What is the Difference between Trade License and Shop and Establishment License?

Difference between Trade License and Shop and Establishment License
Dashmeet Kaur
| Updated: Dec 07, 2019 | Category: Business

India is a hub of millions of Shops and Establishments. Anyone who wants to commence a particular business or open a shop must obtain a trade license or Shop and Establishment license, respectively. Many a time, people get confused about the procedure and purpose of such permits. Therefore, this blog will clarify all your doubts and bring out the differences between Trade license and Shop & Establishment license. Thereby, you can choose the right license that fits well to your business needs.

What is the Shop and Establishment License?

Shop and Establishment is a Government approved license which grants permission to traders for doing business or running a shop. It got regulated by the Indian Labor Law to protect the interest of the employees under the unorganized sector. As per the Shop and Establishment Act, the owner of a shop must make these declarations:

  • Total working hours of the shop
  • Opening & closing hours of the shop
  • Employee breaks
  • National holidays
  • Health and safety measures (like Sanitation and cleanliness, Firefighting and Accidental remedies)
  • Wages paid for overtime
  •  Leave policy

The Profit or Non-profit organizations like Societies, Educational Institutions, Charitable Trusts or any other commercial establishments catering the services of banking has to procure the license of Shop & Establishment license.  

The Shop and Establishment Act clearly defines both the terms of shop and establishments. Let’s have a look at them one by one.

Shop– According to the Act, Shop is a place that sells goods or services to the customer. It can also include offices, storerooms, warehouses or go downs.

Establishment– An Establishment engulfs all residential hotels, restaurants, theatres, commercial establishments, and other amusement for public entertainment.

Procedure to obtain Shop and Establishment License

Follow these simple steps to get the Shop & Establishment License:

  • Firstly, an entrepreneur who wishes to start operations of his shop or establishment must enroll to the Chief Inspector for the license within 30 days of commencement.
  • The application should entail every important detail such as the name of the employer and employees, type of establishment, number of employees and other relevant information as prescribed in the Act.
  • After the Chief Inspector completes the verification and authentication process, he will then issue a Registration Certificate to the applicant.
  • Thereafter, the owner can display the Registration Certificate in his shop or establishment. Moreover, he has to renew the license in periodical terms.  

This entire procedure takes about 7 to 10 working days. In case, the owner desires to make some changes in the information; then, he should communicate the Inspector within 15 days. Thereby, he will get issued a new Registration Certificate for his shop or Establishment.

Advantages of Shop & Establishment Registration

A shop owner can avail an array of benefits from Shop and Establishment license:

  • Proof of Being a Legal Entity– Every business or shop should possess evidence of being a legal entity such as a partnership firm or proprietorship firm. It gives authority to the owner to do business in his region.
  • Seamless Inspection– Local Municipality and State Government conduct regular inspection to check the functions of a shop or establishment. So it’s better to have a license to get over the inspection quickly.
  • Business Bank Account- Every bank demands a legal entity proof to open a current bank account. Therefore, the RBI Compliance[1] has made it mandatory for each shop and Establishment to open a separate bank account for day to day transactions. If you hold a certified shop, then you can smoothly open a current business bank account.
  • Government Perks- Each state has a DIC Department which forms strict policies for all the small businesses. However, if you have a Registration Certificate then, you can easily access to the government benefits.

Key differences between the Trade License and Shop & Establishment License:

The Trade license is poles apart from Shop and Establishment license. Have a look at the difference amidst them:

  • One can obtain a Shop & Establishment on residential premises, whereas the Trade license only applies to commercial entities.
  • An individual who strives to commence any shop or business needs to get his business registered with the Local Government. On the other hand, the Trade license is permitted to a person who carries out a particular business.
  • Further, the rules and regulations for a Trade license are strict wherein, one has to ensure that the company does not perform any unethical practices. While no such laws apply to shops.
  • Establishments such as canteen, hotels, restaurants, manufacturing industries, cyber cafés, food stalls, etc., requires Trade license. Besides, the Shop and Establishment license pertains to all the shops and commercial establishments that offer different services to the customers.
  • Shop & Establishment Act governs the rights of workers and the working conditions of the unorganized sector. It includes wages, leaves, work hours, but no such commandments are there under the Trade license.
  • The time duration to obtain a Trade License is 30 days from commencement of the business. If any individual breach the legal specifications of a permit or cause any nuisance, then the license can get cancelled or revoked.


Whether setting a small-scale shop or commencing a large-scale organization, every business commands to have a license. The Shop & Establishment license protects the workers and employees’ from any kind of mishap. The Act solely aims to safeguard the interest of the working of shops or Establishment as it strictly outlines every aspect from working hours to wage rates.

Now that you have perceived enough knowledge about the registration of shop, you must be eager to get one. However, the procedure of licensing is complex, and you must consult a professional before applying it directly. The best legal advisory for you would be Swarit Advisors. Our experts ease the process of registration for shop and Establishment. We can transform your dream project into reality so contact us today.

Also, Read: Shop and Establishment License in India: A Complete Overview


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