To function, any corporation will require a licence. As a result, obtaining a trade licence for operating a firm is critical. Generally, the state government issues the trade licences. Any person holding a trade licence can conduct business related activities. So, it is essential to get a licence before engaging in a trade/business.
Did you know?
One of the key reasons for which a trade licence is issued is to make sure anti-competitive practices are not followed within a locality/municipality?
What is a Trade Licence?
A trade licence is a type of document that authorises and permits you to engage in commercial business related activities. It doesn't grant land ownership or authority to engage in any action other than business activities. The municipality provides this licence in collaboration with other offices such as healthcare, building, estate, and the state government.
Because of this, each company must get this licence from the Licensing Division before initiating any manufacture, trade, or storage and overall business related activities. You have to fill out the form and submit it to the corporation's commissioner 30 days before the beginning of the business operation. The company must provide all required documentation when filing for this licence.
Also Read: How To Get A Business License In India?
Why Trade Licence?
Why is a trade licence required to start a business operation? This is a critical question you need to know the answer to before we move further. Switching back forty years, the government had issued restrictions for conducting specific types of enterprises. After some time, the government consulted businesses and started issuing trade licences. Today, businesses use this type of licence to carry out a specified business and trade related activity. The authorities will only give these permits to individuals in order to allow them to engage in specific business activities within a specific geographical area. For a certain state to allow enterprises to conduct their operations throughout the state, the state government has to issue a licence.
This licence is a necessary and mandatory document provided by a certain municipality/state government. Companies are allowed to carry out specified operations in a defined region. These licences are also supplied to verify the company to determine whether they are operating in accordance with the law.
Who Can Issue a Trade Licence?
The municipality corporation's licensing department and the state government in some cases grant the trading licence in several areas such as manufacturing, construction, healthcare, and so on. The Indian government authorises the licence in order to stabilise the business activities around the country. Based on the location of the industry on records, it provides authority to conduct any trading or business. The issuance of the licence varies by state, based on the rules and regulations of the local municipal authorities.
Different Categories of Trade Licence
Food Business
Any organisation that handles food related business activities falls under the food industry. This will also include places that prepare and serve meals such as a hotel or a catering centre. To function, the following firms will require trade licences:
- Cafeterias, hotels, and eateries
- Shopping malls, movie theatres, and nightclubs
- Bakeries, confectioneries, and snacks stores
- Dairy shops, merchants, and any other establishments that provide food
Trade and Other Related Services Business
Any trade or occupation that entails providing care to clients would also need to acquire a certain type of licence. For the following trading activities, the firm requires a licence.
- Parlours and barbershops
- Computer shops
- Miniature production units
- Units of intermediate manufacturing
- Small-scale manufacturing
Manufacturing Industries
This licence is also required for any type of industry that manufactures products of any kind.
- Production industries with a moderate base
- Companies and huge manufacturing facilities
Categorization of Trade Licences
The trade licences are split into the following three categories depending on the degree of risk associated with the company:
Low Risk-Based Licence
This type of licence would apply to any industry or a company that does not pose a substantial risk. This licence is usually considered by hotels and other types of eateries.
Medium Risk-Based Licence
This sort of licence is typically provided to enterprises including small and medium-sized enterprises.
High Risk-Based Licence
This sort of licence is typically awarded to businesses and large-scale enterprises. Typically, this type of institution would have a greater risk of working with various types of chemicals and toxins. Usually, the surveillance levels on these companies would be greater than on low/mid-level licences.
Eligibility for Applying for Trade Licence
To be able to qualify for this licence, the candidate must meet the following requirements:
- The candidate or person had to be a major. This indicates that the candidate must be over the age of eighteen.
- There should be no arrests or criminal history on the individual's record.
- The individual's organisation must not have been in violation of any current laws.
Documents Required to Apply for Trade Licence
- Licence Application Form
- If the candidate is a business entity, then they have to supply the PAN card together with the relevant company incorporation paperwork.
- Individual applicants must provide critical credentials such as their Aadhaar card.
- Documentation pertaining to the property's taxation.
- It is necessary to produce a rental contract if any. Copies of the leasing agreement must be produced with the application.
- Documents of Residence
- In the event that the company is situated in a residential neighbourhood, you must acquire a letter of no objection from the authorities of the neighbourhood.
- Papers of Sanctions, if any.
Procedure for Applying for a Trade Licence
The following conditions must be met, based on the location of the applicant in order to apply for this licence:
- The candidate must request the trade licence certificate either online or in person. To use the online facility, the candidate must fill out an application and upload the required documents. For the offline option, the applicant must provide all required documents to the appropriate authorities. With this, the candidate must fill out the application form with the necessary information for applying for this licence.
- Depending on the candidate's needs, various states will have multiple protocols for submitting an application for a licence.
- To apply for an electronic trading licence, the candidate must go to the specified website of the state in which the person wants to operate the business.
- Following that, the candidates will receive a pop-up message with information on the terms & conditions to which each applicant has to agree to in order to obtain a trading licence.
- The candidate must agree to the terms & conditions by clicking the accept icon.
- The applicant might next fill out the relevant details about the trade licence.
- The online platform for licence registration provides an option where documentation verification may be done electronically. The candidate must complete these tasks and submit the necessary documentation.
- After completing this step, the candidate will get a notification stating that they have successfully completed the registration procedure for the trade licence.
- The candidate will get a notification in their registered email address, and the licence will be sent to the person within nine to 11 business days.
- When it comes to rural locations, the procedure of obtaining a trade licence is usually speedier in big cities.
Also Read: A Step-by-Step Guide to GST Registration Procedure in India
Breach or Penalties for Not Getting This Licence
If the candidate does not obtain the licence, the following repercussions will occur:
- Once a candidate has a business permit, they must follow compliance with all the rules and regulations.
- If the candidate fails to get the trade licence, the appropriate authorities may apply a variety of penalties.
- If you form a company and start operations without the necessary permits, a penalty or charge will be collected.
- If the business owner continues to fail to comply, they have to face the consequences.
Trade Licence Renewal
The licence can be renewed if the following requirements are met:
- These licences are typically reissued between the 1st of January and the 31st of March of each financial year.
- This licence is valid for one year.
- In order to obtain a trade licence, the applicant must apply within the Indian territory.
- The application must be submitted 30 days before the previous certificate's expiration date.
- One must present all the proper documents to the appropriate authorities whenever you are renewing the trade certificate.
Conclusion
A trade licence is a measure taken by the government of India to protect the general public from the health dangers and annoyance that a trader/business may create. If the authorities detect a breach of the rules and regulations, charging heavy fines and penalties can take place. We hope that the details of this article would have given you a clear overview of the procedure to get a trade licence.
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