Residents looking to pursue a trade or open a business in a specified premises need a mandatory document approving this transaction. This document is called a trade license. This certificate is given in a neighbourhood within the specified municipal corporation. This is issued pending consultation from specialised departments such as health, engineering, state and fire brigade in addition to other relevant ones depending on the type of business in question. The applicant can then commence his or her business as per the norms mentioned in the application. A trade license allows a person to run a business only of the nature as mentioned while applying for it and it is exclusively meant to run the business and does not authorize any ownership towards the property in question.
Why Does One Need a Trade License
A trade license ensures that the person running the business in no way causes nuisance or health related hazards. It is essentially issued to ensure that the type of trade being conducted follows the safety and standards of government recognized guidelines. Illegal activities or businesses that can be harmful to others is strictly eradicated. Due to the trade licence, the government is able to regulate as well as monitor the type of business being run. Running a business activity without a valid trade licence can result in severe penalties and possibly imprisonment. Availing this license proves beneficial to the owner as well as the public, solidifying harmony in the society.
Objectives of a Trade License
The primary objectives of acquiring a trade license are stated below
- Protecting the public from any harm to their health that the trade could cause
- Saving children and employees from undue mishaps
- Keeping the crime and disorder in control
- Ensuring no undue nuisance value is added to the neighbourhood
Who Can Issue a Trade License
Trade licenses are issued by the department of municipal corporation from several different business categories such as industries, health, engineering, fire, etc. Typically, the Indian government authorizes this licence by granting permission via letters, documents, certificates and contracts – whichever is applicable and adhering to the concerned department.
Benefits of Applying for Trade License
Some solid benefits and reasons why an aspiring trader should apply for a trade license are stated below:
- Aids in keeping track of the kind of businesses that are functioning in the area.
- The regulation and compliance of such businesses are tracked.
- No illegal trades are allowed, keeping the sanctity of the country in check
- Unethical and unacceptable business practices are eradicated right from the beginning, adding to the trade’s credibility.
- The public is safeguarded from any harmful hazards or unwanted nuisances.
- Ensures that rules and regulations are strictly followed.
- A certain standard is maintained due to which social harmony stays intact.
- Allows the government to closely monitor all trade activities within the country
- Additional facilities such as elevators, music, entertainment activities and many more are allowed, if needed so the business can further flourish.
- Obtaining a trade licence gives the opportunity for requesting financial aid from the government to be able to expand the business module.
Eligibility Criteria for Obtaining Trade License
The following mentioned criteria need to be met for a person to be eligible to apply for a trade licence
| Specification | Eligibility Criteria |
| Age of the applicant | Must be minimum 18 years old |
| Background | No criminal history or records should reflect |
| Nature of Business | No illegal activities will be permissible |
| Orientation | Resident of India |
Types of Trade License Categories
Trade licenses are granted to business departments of different categories and are broadly classified into three types, depending on the kind of industry or product in question. These three types are
1. Industrial License
Industries are divided into small, medium and large scale and are typically involved in manufacturing operations. Facilities of defence equipment, aerospace and electronics especially need a license to be able to operate smoothly.
2. Food License
All establishments that are engaged in the making, sale and service of any food are classified into this category. Restaurants, cafes, canteens, cafeterias, bars, liquor stores, fruit vendor stalls, grocery stores, butcheries and any other such sub-category that aspires to be run, will require a trade license. This will also include small home-based catering businesses.
3. Shop License
Stores that deal with dangerous and flammable products need to acquire a trade license before commencing. All the employees of this establishment need to be registered no matter if they are full-time, part-time or even contract based. This also keeps an eye out for the safety of said workers. Businesses that fall under the offensive category include candle shops, firewood sellers, firecracker sellers, etc.
How to Apply for a Trade License
To be able to obtain a trade license, the applicant must take a fully filled and attested application form, necessary documents and the designated fees and submit this to the concerned Municipal department. This should be submitted to the designated Municipal department that is authorized to grant the license. The time to process this takes approximately 7-10 days and can take longer depending on circumstances.
Documents Required for Obtaining a Trade License
- Proof of possession of the said property such as rent receipt, purchase agreement, etc.
- License of ancillary commodities
- Proof of the authenticity of the premises in question
- Safety measures proof certificates
- Additional licenses as per type of establishment
- No objection certificate (NOC) from the commissioner of police
- Cancelled cheque
- PAN card of applicant as well as establishment
- Articles of association
- Photograph of applicant
- ID proofs of all managers and partners of the said trade
- Front facing photo of the establishment
- Key plan of the establishment along with the neighbouring locality
Trade License Renewal
The trade licenses in India are usually renewed between the months of January and March and are issued by the licensing department which functions under the jurisdiction of the municipal corporation in question. Points to be noted about the renewal of a trade licence are as listed below
- The validity of a trade license is one year and needs to be renewed on an annual basis
- Health, industries and engineering categories are classified under the licensing department
- The renewal process is almost the same throughout the country but can marginally differ from state to state
- The application for renewal should be made at least 1 month before the said expiration date
- A fine could be levied id the process is delayed
- Original copy of the trade license, challans from the previous year and tax payment receipts need to be submitted at the time of renewal.
The trade license certificate is a great way for the Indian government to ensure that good and productive businesses are being run in the country, adding to the economic growth. This benefits both, the employees as well as the employers. They are then satisfied with working with a legal document permitting them to run the business and can then focus their energies on getting more clientele/customers and work on their business to prosper. Any aspiring trader should adhere to the rules and obtain a trade license so their trades can run smoothly and legally, without any hiccups.
