Trade License Eligibility and Documents Required

Trade License

Every business organization requires a trade license from regulators, be it the municipal corporation or the state government. This license specifies the range of their business operations i.e. what they are allowed or not allowed to do. A trade license is also essential for accessing the government benefits introduced to promote trade and commerce. Different types of businesses are issued licenses by different levels of government, such as the municipality, district administration or even state government. In India, every state has its own set of rules and regulations so staying updated about them is crucial. 

What is a Trade License?

The concept of the trade license is simple. It is a certificate of permission for trading given to the applicant to trade in a specified area or field. The certificate allows traders to effectively commence operations. Every business requires a separate trade license. Also, if a business is sold or otherwise transferred from one owner to another, a fresh trade license is needed to continue operations. This implies that trade licenses are not transferable.

Why was Trade License Introduced?

Trade Licenses were introduced in India nearly forty years ago. Municipal Corporations under various State Governments have exclusive responsibility for regulation in this area. Basically, issuing a trade license to a business means that the government has checked and verified that the business is following all the laws and guidelines applicable to it. It also ensures that unethical business practices are prevented or detected. In addition, issuing a trade license implies that the cost of doing business, such as environmental pollution, does not have to be incurred by the public at large, and that the responsibility of managing such risks can effectively be pinned on the business. 

Who is Eligible for a Trade License?

A trade license eligibility requires meeting the following criteria:

1.       The applicant cannot possess any criminal records.

2.       He or she must be above 18 years of age.

3.       The pitched business proposal must be legally acceptable. 

Who issues a Trade License? 

The trade license check is done by the municipal corporation in the respective state government where the business will have its registered office and also where the operations will be carried out. Different municipal corporations require the business to pass various checks, such as those regarding health and safety etc. before the license is issued.

What are the Documents Required?

1.)    The documents required for trade license vary depending on the kind of business intended to be set up.

2.)    PAN card with incorporation certificate is required for firms, LLP’s and companies.

3.)    The most recent municipality property tax payment receipt.

4.)    Aadhar card is mandatory in cases of individuals.

5.)    NOC form from your neighbor next door.

6.)    Letter of consent or lease documents from the property owner.

7.)    An authorized layout plan of your trading building, showcasing all rooms.

8.)    Khata extract

9.)    Khata certificate

10.) OC or occupancy certificate

11.)  Sanction plan 

When is the Fresh License Issued?

The fresh license is issued when all the eligibility criteria are met, trade license checks are carried out and the trade license payment has been made. Metropolitan cities normally take 7-10 days to issue the certificate. In small towns and rural areas, more time may be needed.

What is the Validity?

A trade license status issued remains valid for one year and thereafter must be renewed every year, generally, between 1st January and 31st March every year. Renewal applications need to be made within 30 days of expiry otherwise, a fresh license has to be applied for.

Renewals require:

1.The last trade license

2. Previous year’s challans

3. Latest receipt of paid property tax