What is a Trade License?

A trade licence is a document or certificate that enables an applicant (someone who wants to start a company) to start a certain trade or business in a specific region or location. The licence, however, does not authorise the holder to engage in any other trade or business than that for which it was granted. Furthermore, the holder of this licence can not gain any kind of land ownership.

Why Trade License?

Trade licences have been implemented in the country over the last forty years, and they are governed by state governments by municipal corporation acts. This ensures that no one is adversely impacted by any trade or business’s nuisance and health threat. The government has made it mandatory to conduct any particular company or trade in a specific region and to ensure that no one is engaged in unethical business practises. This licence promotes social peace by ensuring that all companies obey applicable laws, guidelines, and safety precautions. This licence was made mandatory so that the government could control the country’s various trade activities. The primary goal of issuing this is to protect the market climate and locality environment by preventing people from conducting certain forms of business from their home place.

Who can issue a Trade license?

It is provided by the municipal corporation’s licencing department in various departments such as industries, engineering, and health. The licence is approved by the Indian government in order to regulate in cities across the country. It grants permission to carry on any business or exchange where it is located via letters or documents or certificates. The licence is issued differently in each state, depending on the rules and regulations of local government agencies (Municipals).

Different categories of trade license

  • License for small, medium and large scale factories
  • Shop licence: Dangerous and offensive trades such as firewood sales, cracker and candle manufacturing, barber and dhobi shops, and so on.
  • Restaurants, food stalls, canteens, meat and vegetable sales, bakeries, and other food establishments require a food establishment licence.

Eligibility for a Trade license

  • The applicant must be above 18 yrs.
  • He/She should not be convicted before any court
  • Business they are conducting must be legally permissible.

Documents need to be submitted for Trade License as per BBMP

To apply for a trade licence, the applicant must fill out an application and send it along with all relevant documentation to the concerned Municipal Corporation. Depending on the type of business that will be conducted, various documentation will be needed.

  • Application in the prescribed Form
  • If the applicant is any Firm, LLP or a Company, their PAN Card, along with the incorporation certificate.
  • In the case of an individual applicant, his/her Aadhaar Card is mandatory.
  • Latest Municipality Property Tax Payment Receipt.
  • Lease documents or consent letters from the owner of the property.
  • NOC from your immediate neighbor
  • A certified layout plan of your trade building showing the business, working or washing or resting areas
  • Katha extracts
  • Katha certificate
  • Sanction plan
  • Occupancy certificate (OC)

Processing Time

In most metro cities, the application for a Trade licence takes 7-10 days to process. However, it takes longer in other small towns and rural areas.

Trade license Renewal

In India, trade licences are usually renewed between January 1st and March 31st. The validity of a municipal authority-issued licence is one year, and it must be renewed every year. The renewal application must be submitted within thirty days of the license’s expiration date. If the renewal process is postponed, the issuing authority’s rules and regulations may apply, and a fine may be imposed. Following are the documents that need to be submitted for renewal of the license:

  • Original copy of the trade License;
  • Previous year challans;
  • Up to date property tax paid receipt.

Penal provisions

The registered person is also expected to obey a variety of other requirements, laws, and regulations. The person in default will be liable to pay the prescribed penalty if he or she fails to comply with the registration requirements of a trade licence and starts doing business before the licence is issued. In addition, legal action against the defaulter can be taken.

Important points to be noted

  • The municipal authority issues a Trade licence that is only for the Trade or corporation.
  • The rules and regulations governing the issuance of a trade licence differ from one state to the next.
  • The fee structure for obtaining a licence varies depending on the type of company.
  • A company with this licence would have more goodwill than an unregistered firm, attracting more buyers and investors as a result.
  • This also ensures that traders follow fair business practices and they must adhere to safety standards and guidelines.
  • If an individual does not apply for a licence or begins a trade or business practise before the licence is granted as required by law, the applicable government authority may impose fines and penalties according to their rules and regulations. Failure to meet the requirements of a trade licence will result in the closure of a company.

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