Whether you are launching a new business or in the process of doing so, there are certain mandatory compliance requirements that you must fulfil. One such essential requirement is obtaining a trade license.
If you are unsure of what is a trade license, don't worry. This article will delve deep into what is a trade license, its significance, types, and guides on how to apply for one successfully.
What is a trade license?
A trade license is a certificate or a document that grants you the right to conduct your business in a specific region or municipality. It is a mandatory document needed to carry out business activities in urban locations. You cannot use a trade license for any other business besides that for which you've applied.
Moreover, acquiring a trade license does not grant ownership rights over the property where trade activities occur. Instead, it solely authorizes the occurrence of trade-related operations.
Who issues a trade license?
The local government body issues a trade license. It can be a municipal corporation, municipal board, town committee, or Nagar panchayat.
The rules and regulations governing trade licenses may vary from one state to another. So, you must submit a trade license application to the relevant authority in the specific state where you intend to establish your business.
For instance, if you're setting up a business in Mumbai, you'll have to get a trade license in Mumbai.
What are the types of trade licenses?
There are three types of trade licenses issued in India. They are:
#1. Shop license -
It is issued to shop owners like crockery, barbers, and dhobi to conduct business in a particular location.
#2. Industry license -
It is provided to those with manufacturing industries, whether large, medium, or small.
#3. Food Establishment license -
As the name suggests, it is for business owners involved in the food business, like hotels, bakeries, restaurants, canteens, etc.
Eligibility criteria of a trade license
To apply for a trade license, you must fulfil the following eligibility criteria:
- Applicant must be at least 18 years old.
- Applicant must have a clear criminal record.
- The type of business must be legally permissible.
Documents required for a trade license
To apply for a trade license, an applicant must submit the following documents to the municipality or corporation where they want to start their business:
1. Aadhar card is a must for individual applicants
2. PAN card with incorporation certificate, if the applicant is any firm/LLP/registered company
3. Receipt of property tax payment to the Municipality
4. Lease documents or consent letter from the property's owner
5. NOC (No Objection Certificate) from the closest neighbor to your business's premise
6. A certified layout plan of your trade building showing the business
7. Sanction plan
8. Occupancy certificate
What is the trade license registration process?
A guide about 'what is a trade license' is incomplete without discussing its registration process. Here's a step-by-step process for applying for online trade license registration.
Step 1: Visit the official website for trade license registration.
Step 2: Fill in the required details.
Step 3: Log in using the user ID and password. Provide the essential details like NOC and type of business.
Step 4: Upload all the required documents.
Step 5: Submit the form.
Step 6: The application form and submitted documents are then verified by the ULB (urban local bodies) officials.
Step 7: A unique application number will be generated upon successful verification.
Step 8: Complete the payment process.
Step 9: The trade license will be issued via mail once the payment is complete.
Typically, the application process takes almost ten days. But it may take longer in rural areas. Now that you understand the registration process, let's move ahead to the most asked question, 'What is the trade license fee?'
What is the trade license fee?
Since the municipalities of each state issue trade licenses, the fees differ from one state to another. The rules and regulations established in a particular state determine the license fee. In some states, it is assessed annually; in others, it's determined using the proportion of annual firm turnover.
What is the trade license's renewal process?
The trade license is valid for one year and necessitates renewal on an annual basis. The renewal process of issued trade licenses takes place between January 1st and March 31st. To renew the trade license, applicants must submit their renewal application 30 days before the license expires.
For the trade license renewal application, the following documents are mandatory:
1. The original copy of the existing trade license
2.Challans from the previous year
3. A current receipt confirming the payment of land tax.
Any delay in the renewal process can result in penalties imposed by the issuing authority, which vary depending on the governing principles and regulations. Therefore, adhering to the renewal timeline is advisable to avoid fines or complications.
Benefits of a trade license
While trade licenses offer various social benefits, such as ensuring that business activities don't cause any harm to the general public, there are various other advantages for business owners:
#1 Credibility
Obtaining a trade license provides customers with the reassurance that the business is legitimate, law-abiding, and committed to ethical practices.
#2 Fewer Legal Confrontations
Business entities that diligently conform to all compliances are less likely to encounter legal issues.
#3 Attracting Investors
Businesses with strong ethical practices attract investment groups and other organizations, and a trade license is a testament to compliance with mandatory requirements.
Final thoughts
Let's take a quick recap of what is a trade license. It's an official document or certificate required to conduct business in a particular location. Operating a business without this license may result in the seizure or closure of the business by the relevant authorities, with or without prior notice.
However, even before you acquire a trade license, you require adequate funds to start a business. If you're starting a new business or are planning to expand your existing one and need urgent funds, turn to Tata Capital. We offer business loans with minimal documentation at competitive interest rates.
Visit our website to know more.
31 July 2023
6 mins read
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