpage to file the online trade license.
- After this, the applicant will get a pop-up notification related to the terms and conditions which have to be adhered for the trade license.
- The applicant has to click on the accept button for the terms and conditions.
- Next step in the process would include the applicant to fill in necessary information and details regarding the trade license.
- The online system for license registration has a specific mode where authentication of documents can be carried out electronically. The applicant has to perform these and submit relevant documents.
- Once this process is carried out, the applicant will get a confirmation for successful registration of the trade license.
- The applicant will get the confirmation regarding the same, and the applicant will receive the license within eight to eleven working days.
- Usually, the process of receiving the trade license is faster in Metropolitan Cities when compared to rural areas.
Breach or Penalties for not taking License
There are severe consequences if the applicant does not take the license:
- Once a trade license is taken by the applicant, he/ she has to ensure that compliance is followed and maintained by the applicant.
- In case the applicant does not secure the trade license, then there are different consequences which can be imposed by the relevant authorities.
- If the business is started, its operations without relevant licenses, then a penalty or fee would have to be paid.
- The defaulter can also be prosecuted if non-compliance is continued.
Renewal of Trade License
The license can be renewed subject to the following conditions:
- Usually, these licenses are renewed between 1st January to 31st March of the respective financial year.
- This license is valid for 1 year.
- The applicant has to make an application for the trade license in India.
- The application can be made thirty days before the expiry of the certificate.
- When the certificate is renewed, documents have to be submitted to the respective authority.
- Application for the License.
- If the applicant is a corporate entity, then PAN card along with the respective company formation documents must be submitted.
- For an individual applicant, documents such as Aadhaar Card is compulsory.
- Property Tax Documents for the Property.
- Lease agreement should be provided. Copies of the lease agreement.
- Any form of Khata Extracts and Certificates.
- Occupancy Documents.
- No Objection Certificate from Neighbor in Case the business is located in a residential area.
- Sanction Documents.
How can Enterslice help in securing Trade License?
- We file the application form on your behalf to get the Trade License.
- We monitor and track the status of the application on behalf of the client.
- We value your time and money.