What is Trade License

A trade license authorises an applicant (someone wishing to start a business) to conduct a particular industry or trade in a specific location. The license does not permit the holder to get into any company or profession other than issued. Moreover, the licensee does not get any property ownership rights.

A trade license is granted with safety rules, guidelines, and applicable regulations to ensure proper business practices and protect the state’s community. The State Government observes and issues trade licenses to regulate commerce and business inside the city.

Businesses that violate the rules governing their trade license may face severe penalties. As a result, business owners must immediately apply for a trade license with the appropriate state authority. The registration of a trade license is a time-consuming and expensive process.

Trade licenses have been implemented over forty years ago and are governed by state governments under municipal corporation statutory provisions. This helps ensure that no one is seriously affected by health risks and hazards in any business. The government has made it mandatory to conduct any particular business or trade in a specific location and ensure that no one engages in unethical business activities.

This license is required to make sure that the government can control various commercial operations in the country. The primary purpose of issuing this is to regulate the sites by restricting specific types of business from their residence to preserve the community and business environment.

Need for Trade License:

This license is a necessary and mandatory certificate prepared by a municipality. Organizations are permitted to engage in specific activities within a defined geographic area.

These licenses are also used to monitor businesses to ensure they are operating under the requirements of the laws.

The government gives licenses to businesses that meet specific standards. Apart from that, a trade license is granted for the following purposes:

• To regulate business activity inside a specific city or municipality.
• Verify that anti-competitive activities are not being used inside a municipality.
• To keep track of a business’s activity. Besides this, local authorities can keep monitoring a business’s operations.
• The issuance of such a license indicates that a firm is in accordance with the law.
• It allows the local authority to check if the firm violates any law or causes any public annoyance.
• Businesses that hold this license enjoy a higher level of consumer trust. Consumers also get a greater level of trust in their services.
• Obtaining a license prevents firms from using a residential property for business. As a result, this kind of regulation secures the regulation of organizations.
• This type of permit also controls the usage of eco-friendly substances inside a specific area. 
• Companies with this type of licensing would take the appropriate safeguards while conducting a specific activity. Businesses with this certification would also obey the local or state government’s rules.

Trade License Issuing Authority

This type of licensing is governed by the relevant state authority or municipal entity. As a result, an applicant must apply to the appropriate state authorities to obtain a business permit.

An application must be submitted in accordance with the location where the applicant wishes to establish their enterprise. Trade License applications are accepted in more than 28 Indian states and union territories.

Before issuing a license, the various municipal corporations need the business to undergo various inspections, including those of health and safety.

Trade License Categories

A trade license is granted in one of three categories:

1. License for Industrial applications: This kind of license is granted to businesses involved in manufacturing on a small, medium, or large scale.
2. License for the shop: This form of license is provided to businesses that engage in offensive and harmful activities, like candle manufacturing, cracker industries, and firewood sales, among others.
3. License for Food & Retail Establishment: This kind of license is provided to establishments that deal with food, like hotels, canteens, restaurants, and food stalls.

Licenses are categorized into the following types based on the level of risks faced by the business:

1. License with a low level of risk – This type of license would apply to any particular business that does not require a high degree of risk. Generally, restaurants and other kinds of cafes consider this license.
2. License with a Moderate Risk – This license is frequently granted to small and medium-sized businesses.
3. License with a High-Risk Factor – Typically, industries and large-scale organizations are granted this type of license.

How to Apply For A Trade License

Eligibility –

The following conditions should be satisfied to obtain a trade license:

1. Applicants must be at least 18 years old.
2. The applicant has to be authorized by law to do its business.
3. The applicant must have no criminal background.
4. Business must be operated in a permitted area such as Commercial, Local commercial, or Notified commercial.

Document Required –

The following documents are necessary to register a trade license:

1. Individuals must provide proof of their address and identity.
2. Affidavit
3. The company’s Certificate of Incorporation, Memorandum of Agreement, and Articles of Association.
4. Cancelled cheque and the statement of bank.
5. Document of Legal Occupancy A copy of the establishment/unit certificate or a letter of allotment from the government agency is required.
6. Documentary evidence of the commencement of business.
7. The constitution’s Lease Deed.
8. Documentation of no illegal development.
9. The land-owning agency must provide a NOC (No Objection Certificate).
10. Khata Certificate and extract of Khata
11. Sanction plan

Steps to get a trade license –

It is necessary to follow the following standards depending on the applicant’s location:

• The candidate must apply online and attach the required documentation. The offline option requires the applicant to bring all required documentation to the appropriate authority. 
• To apply for an online trade license, the applicant must navigate to the prescribed website page.
• Following that, the applicant will receive a pop-up message outlining the terms and conditions of the trade license.
• The applicant must click on the accept option on the application form.
• The applicant would then complete the relevant information and facts concerning the trading license.
• After submitting the form, the applicants must pay the stipulated trade license payment amount to the authorities.
• The online license registration system provides a special mode in which documentation can be checked electronically. The applicant is responsible for completing these tasks and submitting the necessary documentation.
• After this, the applicant will receive confirmation that the trade license is successfully registered.
• The applicant will be notified and will obtain the license within 8-11 working days.
• Metropolitan areas typically receive trade licenses faster than remote areas.

FAQs about Trade license

Q1. How do I renew my trade license if it expires?

Ans: If the license has expired, the applicant may apply for trade license renewal. If not, the applicant must show to the appropriate municipal authorities the existence of the trade license.

Q2. What penalties are imposed for failure to comply with the license requirements?

Ans: The municipal corporation may impose the following penalties:

• License revocation in the event of non-compliance with the license terms

• Penalty for violating the license’s terms and conditions; or

• In addition to this, the municipal government may initiate prosecution.

Q3. Can a company apply for a license?

Ans: Yes, a company may apply for a trade license. The organization must provide paperwork along with other details, like the Permanent Account Number (PAN).

Q4. How do you obtain a trade license in India?

Ans: This license can be obtained by submitting a trade license online application to the local municipal government. Without a license, an applicant cannot conduct business or provide services.