Trade license, also called a corporation license, is a document that gives permission to an individual to start a business. The business could be of any type depending on the individual.
The word ‘Trade’ refers to the exchange of goods and services or buying and selling goods. The payment of the goods is made by the buyer to the seller.
After its introduction, it has been regulated by the state governments of the respective states under the Municipal Corporation Acts.
Why is it required?
It is important for individuals to start a business after the completion of the registration process and only after receiving the trade license. The license serves as proof that the business is following the rules and laws laid down by the Government.
Once the license is accepted, the businesses need to start their activities according to certain rules and regulations and also maintain a certain standard when it comes to the kinds of goods sold and services provided.
Trade License Types
The individuals who are planning to start a company are aware that before applying for a trade license, they need to apply for the one type that suits their business type as the trade licenses in India are briefly categorized into three types.
Industrial/ Industries license
Industries license is essential for the small, medium and large scale manufacturing factories.
Shop license is required if the business deals with the sale of hazardous products like Firewood, Firecrackers manufacturing, candle making. Barbershops and laundry shops also need to acquire this type of license.
Food Establishments license
Food establishment business is a requirement for a food or beverage business.
Restaurants, hotels, food stalls, bakeries, shops selling meat or vegetables are some examples that require a food license to function.
Other necessary licenses required are:
- FSSAI – Food Safety and Standards Authority License
- Liquor License
- Health/ Trade License dropping
- Eating House License
- Shop and Establishment Act- Registration under the Act is required before starting a food business in India.
- GST Registration: One of the mandatory registrations is to register under GST in order to ensure a smooth and hassle-free run of the restaurant.
The steps in the process are as follows-
Choosing the category of the business.
Filling up and applying to the concerned Municipal Corporation along with all the necessary documents.
The license will carry a validity of one year after which it has to be renewed.
The application needs to be filed within 30 days of starting to operate a business.
The license approval takes up to 7-10 days. It may take longer in some states.
The necessary documents required for a trade license needs to be submitted to the Municipal Corporation in the particular city where he wants to start his business. After the approval of the documents, the Municipal Corporation issues the license.
The documents required are-
- Application form of the trade license
- Municipality Property Tax Payment Receipt
- Aadhaar Card
- Form 353 duly filled
- A letter of consent from the owner
- Lease documents
- A blueprint of the premises for certain types of businesses
- Tax receipts
- Sanction plan
- Occupancy certificate (OC)
- The city survey map of the property
- Other necessary documents
- Individuals who are above 18 years’ old
- Individuals who do not hold any criminal record
- The goods they plan to sell are legal
The cost of the trade license depends on the company from where the individual is applying for the license.
The average cost falls under Rs 5000/-
The Government has specified two ways by which an individual can make the payment for the trade license:
- At the MOH bank or office
Trade License Renewal
The businesses need to renew the trade license on an annual basis.
The application for renewal should be made 30 days before the start of the year for which the license is sought.
Documents required for renewal
- Original copy of the Trade license
- The receipt of previous year fines
- Receipt of the tax paid recently
Trade license renewal is done between 1st January to 31st March every year.
Denial of the license
In situations where the Municipal Corporation does not accept the trade license, the individual can submit a petition to the Standing Committee along with a denial letter.
Trade license is an important document required by the Government for the successful operation of a business. A license also ensures that the products sold are not harmful in any way which will eventually attract many customers to the business.