A trade license is a certificate or a document that gives the authorization to the applicant (person seeking to open a business) to initiate a particular business or trade in a particular location or area. However, the license does not permit the holder to any other business or trade than for it is issued. Furthermore, this license does not pass on any sort of property ownership to the holder of the license.

Trade License is issued with safety standards, guidelines, and relevant laws to make sure how business is being done and to safeguard the community within the state. Trade License is observed and issued by the State Government for regulating trade and business within the city.

Business entities not adhering to the rules of trade license can face a heavy penalty. Therefore business owners must apply for a trade license to the specific state authority without subsequent delay. Trade license registration is time-consuming and a costly procedure.

In the last forty years, trade licenses have been introduced in the nation and are being regulated through municipal corporation acts by the state governments. This helps in making sure that no one is severely affected by health hazards and nuisance of any business or trade. It has been made essential by the government to carry out any particular business or trade in a particular location and to ensure that no one is carrying out any unethical business practices.

This license was made mandatory to ensure that the government can regulate various trade activities in the country. The main objective of issuing this is to control the locations by restricting the people from executing certain types of businesses from their home location to maintain the locality environment and business environment.

Categories Of Trade License 

There are three categories under which a trade license is issued which are as follows :

1. Industrial License: Industrial license is issued to a business engaged in manufacturing industries operating in small, medium and large scale.
2. Shop License: Shop license is issued to a business involved in carrying out offensive and dangerous activities such as candle manufacturer, cracker manufacturer, firewood shop, etc.
3. Food & Shop Establishment License: This type of license is issued to the business engaged in food business such as hotels, canteen, restaurants, food stalls, etc.

Eligibility for a Trade license 

The eligibility required for a trade license is as follows :

1. Applicants must have crossed the minimum age of 18 years.
2. Business carried out by the applicant must be permissible under law.
3. There shall be no criminal record of the applicant.
4. Trade License can only be assigned if the business is conducted in a permissible area like Commercial, Local commercial or Notified commercial.

Documents Required for Trade License 

The list documents required for the registration of a trade license are as follows :

1. Address Proof and Identity Proof – Individual.
2. Affidavit
3. Certificate of Incorporation, MOA, and AOA of the company.
4. Canceled Cheque and Bank Statement.
5. Certificate of Incorporation, MOA, and AOA of the company.
6. Legal Occupancy document proof of the establishment/unit or allotment letter of the government agency.
7. Documentary proof of establishment of trade.
8. Lease Deed of the constitution.
9. Documentary proof regarding the non-existence of unauthorized construction.
10. NOC (No Objection Certificate) from the land-owning agency.
11. Katha certificate
12. Sanction plan
13. Katha extracts

Renewal Of Trade License 

The validity of a license issued by the municipal authority is for a period of 1 year and is needed to be renewed every year. Trade licenses in India are renewed in between January 1st to March 31st. The renewal application for the trade license is to be made within 30 days from the date of its expiry. In case of delay in filing the renewal, application attracts fine depending upon the rules and regulations of the issuing Authority. There are certain documents required for the renewal of trade license which are as follows :

1. Original copy of the trade License.
2. Challan copies of the previous year.
   
3. The Updated property tax paid receipt.

Processing time for Trade License 

Trade license has to be obtained within seven to ten days in metropolitan cities, if documents are not filled according to the rules, it will take time as in thirty-five to forty working days. It has to be acquired within thirty days of commencement of business in other small cities and rural areas.

Penalty for Non-Compliance 

The appropriate municipal authority of the area orders obedience from the businesses once the trade license is issued. The entities are required to follow the by-laws mentioned and if they are not complied with they attract penalties for the infringement of the provisions such as :

1. The license owner that has committed a breach of the license will be liable to pay the penalty as may be prescribed by the MCD officers
2. If the applicant doesn't renew his license within the time prescribed he is levied a 50% of the fee as a penalty.
3. If the business activity performed is hazardous or dangerous for the surrounding or neighborhood the trade license for the business can be canceled.