Trade License

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What is Trade License?

If you plan to establish a business of your own and you have no idea where to start and what approval is needed, then the first thing you need to look is that –whether you want to deal in goods or services and secondly- what will be your place of business. After being clear about the above mentioned points, the next thing on your to-do list is getting a trade license.

By the way of trade licenses, the government regulates any specific business in a specific locality. The Municipal Corporation of the place grants permission or license to carry on a particular trade in a particular locality. The trade license ensures adherence to relevant rules, standards and safety guidelines prevailing in the land.

Why it is different from Company Registration?

The registration of the business is important for giving it a legal identity of its own. It depends upon the promoter to decide upon the type of entity he wants to establish depending upon his business scale. However, it is mandatory for every entrepreneur to obtain the trade license before the commencement of any business activity. If any person is found conducting the business activity without obtaining the trade license, the business will be considered as illegal and heavy penalty may be levied upon the owner.

When should Trade License be acquired?

Every business entity planning to start its business operations shall be required to obtain the trade license within 15 days of the commencement of any activities. The activity consists of manufacture, exchange or even storage of any commodity. In some states it is mandatory to apply for the trade license 3 months prior to the commencement of any business activity.

Regulator of Trade License

Generally, the state governments regulate the trade licenses in the state with the help of Municipal Corporations of the area. In some states, it is mandatory while it is optional in other states. The fees prescribed for the trade licenses also varies from one state to another. The manner of collection of the fees for trade license is also different. In some cities it is charged as the annual fees while in the other, it is calculated and charged on the basis of percentage of business turnover. Some states have exempted certain departments from getting a trade license, eg. MSME in Delhi.

Minimum Requirements for getting a trade license

The Government has prescribed certain minimum requirements for obtaining a trade license in various states and cities. Some of the general conditions are as follow:

  • The individual applying for trade license must be atleast 18 years of age.
  • The activities in which the business is going to get engaged shall be legal.
  • The applicant shall be of clean image and shall be free from any criminal background.
Categories of Trade License
Type A Category

these licenses are issued for the business activities related to consumable items and eating hubs.

Type B Category

these licenses are issued for such trades which makes use of locomotive power in order to function, such as industries, workshops, flour mills etc.

Type C Category

these licenses are issued for trade involving dangerous activities such as firewood, charcoal etc.

Documents Required
From Trade License
  • Utility Bill of the premises in which the business is going to be carried on.
  • Rent Agreement, in case the premises is on rent/lease.
  • Fire Department NOC.
  • Municipal Tax Receipts.
  • Registration Certificate under Shop and Establishment Act or Infrastructure development department etc.
  • In case the premises is managed by any person other than the owner, then the photograph, ID proof and address proof of such manager.
  • ID proof of the applicant.
  • PAN card of the company, in case the applicant is a company.
  • Copies of blueprint of the premise.

Renewal of Trade License

Trade License is not a one-time license. It shall be renewed on periodical basis. The requirement of payment of annual fees for the continuity of the license is also mandatory in some states and cities.The trade license renewal is done from 1st January to 31st March of every year. The application for renewal shall be made atleast 30 days before the commencement of the year for which application is sought for. A fine of 50% of the license fees is levied in case of any delay in the renewal process. The following are the documents which are to be submitted with the application for renewal

  • Copy of the Original License.
  • Challans of the fees paid in the previous years.
  • Tax Payment Receipt.

Appeal for denial of application

In case your application for Trade License is denied on any grounds, then, you can file a petition to Standing Committee (Health) with a copy of letter of denial to consider the matter.

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