How does a trade license work?
The purpose of a trade license registration is to allow an applicant (a person seeking to open a business) to engage in a particular trade or business in a particular location or area. The license, however, can only be used for the trade or business for which it was issued. The holder of the license does not obtain any property ownership rights as a result of this license.
How does a trade license help?
In the last forty years, trade licenses have been introduced in the country and are regulated by state governments through municipal corporation acts. By doing so, we are able to ensure that no one is adversely affected by nuisances and health hazards resulting from any trade or business. To ensure that no unethical business practices are being carried out in a specific area, the government has made it necessary to conduct certain businesses or trades. As a result of this license, there is harmony in society since every business follows relevant rules, guidelines, and safety measures. Various trade activities are regulated by the government using this license. To maintain the business environment and locality environment, issuing these permits restricts people from executing certain types of businesses from their homes.
Who is able to issue a trade license?
In various departments such as industries, engineering, health, and licensing, it is issued by the municipal corporation’s licensing department. The government of India authorizes licenses in order to regulate the industry across the country. Any business or trade can be carried out where it is located by means of letters or documents/certificates. According to the local government agencies (Municipalities) rules and regulations, the license is issued in different states.
Trade licenses are categorized in different ways
- Manufacturing licenses: small, medium, and large-scale factories
- Shop license:
Trades involving danger and offense, such as firewood sales, cracker manufacturing, candle manufacturing, barber shops, and dhobi shops.
- Food establishment license:
Among these are restaurants, hotels, food stalls, canteens, meat and vegetable markets, and bakeries.
Trade license eligibility
- Applicants must be at least 18 years old
- Criminal records must not exist for the applicant
- Legality of the business must be ensured.
Metro cities generally take 7-10 days to process trade license applications. Other small cities and rural areas, however, take longer.
Trade license Renewal
The renewal of trade licenses in India typically takes place between January 1st and March 31st. Municipal licenses are valid for one year and must be renewed every year. Within thirty days of the expiration date, the license must be renewed. The issuing authority may impose fines if the renewal process is delayed.
Renewal of the license requires the following documents:
- A copy of the original trade license; an advertisement
- Challans from the previous year;
- An up-to-date receipt for property taxes paid.
Provisions for penalties
Registered persons must also follow various other provisions, rules, and regulations. Defaulting on the registration requirements for a trade license and commencing any trade activity before it is issued will result in a penalty payment. In addition, the defaulter can be legally prosecuted.
Important points to be noted
- Municipal authorities issue trade licenses exclusively for businesses or trades.
- The rules and regulations governing the issuance of trade licenses vary from state to state
- Depending on the nature of the business, licensing fees differ
- With this license, a business will gain a greater reputation and attract more customers and investors than an unregistered one.
- Additionally, this ensures that traders follow safety guidelines and follow ethical business practices.
- The relevant government (authority) may impose fines and penalties as per its rules and regulations if someone does not apply for the license or begins businesses or trades before the license is granted. A business can also be closed if it fails to comply with the pre-requisites of its trade license.