Trade License is a certificate through which an entity is permitted or allowed to open the business and commence a particular trade in a particular area.
A trade license is a certificate that gives permission to the applicant (person seeking to open a business) to commence a particular trade or business in a particular area. However, the license does not allow the holder to any other trade or business than for it is issued. Furthermore, this license does not pass on any kind of property ownership to the holder of the license.
What is the use of a Trade License?
In the last forty years, trade license has been introduced in the country and is being regulated through municipal corporation acts by the state governments. This helps in ensuring that no one is severally affected by the nuisance and health hazard of any trade or business.
It has been made necessary by the government to carry out any particular business or trade in a particular area and to ensure that no one is carrying out any unethical business practices. This license creates harmony in the society that every business is following relevant rules, guidelines, and obeying the safety measures. This license was made obligatory to make sure that the government can regulate various trade activities in the country. The core objective of issuing a this is to control the locations by restricting the people from executing certain types of businesses from their home location to maintain the business environment and locality environment.
What are the Categories of Trade License?
Following are three categories under which a trade license is issued:
1. Industrial License
This license is applied by a business engaged in manufacturing industries operating in small, medium and large scale.
2. Shop License
This license is issued to a business involved in carrying out dangerous and offensive activities such as cracker manufacturers, candle manufacturers, firewood shops, etc.
3. Food & Shop Establishment License
This license is obtained by the business engaged in food businesses such as restaurants, hotels, canteen, food stall, etc.
What is the Importance of Trade License?
Trade license is a permission to carry out business within the particular locality issued by the municipal authority. Trade License is crucial because of the following reasons:
1. Monitors the business operating in a particular locality;
2. To ensure there is no harm to the health of the general public due to improper conduct of business;
3. It ensures the applicable rules, regulations, and standards set are duly adhered to;
4. It regulates the business by putting restrictions on certain commercial activities;
5. Monitor the responsibilities of an entrepreneur in connection with the business;
6. A trade license holder is assumed to be certified that there is no unethical or illegal activity or trade is conducted.
What are the documents required for Trade License?
Application in the prescribed Form 353 duly filled;
In case where applicant is any Firm, LLP or a Company, then PAN Card, along with the incorporation certificate is required;
1. An individual applicant needs to submit his Aadhaar Card;
2. Recent Municipality Property Tax Payment Receipt;
3. Lease documents or consent letter from the owner of the property (in a case where property is rented);
4. No Objection certificate from your immediate neighbor;
5. A certified layout plan of your trade building;
6. A blueprint of a building, if the applicant is carrying business of explosives, dangerous goods, and timber;
7. For Katha extracts, Katha certificate is required;
8. Sanction plan;
9. Occupancy certificate (OC).
What are the documents required for the renewal of the Trade License?
1. Original trade License;
2. Tax receipt furnishing details of tax payments;
3. Previous payment challans.
What is the processing time of a Trade license?
Usually, it takes 7- 10 days of a time period to process the application of trade licenses in major cities of India. However, where the applicant belongs to rural areas processing time is a bit longer.
What are the penalty provisions?
In the case where business owners operate their business without a license, the following can be the risk on non –compliance-:
1. Fine and Penalties
If any business owner operates his business without any valid license, in that scenario person is liable to pay fine or penalty. The fine is imposed according to the rules and regulations of that particular area’s Municipal Corporation. The fine also depends upon the nature of the business being carried out.
In the case where a person fails to renew his license, a fine of 50% of the license fee is levied upon the person.
2. Closure of Business
A person caught without a license can face the closure of business by the MC authority. Unfortunately, a person delaying applying for a trade license can face such a consequence, which is the biggest loss business can face.
3. Chances of legal action
If a customer is not happy with the service or product offered by you without a trade license, the customer can file a lawsuit against you. In fact, doing business without a license is a fraudulent act in itself. Furthermore, if the plaintiff wins the lawsuit, there will be chances that the owner will be responsible for paying heavy compensation to the plaintiff.
4. Revocation of License
If any person violates the rule and regulation of the license or causes any nuisance to the neighborhood, there will chances authority can revoke the license on a mere complaint.
What do you mean by Trade license Renewal?
Statically, trade licenses in India are renewed between January 1st to March 31st. The validity of a license issued by the municipal authority is for a period of one year and required to be renewed every year.
The application for renewal of the license is to be made within thirty days from the date of its expiry. In case the renewal process is delayed, then it may attract fine depending upon the rules and regulations of the issuing authority.
Following are the documents that need to be submitted for renewal of the license–
1. Original copy of the trade License;
2. Previous year challans;
3. Up to date property tax paid receipt.
What is the punishment in case of failure to comply with the Trade License Registration?
There are various other provisions, rules, and regulations that are required to be followed by the registered person. In case of failure to comply with the registration requirements of trade license and commencing any trade activity before the issuance of this license, the person in the default will be liable to pay the prescribed penalty. Furthermore, legal action can also be taken against the defaulter.
Conclusion
Trade License is a certificate through which an entity is permitted or allowed to open the business and commence a particular trade in a particular area. Through Trade License, State Government regulates the operation of the specific business from a particular locality. In case of any query, contact Corpbiz.
Also checkout other related topics: Planning Business set up in Local Municipal Area
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