Overview of Trade License
Nowadays, every business must obtain a Trade License for commencing its business operations. Trade license is issued either by the State Government or by respective Municipal Corporation. It acts as permission for the business to carry out its functions and business activities. However, this license does not confer any other right on the applicant than the one specified.
It shall be noteworthy to take into consideration that the Municipal Corporation issues a trade license only after consulting with the departments like Estate, Engineering, Health, and any other of the same type.
The applicant is required to obtain a Trade License by applying for the same to the Municipal Corporation. The said application is required to be submitted along with the necessary documents thirty days before starting the business. Moreover, every business regardless of the business activity is required to obtain a trade license.
What is a Trade License?
A Trade License is a certificate or a document by way of which an entity is allowed to start a trade or business in a particular area. By way of Trade License, the respective State Government regulates and administers the business operations of a particular entity.
Moreover, this license regulates and makes sure there is no harm caused to the health or the living of the citizens, by way of the activities carried out through trade. A Trade License is issued only after the due abidance of safety guidelines, standards, and pertinent laws.
The Business entities who are not complying with the prescribed rules of the trade license will be liable to face a heavy penalty. Thus, it is obligatory and compulsory for every business owner to obtain a trade license without any subsequent delay.
What are the Eligibility Criteria for Trade License?
The following listed are some of the requirements prescribed by the Government for obtaining online trade license:
- The applicant must have attained the age of 18 years.
- The applicant must not be having any previous criminal records.
- The Business concerned must be of legal nature.
Why is there a need to obtain Trade License?
The listed below are the reasons as to why one must obtain a Trade License:
- The main aim behind acquiring a trade license in India is to control and regulate the businesses flourishing in the market.
- By way of a Trade license, the state government in a way can check and regulate the business activities. The same is done to make sure that none of the business activities will cause any harm or injury to the citizens living in that particular area
- A Trade License helps the government to keep an eye on all the business activities.
- Moreover, a trade license also acts as an assurance to both people and authorities that all the rules and regulations are duly complied with.
- This license is needed to restrict people from carrying out certain business activities from their home location. The same is done to maintain both the locality and the business environment.
Who has the Authority to Regulate Trade License?
The State Governments have the ultimate authority to regulate and administer the Trade License issued to a business. The same is done with the assistance of the Municipal Corporation of that respective area.
What are the Different Categories of Trade License?
The term trade license has been further bifurcated into three parts:
- Industrial License
This specific license is applied by those businesses which are engaged in the field of manufacturing industries irrespective of its size, i.e., small, medium, and large size.
- Shop License
Shop License is required by the businesses willing to start a retail shop. Moreover, the businesses engaged in carrying out dangerous and hazardous activities like the cracker manufacturer, firewood shop, candle manufacturer, etc. are also required to obtain Shop License.
- Food and Establishment License
This type of Trade License is needed by the businesses involved in food businesses like hotels, restaurants, food stalls canteen, etc.
What are the Points to be considered for obtaining Trade License?
The points that are to be considered while obtaining a Trade License in India are mentioned below:
- Trade license is granted by the Municipal Authority of the area in which the said business is registered.
- A Trade License can only be used for the activities for which it is exclusively issued.
- The rules, regulation, standard, time-limit, procedure, and the fee structure concerning a trade license varies from one state to another state.
- The business which is having a trade license will have comparatively Better Goodwill, Brand Image, and Competitive Advantage than the business with no trade license.
- The Business having such a license denotes that it is carrying out the business activity of legal nature.
What are the Documents needed for Trade License in India?
The set of documents needed for obtaining Trade License in India is enumerated below:
- Application Form according to the prescribed format.
- In the case where the applicant is a Company, then a copy of the Memorandum of Association (MOA) and Article of Association (AOA) and Certificate of Incorporation is required.
- In case where the applicant is an LLP, then a copy of the LLP agreement is required.
- In case the applicant is a Partnership Firm, then a copy of Partnership Deed is required.
- PAN Card details of the company.
- An individual applicant must submit their Aadhar and PAN.
- A No-objection Certificate (NOC)is required from the immediate neighbour of the place being used for carrying out the business or trade.
- Evidence of the latest Municipality tax paid like a receipt, tax invoice, etc.
- Katha Certificate and extracts.
- Plan Layout of the Sanctioned Plan.
- A cancelled cheque.
- A copy of the Bank Statement.
- Documentary proof of the place of trade.
- A copy of the Property Tax Receipt and Income Tax Return (ITR).
What is the Procedure for an online Trade License?
