Are you thinking about starting a new business and wondering what paperwork you’ll need? One of the most significant documents to start a business or trade in a specific municipal limit is a trade license. Let us describe the trade license and its benefits in brief.
If you’re wondering, “What exactly is a trade license?” A trade license is required for a company to legally carry out specific activities. It is a legal document that gives a corporation credibility and allows it to execute specified operations in the country where the trade license was given.
This type of license is only valid for the activity for which it was initially given. It does not grant any special license to engage in any activity other than the one for which it was issued.
When seeking loans or capital for your business, you may be required to provide a trade license. It will almost certainly be required if you wish to open a business checking account. It will be especially useful while hiring personnel. The License Department, an authorized agency that specializes in awarding firms the right to do particular activities, issues a trade license.
In simple words, a trade license is a license or permit granted by a municipal corporation to conduct a certain business at a specific address. It ensures that citizens are not harmed by health hazards and nuisance caused by improper trade conduct.
What is a Trade License?
A trade license is a document or certificate that authorizes the applicant to begin a specific trade or business in a given area or place. The trade license holder may not utilize it for any other work or business.
To begin any business in a specific area or location, a state, corporation, or municipality will require trade license registration from the involved central or state government. To get registration, the applicant must first comprehend the jurisdiction in which the business is located as well as the applicable Act.
The trade registration application should be submitted within 30 days of beginning a business. When an application is submitted, a trade license is normally issued within 7-15 days. In most states, the application for license issuance or renewal will be made to the commissioner of the corporation.
Why do you need a Trade License?
Trade licenses have been adopted in the country over the previous forty years and are regulated by state governments through municipal corporation statutes.
This assists in ensuring that no one is harmed in various ways by any trade or business’s nuisance and health dangers.
The government has made it a requirement to conduct any specified business or trade in a specific place and to ensure that no one is indulging in unethical business practices.
This license promotes social harmony by ensuring that all businesses follow necessary regulations, guidelines, and safety precautions. This license was made mandatory for the government to be able to regulate various commercial activities in the country.
The primary goal of issuing this is to protect the business environment and locality environment by limiting persons from conducting specific sorts of companies from their residential location.
When should someone get a Trade License?
If you want to start a business, you must first obtain a trade license. This will validate your capacity to carry out specific tasks. The trade license functions as a kind of permission sheet that allows you to carry out your operational processes. You must obtain a trade license at least three months before you want to begin your activity. Trade licenses became accessible in India throughout the previous 40 years.
Who has the authority to issue a trade license?
It is issued by the municipal corporation’s licensing department in several areas such as industries, engineering, health, and so on.
The license is authorized by the Indian government to regulate cities around the country.
By letters or documents/certificates, it confers authority to carry on any business or trade where it is located. The issue of the license varies by state, depending on the rules and regulations of local government bodies (Municipals).
Different types of trade licenses
- Industries licensed include small, medium, and large-scale manufacturing plants.
- Shop license: Dangerous and offensive trades such as firewood sales, cracker manufacturing, candle manufacturing, barber store, laundry (dhobi) shop, and so on.
- Restaurants, hotels, food stalls, canteens, meat and vegetable sales, bakeries, and other food establishments require a food establishment license.
Eligibility to apply for a business license
The following are the eligibility requirements for applying for a trade license:
- The applicant must be at least 18 years old.
- The applicant should have no criminal history.
- The enterprise must be legally permissible.
Documents must be presented to obtain a trade license
To apply for a trade license, the applicant must complete an application and submit it to the relevant Municipal Corporation together with all required documentation.
Several documents must be submitted based on the type of business that is being conducted.
- Application in the prescribed form]
- PAN Card along with the incorporation certificate if the applicant is any firm, LLP, or company.
- Aadhar is mandatory in the case of an individual applicant.
- Latest Municipality property tax payment receipt
- Lease documents or consent letters from the owner of the property.
- NOC from an immediate neighbor
- A certified layout plan of your trade building showing the business
- Katha extracts
- Katha Certificate
- Sanction plan
- Occupancy certificate
In metro cities, it usually takes 7-10 days to execute a trade license application. However, it takes longer in other small towns and rural areas.
How to get a Business Trade License
To apply for this license, the following prerequisites must be met, depending on the applicant’s location:
- The candidate must request the trade license certificate in person or online. To use the online service, the candidate must complete an application and attach the necessary papers.
- The applicant must present all needed documentation to the authorized authorities for the offline option. With this, the candidate must complete the application form with all of the required information to apply for this license.
- Depending on the demands of the candidate, different states will have different methods for applying for a license.
- To apply for an electronic trading license, the candidate must visit the website of the state in which the company will be conducted.
- Following that, the candidates will see a pop-up message containing information on the terms and conditions that each applicant must agree to obtain a trade license.
- By clicking the accept icon, the candidate must agree to the terms and conditions.
- The applicant may then fill out the necessary trade license information.
- The online platform for license registration includes an option for electronic documentation verification. The candidate must accomplish these activities and provide all required paperwork.
- After completing the step, the candidate will receive news that they have completed the trade license registration procedure.
