What are the differences between Trade License and Shop & Establishment License?May 25, 2021
Irrespective of the business establishment, all shops, commercial establishments, or any retail businesses in India have to abide by the rules & regulations prescribed by the Government of India. Under these, Trade Licence and Shops and Establishment Licence are among the most important licences that a new company in India has to obtain. Let us know further about these licences, their uses, and the differences between them.
Trade License Registration:
What is a trade licence?
A trade license is a certification that permits the applicant or business owner to start a particular trade or business in a particular area. It ensures that the business is in compliance with all the prescribed safety procedures of the government.
For a trade license registration, the applicant must fulfill certain preset criteria. Some of them are that the applicant must be more than 18 years old, should not have any criminal record and that the business should be legally permissible.
Document required for trade license registration:
- ID proof of the applicant (Aadhaar card or any other valid Identification)
- Physical address proof of the business
- PAN (Personal Identification Number) of the firm of the company. In the case of a proprietorship, it can be the PAN of an individual.
- Memorandum of Association (MOA) in case of companies
- Certification of incorporating in case of companies
- A recent municipal property tax receipt for owners of the property, lease document or consent letter of the owner of the property where the business is registered.
- NOC of the neighbouring property owners.
- Certified layout plan of the office
Shop and Establishment License
Shops and Establishment license concerns the working conditions and rights of employees and workers engaged in the sector. This includes payments, holidays, work hours, etc. These are state subjects, and the rules differ according to different states.
It is basically a government-approved license that grants permission to traders for doing business or running a shop.
As per the Shop and Establishment Act, the shop owner must make these declarations:
- Total number of working hours of the shop
- Health and safety measures (Sanitation, Cleanliness, Firefighting and Accidental remedies)
- Overtime wages
- Leave policy
- National holidays
- Opening & closing hours of the shop
- Employee breaks
Every Establishment needs to register itself within 30 days of the start of the shop. This is mandatory for all business entities. It covers commercial establishments like shops, restaurants, hotels, theatres, and retail trade/business. The shop establishment licence is proof of being a legal entity. It also comes with many government perks, including the eligibility for a business bank account.
Difference between Trade License and Shop & Establishment License
- Shop & Establishment can be applied on residential premises. However, a Trade license can only be provided to commercial entities.
- Trade license is permitted to any person who carries out or wishes to carry out a particular business. The Shop & Establishment license, on the other hand, needs to be registered with the local state government.
- Rules and regulations for a trade license are very strict, whereas there is a chance of leniency in the Shop and Establishment license.
- Establishments such as canteen, hotels, restaurants, cyber cafes, food stalls, etc., require a trade license. Shops and establishment licences are required by any commercial establishment or shop providing any kind of service to the customers.
- Shop and Establishment Act governs the rights of workers and the working conditions . It includes wages, leaves, work hours, etc. The trade license, however, is just a license to trade and hold no such conditions.
- The time duration to obtain a Trade License is 30 days from the start of the business. If any individual breaches the legal specifications of a permit or causes any nuisance, then the license can get cancelled or revoked.
- As every state has different laws, trade License and Shop Establishment laws vary from state to state . The fees, too, are also different in every state.
Whether setting a small-scale shop (MSME) or commencing a large-scale organization, every business is required to have a license. These licenses ensure the well-being of the workers as well as the authenticity and ethical values of the owners. The Shop & Establishment license directly protects the workers and employees from any mishap. It is thus, very necessary for establishments to have government-approved licenses. However, there are certain eligibility criteria, some of which have been mentioned above. It is advisable to consult a professional before applying for a trade license registration and shop establishment license registration.