How to Start a TRADE LICENSE

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Overview of Trade License

A Trade License is a legal authorization that allows an entity to operate a specific trade or business in a designated area. This license ensures that the business does not harm public health and follows safety guidelines, standards, and relevant laws. A Trade License is issued only when the applicant adheres to the required regulations. Non-compliance with these rules can lead to heavy penalties, making it mandatory for every business owner to obtain this license promptly.

In today's business landscape, acquiring a Trade License is a necessity to start any business in a given location. This license is issued either by the State Government or the local Municipal Corporation. It serves as official permission for the business to conduct its operations. However, it does not grant any rights beyond the specified scope of business activities. The application for this license must be submitted to the Municipal Corporation with the required documents at least 30 days before beginning business operations. Regardless of the nature of the business, obtaining a Trade License is a legal requirement. The authority to issue and manage the license lies with the State Governments, supported by the respective Municipal Corporations.

Why is a Trade License Necessary in India?

Here are the key reasons why a Trade License is essential:

  • Regulation of Business: The primary purpose of obtaining a Trade License is to regulate businesses in the market.
  • Ensuring Public Safety: It helps the government monitor business activities to ensure they do not harm the health and safety of citizens.
  • Government Oversight: The license allows the government to keep track of business activities within its jurisdiction.
  • Ensuring Compliance: It ensures that businesses comply with all relevant laws and regulations.
  • Restricting Unauthorized Activities: A Trade License prevents businesses from conducting certain activities at home or in non-designated areas, maintaining order in both residential and business environments.

Categories of Trade Licenses

Trade Licenses are classified into three categories:

  1. Industrial License: This is required for businesses involved in manufacturing, regardless of size (small, medium, or large-scale industries).
  2. Shop License: Required for businesses running retail shops. It also applies to businesses involved in hazardous activities, such as firewood shops, cracker manufacturers, etc.
  3. Food and Establishment License: This license is necessary for businesses in the food industry, such as hotels, restaurants, food stalls, and canteens.

Key Points to Consider for Obtaining a Trade License

When applying for a Trade License in India, consider the following points:

  • The license is granted by the Municipal Authority of the area where the business is registered.
  • The license is specific to the activities for which it is issued.
  • The rules, regulations, fees, and procedures vary between states.
  • A business with a Trade License tends to have better goodwill, a stronger brand image, and a competitive advantage over businesses without one.
  • Having a Trade License demonstrates that the business is operating legally and in compliance with regulations.

Eligibility Criteria for Trade License

To obtain an online Trade License, the following criteria set by the Government must be met:

  • The applicant must be at least 18 years old.
  • The applicant must have no criminal history.
  • The application must be made in accordance with the regulations of the Municipal Corporation, based on the state-specific requirements.
  • The business must be legally recognized.

Who Can Apply for a Trade License in India?

The following business entities are required to obtain a Trade License from the respective Municipal Corporation before commencing their operations:

  • Local Commercial Businesses
  • Commercial Shopping Complexes (CSC)
  • Commercial Areas
  • Community Centres
  • Pedestrian Shopping Streets
  • Metropolitan City Centres
  • Local Shopping Complexes (LSC)
  • Mixed Land Use (MLU) Areas
  • District Centres
  • Service Centres or Service Markets

Documents Required for Trade License in India

The following documents are necessary to obtain a Trade License in India:

  • Completed application form in the prescribed format.
  • Proof of business address.
  • Identity proof of the applicant.
  • For a company, a copy of the Memorandum of Association (MOA), Articles of Association (AOA), and Certificate of Incorporation.
  • For an LLP, a copy of the LLP agreement.
  • For a proprietorship, the PAN of the individual, or PAN of the company.
  • For a partnership firm, a copy of the Partnership Deed.
  • PAN card of the company.
  • For individual applicants, the Aadhar card and PAN are required.
  • No Objection Certificate (NOC) from the immediate neighbor of the business premises.
  • Latest municipal property tax receipt if the premises are owned, or lease agreement/consent letter from the property owner if rented.
  • Certified layout plan of the office or premises.
 
 
 
 

Procedure for Obtaining a Trade License

The process to obtain an online Trade License is as follows:

  1. Registration: First, the applicant must register by providing necessary details such as full name, email ID, mobile number, and address. Upon registration, login credentials are provided.

  2. Filling the Application: Once you have your login credentials, sign in and correctly fill out the application form.

  3. Documentation: After completing the application, the applicant must gather and submit all required documents. All documents must be signed by the concerned authority.

  4. Verification: After submission, the Urban Local Bodies Officials verify the documents and application. Upon successful verification, a unique application number is generated.

  5. Payment of Fees: Once verification is complete, the applicant must make the necessary payment of the prescribed fees.

  6. Issuance of License Number: After the completion of all steps, the Trade License Number is issued. The license is valid for one year and must be renewed annually.

Important Note: The licensing process may include an on-site inspection. In such cases, an official from the concerned authority inspects the business premises to ensure compliance with regulations.

Fee for Obtaining Online Trade License

The fee for obtaining an online Trade License varies from state to state, depending on the local rules and regulations. In some states, the fee is charged annually, while in others, it may be based on a percentage of the business's annual turnover. Some states, like Delhi, exempt certain departments (e.g., MSME) from needing a Trade License.

How to Renew a Trade License in India

Trade licenses must be renewed annually. The renewal application should be submitted between January 1st and March 31st each year. It is advised to apply for renewal at least 30 days before the license expiry date to avoid late fees. Any delay in renewal may result in a late fee, which is typically 50% of the prescribed license fee.

Documents Required for License Renewal:

  • Original copy of the Trade License
  • Address and identity proof
  • Copy of last year's challan
  • Old G-8 receipt
  • Property tax receipt

Documents for Duplicate Trade License:

  • FIR (First Information Report)
  • Indemnity bond in the prescribed format

Difference Between a Trade License and Company Registration

Basis of Difference Company Registration Trade License
Purpose Required to establish a new business entity. Required for any existing business entity to conduct business activities.
Eligibility Shareholders and directors must be of legal age and define business objectives. Business must be legal, and the applicant must be 18+ years old with no criminal records.
Registration Authority Registered with the Registrar of Companies (ROC). Obtained by applying to the respective municipal corporation.
Types Private Limited, Public Limited, One Person Company, etc. Shop License, Industrial License, Food & Establishment License, etc.
Validity Valid for a lifetime. Needs to be renewed after a specific period.