- The candidate will be notified by their registered email address, and the license will be delivered to them within nine to eleven business days.
- In rural areas, the process of acquiring a trade license is usually faster than in big cities.
Fees for Trade Licenses
The rates for trade licenses vary by state because they are issued by the various state government bodies (Municipals). The license fees are set by the rules and regulations in effect in that state. Trade license fees are imposed on an annual basis in several states. Other states determine it depending on the proportion of annual firm turnover.
Important components of a Trade License
- Gumasta License: In Maharashtra, a trade license is known as a Gumasta License. In various sections of the country, trade licenses are known by different names.
- Application: An application for a trade license must be submitted to the relevant state government, company, or municipality. The application procedure might vary depending on the state rules.
- Verification: In some states, the trade license is only issued in person after verification by the appropriate authorities.
- Time Required for Processing: It takes approximately 10-15 days, depending on government processing time. After acceptance, this certificate can be downloaded online.
- Validity: In most states, trade licenses are valid for one year. Trade licenses can be renewed by paying the renewal fee at the end of each year.
- Penalties: If a registered person fails to comply with the registration requirements of the trade license and begins any trading activity before the issuing of this license, he must follow several conditions, rules, and regulations.
In addition, legal action can be taken against the defaulter.
Things to think about before applying for a Trade License
- Before you can start a business, you must first apply for a trade license.
- It is necessary to renew your license on an annual basis, and it must be renewed within 30 days of its expiration date.
- To obtain a trade license, you must be at least 18 years old.
- You are not permitted to have a criminal record (there may be exceptions to this).
- You must be competent to carry out certain legal tasks, such as reporting income and expenses.
How to apply for an online Trade License?
- To apply for a new trade license, the applicant must go to the GHMC website at www.ghmc.gov.in
- Applicants must register and log in using the one-time password.
- Fill out the online application form with all mandatory information.
- Following the submission of the application, the applicant must pay the Trade License fee via an online payment channel linked to the same application using a Net banking/Credit/Debit card.
- After making a successful payment, the applicant will receive an online receipt.
- In the login, the applicant can track the status of his application at several levels.
- The online application form will be reviewed on several levels, including by a field verification officer and final approval authorities.
- The field verification officer will verify the documents and make a recommendation to the Deputy Commissioner/Zonal Commissioner/Chief Veterinary Officer for approval/rejection/issuance of a trade license certificate. The final approval authority (ZC/DC/CVO) will review the application received from the field verification officer and can approve or reject it.
- After ZC/DC/CVO approval, the applicant can use the GHMC web portal and download the final digitally signed Trade license certificate.
By following these steps and filling in all the details correctly, you will get the e-trade license.
Trade License Payment
The Trade Licence service portal provides a digital interface through which citizens can apply for a trade license, follow their applications, pay online, and obtain their payment receipt and TL certificate. Citizens can also use this service to renew their trade licenses.
- Submit an application for a trade license along with the necessary data and documentation.
- Submit the Application Fee (if Applicable)
- CB officials will verify, inspect, and approve the application.
- Upon application clearance, pay the trade license charge and download the Trade Licence Certificate.
Other Reasons to get a Trade License
Here’s a closer look at why you might require a trade license.
You must follow the proper procedures to obtain a trade license to avoid being punished. Failure to obtain a trade license is regarded as an infraction in India. The Shop and Establishment Act requires that enterprises adhere to business-like working hours and that workers receive adequate benefits. A trade license will assist you to demonstrate that you meet these standards.
If you don’t have a trade license when you should, it indicates you’re running an illegal business, which can result in heavy fines and penalties.
A trade license is particularly advantageous because it protects you from being personally accountable for your company’s debts. You don’t want your taxes to be mixed in with your business taxes, and a trade license helps to keep them distinct. For your business, you must file a separate tax return. This means you’ll be able to take advantage of a wide range of company deductions. In reality, there are various corporate tax deductions available to you that you cannot claim on your taxes.
Another reason a trade license is essential is that it may allow you to join certain professional organizations. You would not be able to join certain groups if you did not have the license, which may include the Better Business Bureau, business-oriented groups, and investment groups.
A trade license is also useful for the following reasons:
- Personal security.
- Individual privacy.
- The ability to join Emirates Business Rewards.
Trade License Renewal
If the following conditions are met, the license can be renewed:
- These licenses are normally reissued between January 1st and March 31st of each fiscal year.
- This license is only valid for a year.
- To apply for a trade license, the applicant must do so within Indian territory.
- The application must be submitted 30 days before the expiration date of the preceding certificate.
- When renewing a trade certificate, all necessary documentation must be presented to the authorized authorities.
Finally, a trade license allows you to refer to your firm as a real one. This is especially useful when it comes to marketing your company. Customers and investors will be far more likely to work with you if you have a trade license.
A trade license is a measure taken by the Indian government to safeguard the general public from the health risks and inconveniences that a trader/business may cause. If the authorities discover a violation of the laws and regulations, hefty fines and penalties may be imposed. We hope that the information in this post has provided you with a clear picture of the process of obtaining a trade license.
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