Trade license: A Concept Study

A Trade License is permission essential for the businesses to start a trading business within a specific locality. Generally, the provisions regarding the trade license are established by the State Government. Hence, a trade license is essential for ensuring that trade is carried on in the manner described in the rules and regulations. Further, it is significant to mention that running any unauthorized business will be considered as an offense. Thus, if in case any person is found to be guilty, then he or she will be subject to a substantial penalty.

Every state has its own municipal authority which administers the trade license in the particular area where it runs because regulations pertaining to Trade License vary from state to state. For instance, for obtaining a trade license in Ghaziabad, the applicant is required to apply to the Ghaziabad Municipal Corporation.

Moreover, if the business owner needs to start the business in other areas also, then he or she must again obtain the trade license for that particular area. Hence, it is clear that such licenses are granted for carrying out the trade in a particular area.

When should the Trade License be acquired?

Every business organization planning to start its business operations shall be needed to obtain this license within a period of 15 days from the commencement of any activities. The activity includes the manufacture, exchange or even the storage of any commodity. In some states, it is obligatory to apply for this license three months before the commencement of any business activity.

Who Regulates the Trade License?

Usually, the state governments regulate in the state with the help of the Municipal Corporations of the concerned area. In some states, it is compulsory while it is optional in some states. The fees prescribed for obtaining online trade licenses also vary from state to state. The manner for collecting fees is also different in a different state. In some cities, it is charged as the annual fees while in some other states, it is calculated and charged based on the percentage of business turnover. Further, it is significant to mention that some states have been granted exempted by certain departments from getting a license, for example- Micro, Small and Medium Enterprises in Delhi.

Who can apply for the Trade License?

There are three major requirements for Trade License. These requirements are mandatorily required to be fulfilled by the applicant concerned. Following are the requirements-

1. The person concerned must have attained the age of 18 years and
2. There must not be any previous criminal records in their name.
3. The proposed business must be of a legal nature

What are the Features of the Trade License?

1. The essential feature of the Trade License is that it is needed to be applied beforehand, i.e. before commencing the business. However, in the rural areas as well as in some small cities, the license can be applied within thirty days from the date of the commencement of business.
2. The trade license granted by the authorities concerned is valid for a period of one year and is required to be renewed annually. Further, the application for renewal of the Trade License is to be submitted within a period of thirty days from the date of the expiry of license.

What are the Categories of the Trade License?

1. Type A Category - These licenses are issued for those businesses whose activities relate to the consumable items and eating hubs.
2. Type B Category - These types of licenses are issued for those trades which makes use of the locomotive power to function, such as the industries, workshops, and flour mills, etc.
3. Type C Category - These licenses are issued for those trades, which are involving dangerous activities, such as firewood, charcoal, etc.

What is the Significance of the Trade License?

Following are the Points which relates to the significance of Trade License -

1. A licensed business format, in whatever form you opt to incorporate the concerned business, provides prestige, privileges and an aura of stability to the concerned business. This will result in attracting prospective customers and investors.
2. A licensed business safeguards its owners against certain and specific types of liability. If in case the injury or damage occurs in the business actions or affairs, then the personal finances would not be at risk in any settlement. Further, it is significant to note that the different types of licenses provide different levels of protection.
3. A licensed business may grant the owner with access to certain specific groups that would be unable to participate or join in if the person concerned operates in his or her personal name. Further, the companies having better investment groups, business practices and other business-oriented structures may not grant access to the information if the company is not having a trade.
4. The government has made it obligatory for everyone to get a trade license to make sure that one is not carrying out illegal and unethical business practices and is also following all the prescribed safety measures and guidelines.
5. To detect any illegal or unethical activity and also to make sure the maintenance of the environment. Further, it also ensures that neither the industrial nor the manufacturing-related activities are being conducted in any residential area.

What is the Concept of Online Trade License?

For obtaining the Trade License, an online application is to be filed with the authority concerned by the professionals. Further, for obtaining the online trade license, documents needed are to be submitted with the prescribed form. After that, the trade license is granted by the authorities concerned.

What are the Advantages of the Trade License?

Following are the benefits of Trade License -

1. A licensed business will enjoy the benefit of greater goodwill and will also be able to attract both the investors and customers than an unregistered entity.
2. It safeguards the owner against the certain and specific types of liability
3. Companies having better business practice will attract the various level of investment groups and also the other business organizations
4. In order to do an ethical business practice, the person concerned can file an application for obtaining Trade License Registration which will ensure the safety measures and guidelines
5. Lastly, if a person concerned does not get a Trade license as required under the law and commence any business, then the government can impose a fine and a penalty on such defaulter person. Further, this might also result in the closure of such a business.

What is the Procedure and Documents required for obtaining the Trade License?

For making an application regarding obtaining the trade license, the applicant concerned is required to submit an application to the concerned Municipal Corporation together with all the needed documents. The documents needed for the same are as follows -

1. Utility Bill of the concerned premises in which the business activity is going to be carried on.
2. Rent Agreement  in case the premises is on rent or lease
3. No-Objection Certificate from the Fire Department
4. Municipal Tax Receipts.
5. The Registration Certificate acquired under the Shop and Establishment Act or the Infrastructure development department etc.
6. In case the premises are managed and operated by any person other than the concerned owner, then the passport-sized photograph, ID proof together with the address proof of such manager.
7. ID proof of the concerned applicant
8. Company’s PAN card, in case the applicant is a company
9. Copies of the premise blueprint.

What is the concept of Trade License Renewal?

Obtaining a Trade License is not a one-time job. It shall be renewed every year on an annual basis. The requirement regarding the payment of the annual fees for the continuity of the license is also compulsory in some of the specific states and cities. Further, the renewal of the trade license is done from 1st January to 31st March of every year. Furthermore, the application for renewal shall be made at least thirty days prior to the commencement of the year for which concerned application is sought for. Lastly, a fine of fifty percent of the prescribed license fees is levied in case of any delay in the process of renewal of the trade license.

What are the Documents Required in case of the Renewal of the Trade License?

1. Copy of the Original Trade License
2. Challan copy of the Fees paid in the previous year
3. Receipt of the Tax Payment