The steps included in the Procedure for an online Trade License are as follows:
- The concerned applicant is required to apply to the licensing or the regulatory authority of a specific municipal area where such a business is located.
- The applicant is then needed to submit his application form comprising of the complete information listed below:
- Details of the Trade License
- Details regarding applicant’s Name and Address
- Details regarding Business Name and Address
- Details of all the type of license already issued
- After successfully submitting the form together with all the required documents, the applicant is then needed to submit the prescribed fees for registration.
- Once the process of registration is duly complete, the applicant will then acquire a transaction number on its registered Email-ID and mobile number for future reference.
How much is the Fee charged for obtaining an Online Trade License?
The fee prescribed for obtaining an online Trade License varies from state to state. The same is determined based on the rules and regulations prevailing in that state.
In some states, the fee is charged on an annual basis. Whereas, in other states, the same is calculated and levied based on the percentage of annual business turnover.
It shall be relevant to note that there are a few states which have exempted some departments from acquiring a Trade License. For example- MSMEs located in Delhi.
What is the Validity Period of a Trade License?
The Trade License issued to a business entity remains valid for one year. After that, the same license is needed to be timely renewed for carrying on business activities.
How to obtain Renewal of Trade License in India?
The Trade License issued is needed to be renewed on an annual basis. The same is possible only after applying for renewal. Usually, the period for getting the license renewed is from 01st January to 31st March of every year.
The application for the renewal of the trade license is submitted within thirty days before the expiry date of the license. Any kind of delay caused in the filing of the application for the renewal of trade license may lead to the levying of late fees which is 50 percent of the prescribed license fees.
The listed below are the set of documents needed for obtaining the renewal of a trade license are:
- Original copy of the Trade License
- Address and the Identity proof
- A copy of Previous year Challan
- Old G-8 receipt
- Property tax receipt
How is a Trade License distinct from Company Registration?
The listed below are the key difference between a Trade License and Company Registrations:
Basis of Difference
It is needed to start a new business entity.
It is needed by an existing entity in order to carry out the business activity.
The Shareholders as well as the Directors must not be minor in age. Further, the shareholders have to power to determine the objective and purpose of the concerned business.
However, in order to start a business activity, a company obtain registration.
The following listed are some of the requirements prescribed by the Government for obtaining online trade license:
a) The applicant must have attained the age of 18 years.
b) The applicant must not be having any previous criminal records.
c) The Business concerned must be of legal nature.
It is required to be registered with the ROC (Registrar of Companies).
It is obtained by filing an application of trade license to the respective state Municipal Corporation.
The listed below are the different types of Companies:
a) Private Limited Company,
b) Public Limited Company,
c) One Person Company.
The listed below are the different categories of a Trade License:
a) Shop License,
b) Industrial License,
c) Food and Establishment License, etc.
It shall remain valid for a lifetime.
It needs renewal after a specified time.
Frequently Asked Questions
The procedure for filing a Trade License Application is state-specific. Hence, it varies from one state to another. Obtaining a trade license has been made compulsory by some states. In contrast, there are some states which have made it an optional choice for the businesses.
Normally, the processing time for obtaining a Trade License varies from one state to another. And usually, it takes around 9 to10 days to process the application in metro cities. However, in the case of small cities, or rural areas, the same may go around 15 to 20 days or even longer than that.
A Trade License can be acquired by filing an application form to the respective Municipal Corporation. The application form is required to be filed within thirty days of commencing the business.
The listed below are the eligibility criteria for obtaining a Trade License:
- The concerned applicant should be of the age of 18 years.
- The applicant shall not have any previous criminal records.
- The business concerned must be of legal nature.
A Trade License is used for carrying out the trade activities for the Industrial Business, Food Establishment Business, and for the local shops.
A Trade License is required to make sure that no kind of adverse effect or harm is caused while carrying out the trade activities in a particular area.
A Trade License can be revoked is liable to be revoked by the Municipal Corporation, if in case the trader has violated or infringed the guidelines specified by the MCD Act.
The term KMC Trade Licence stands for the Kolkata Municipal Corporation Trade License.
The term BBMP Trade License stands for the Bruhat Bengaluru Mahanagara Palika Trade License.
Yes, getting the license renewed has been made compulsory requirement by the government. Failing to do so, will attract either a penalty or a fine.
An individual is required to apply for the license thirty days before the commencement of his or her business.
If for any reason the applicant has been denied of the Trade License, he can then submit a request to the Standing Committee along with a copy of his denial letter.
The prescribed renewal period is from 1stJanuary to 31stMarch of every year.