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All about trade license

1. What is a Trade License?

A trade license is a document/certificate that gives the permission to the applicant (person seeking to open a business) to commence a particular trade or business in a particular area/location. 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.

2. Why 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 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 a 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.

3. Who can issue a Trade license?

It is issued by the licensing department of the municipal corporation in various departments like industries, engineering, health etc.

The government of India authorizes the license in a manner to regulate in cities across the country. It grants permission by the way of letters or documents/certificates to carry on any business or trade where it is located. The issuance of the license varies from state to state depending on the local government agencies (Municipals) rule and regulations.

4. Different categories of trade license

a. Industries license: small, medium and large scale manufacturing factories

b. Shop license: Dangerous and Offensive trades like a sale of firewood, cracker manufacturer, candle manufacturer, barber shop, dhobi shop etc.

c. Food establishment license: Restaurants, hotels, food stall, canteen, the sale of meat & vegetables, bakeries etc.

5. Eligibility for a Trade license

a. The applicant must have crossed the age of 18 years

b. The applicant must not have any criminal records

c. Business must be legally permissible.

6. Documents need to be submitted for Trade License as per BBMP

In order to apply for a trade license, the applicant is required to make an application and submit the same to the concerned Municipal Corporation along with all the necessary documents.

There are different documents that required to be provided depending on the type of business intended to carry on.

a. Application in the prescribed Form

b. If the applicant is any Firm, LLP or a Company, their PAN Card, along with the incorporation certificate.

c. In the case of an individual applicant, his/her Aadhaar Card is mandatory.

d. Latest Municipality Property Tax Payment Receipt.

e. Lease documents or consent letter from the owner of the property.

f. NOC from your immediate neighbor

g. A certified layout plan of your trade building showing the business, working or washing or resting areas

h. Katha extracts

i. Katha certificate

j.Sanction plan

k. Occupancy certificate (OC)

7. Processing Time

In general, it takes 7-10 days time to process the application of Trade license in metro cities. However, in other small cities and rural areas, it takes longer.

8. Trade license Renewal 

Statically, trade licenses in India are renewed in 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 regulation of the issuing authority.

Following are the documents that need to be submitted for renewal of the license–

a. Original copy of the trade License;

b. Previous year challans;

c. Up to date property tax paid receipt.

9. Penal provisions

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 prescribed penalty. Furthermore, legal action can also be taken against the defaulter.

10. Important points to be noted

a. The Trade license issued by the municipal authority is exclusively for the Trade or business.

b. Rules and regulations in relation to the issuance of a trade license varies from state to state

c. The fee structure for the issuance of the license differs based on the nature of the business

d. A business granted with this license will enjoy a greater goodwill than an unregistered entity and subsequently attracts more customers and investors.

e. This also ensures ethical business practice is performed by the traders as they have to follow safety measures and guidelines.

f. If a person doesn’t apply for the license or before the grant of the license as required under law and commences any trade or business activity than the relevant government (authority) can impose fines and penalty as per their rules and regulation. The failure to comply with pre-requisites of the trade license can also result in the closure of a business.

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