What is Trade License?

To commence a business or trade in a particular geographical location the individual needs to obtain a certificate or license from the state government (MCD). This licence in no way provides ownership over the property.

Every country around the world has rules and regulations that are mandatory before incorporating and operating a business in any geographical area. In India, the person is expected to register his company or business and also obtain permission from the municipal authority to carry out the business in that geographical area. The permission is granted by MCD is commonly referred to as a trade license.

The primary objective to introduce trade licence was to see that no individual or person establishes a business in a residential area. It is must that the application for Trade license to be filed within 30 days of commencing the business.

Types of Trade License

The trade license application is divided based on the type of business that person is involved in:

types of trade kicence

Type A: Food

All food serving premises need to obtain the following trade licence before commencing business in a premise.

Type B: Manufacturing

Any premises that have large manufacturing and processing unit need to obtain this license. Businesses such as milling units fall under the category.  

Type C: Hazardous

Businesses that have high-risk factor need to obtain this license. Companies involved in the manufacturing of the firecrackers or timber wood will fall under the category.

The main purpose of making trade license necessary is to control the location of any business and stop them from carrying out business in a residential area. The businesses carrying out the trade of any hazardous category have been limited to one specific area with safety measures prescribed. 

Eligibility to Obtain License

Every business activity that is being carried out in a particular area needs to obtain a permit from the state government and to ensure that no illegal or hazardous business is carried out the following parameters have been set:

  1. The applicant should be of 18 years at the time of making the application and with no criminal record.
  2. The nature of the business should be legally sound.
  3. Businesses involved in any food serving services, Service trade and manufacturing units have to obtain a license.
Remember: The eligibility criteria is for a commercial place only

Process of obtaining a Trade license

You might have registered your business or company but you will require various licenses before starting the activities involved in your business such as FSSAI, GST and Trade license.

Trade license can be easily obtained online by submitting the document with the municipal corporation of the respective state along with the required fees. The entire process may take up to 40 days.

Documents required for trade license

Address Proof

Address Proof

Address Proof

Rent Agreement

Sales and Purchase Bills

PAN Card

Identity Proof

Tax Reciepts

 

  • Address proof and Id proof of the applicant
  • MCD tax receipts
  • Rent or lease agreement
  • If the application is made on behalf of the company, then the applicant must submit MOA, AOA and incorporation certificate.
  • Pan card of the company

Where to Get Trade License?

The first basic step in obtaining the license is to know where to apply one. Only state government or MCD has an authority to grant you one and hence the application is to be made with them within 30 days of incorporating or starting the business. Each area has different municipal body governing them hence, the applicant will have to locate the MCD body governing them based on the area code of operating business.

NOTE: Restaurants need to obtain health license along with fire safety plan approved from the fire department.

Validity of Trade License

The validity of a trade license is for a term of 1 year after which the certificate needs renewal with the fees based on the area of the premises. It is necessary to see that whatever business is being carried out, as per the local laws of the geographical area. The renewal should be done before 30 days of expiry.

Benefits Of Obtaining Trade License

Implies Competence

Commonly licenses are granted after testing something and in case of trade license, the municipal corporation officers are expected to check whether the particular business can operate in the specified area or not. If the license is granted it basically implies that the business is competent to conduct operations in that particular area.

Legally Safe

Trade license implies that the working environment of that particular business is safe and is in compliance with the rules and regulation applicable in the state. This would also mean that the business cannot be shut down based on the fact that it is not safe for that geographical area. Saves owners from certain kind of liabilities as well.

Penalties Imposed

An analogy of a trade licence can be drawn with the driving licence as the person without driving license drives is going to attract penalties and in certain cases imprisonment similarly person if starts operating a business in an area without prior approval from the state government is likely to face shutdown as well as heavy penalties. 

The penalties issued on such business depends on the type of operation being carried out and in what area.

Cost of Filing Trade License

Fee structure of a trade license will differ based on the nature of the business carried out. As can be seen below:

Trade Name Trade License Govt. Fee
Blacksmith Rs.1450
Book Shop Rs.1750
Electronics Media Shop Rs.1750
Gas Agency Rs.8650