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What are the benefits of Gumasta License?

07/07/2018 19:58:43 Shop and Establishment Act
What are the benefits of Gumasta license

The Municipal Corporation of Greater Mumbai was earlier named as Brihanmumbai Municipal Corporation. This is the primary civic body that governs the financial capital of India, Mumbai. It is one of the richest Municipal Corporations that was established under the Bombay Municipal Corporation Act of 1888. The annual budget of this municipal corporation exceeds that of many small Indian states. Headed by an Indian Administrative Officer, who serves as a Municipal Commissioner, the corporation is primarily responsible for the administering the civic infrastructure of the city and some of the suburbs that are located nearby. As a part of its duties, corporation serves in matters related to public health, sanitation, sewerage, water supply, birth and death registrations, gumasta licenses, maintenance of parks and public spaces, coastal safety, garbage collection and disposal and many more. As a part of its various roles, the municipal corporation also records the urban property and is responsible for setting up building norms and enforcing them thereafter.


One such registration that is done by the municipal corporation is regarding the kind of businesses that run in its jurisdiction. Such a registration is commonly referred as Gumasta license. The license or the registration certificate that is provided by the authority allows an individual to pursue business at a particular place. Further, obtaining Gumasta ensures a business that it can develop without any complications. For instance, the license is a basic requirement for opening a current account or to get a loan from the bank and financial institutions. Also, Gumasta is required for a business to proceed for Goods and Service tax (GST) registration. In simple words, Gumasta is a must for any business to be recognized by the Government or bank irrespective of the size and type of business.


Here are a few steps that one must follow in order to get a new registration certificate:


  • An employer who has more than 10 employees working under him has to submit Form A along with undertaking and prescribe fees to the Inspector of the local area.

  • In case of the partnership; a partnership deed and in case of a company; an incorporation certificate along with the list of directors has to be attached along with the duly filled application.

  • The application has to be submitted within 30 days after commencement of business in ward’s Citizen Facility Centre.

  • The area Inspector shall verify the correctness of the statement made by the employer in its application by visiting the premises where the business is situated.

  • Inspector will submit the verified Form A to obtain the order of the Senior Inspector for issue registration certificate.

  • The Senior Inspector will issue a registration certificate within 15 days from receipts of application.


The diagram below will give a better understanding of the application procedure:


While the procedure may appear to be simplified, yet it is a cumbersome process. It is advised to take professional help in obtaining the license. This is because there are chances that the application has some errors. These errors can be traced through the tracking system once the application is being processed at a Citizen Facility Centre established nearby. The process is, therefore, a tedious one. Then, one would question as to why should Gumasta license be obtained? This is because of the advantages that the Gumasta has to offer and benefits one can prevail.


Benefits to Businessmen or Employer:


Here is a list of benefits that businesses can attain by registering for Gumasta:


  1. Government schemes: once the business has received its registration certificate, the business is then considered eligible for all the benefits and tax subsidies that are offered by the state government of Maharashtra. Some of the schemes that can be availed post-Gumasta license are:


  • Prime Minister’s Employment Generation Programme: All manufacturing projects that involve an investment up to INR 25 lakhs and service projects that involve an investment of INR 10 lakhs are provided financial assistance under the scheme. Loans are provided from public sector banks, regional rural banks, and Industrial Development Bank of India. Here, obtaining Gumasta is a prerequisite. The loans are provided for upto 90% of the project costs. For those entrepreneurs belonging to SC, ST, OBC, minority, women, ex-servicemen, and physically handicapped, loans are provided up to 95% of the total project costs. Here projects costs include both capital assets cost as well as the working capital.


  • Seed Money Scheme (SMS): In this scheme, soft loans are provided to unemployed persons so that they are encouraged to become entrepreneurs. Part of the margin i.e. the part of the money required is met by availing bank loans. All Gumasta license holders can apply for the scheme provided they have plans to establish an industry or service business with a project cost of up to INR 25 lakhs. In such a project, entrepreneurs are offered assistance of 15% of the total project costs. For those entrepreneurs belonging to SC, ST, OBC, NT/VT, and physically handicapped, assistance is provided up to 20% of the total project costs. However, the maximum amount of this seed money is INR 3.75 lakhs. The rate of interest for this is 6% per annum after the holiday period of 3 years.


  • District Industries Centre Loan Scheme: under this scheme, financial assistance is provided in the form of seed money or margin. The purpose of the assistance is the promotion of tiny industries that lie in the vicinity of semi-urban and rural areas such that they involve generating employment opportunities. The establishment can be in town or rural areas. An assistance of up to INR 40000 or 20% of the total investment is provided to entrepreneurs of the general category. The assistance is extended for up to 30% of the total fixed capital investment for entrepreneurs belonging to a scheduled caste or scheduled tribe categories. The maximum offered under this category is INR 60000. The loans offered as assistance under the scheme have to be repaid to the State government with a rate of interest of 4% within a time period of 7years.


  1. Proof of Legal entity: It gives the business a proof of legal entity which means that it will give a business legal authenticity and authorization for running the business through structural premises like an office or business layout. This is essential to begin any kind of business, establishment, or shop in Mumbai. It is necessary to keep at least one legal entity proof on the business premises at the time of its operation such that it shall give the employer the right to do any business in Mumbai or the state of Maharashtra.

  2. Bank Transactions: For conducting any business transaction of any amount of money, one requires a business bank account that should preferably be a current account. While all banks require at least one legal entity proof to open a current bank account, most banks prefer Gumasta license. Also, if the business is looking for financial assistance in the form of bank loans, Gumasta license is preferred there.


Benefits to Government:


While it earns the Municipal Corporation some extra income through the prescribed fee they charge for granting the license, it is also a complex process for them. Therefore, on 15th August 2001, the Municipal Council of Greater Mumbai introduced a single window clearance system. This system has made the application process transparent and efficient and has been effective in providing speedy licenses and strict regulation. Under this system, any owner of the shop or establishment can settle dues at a single window rather than visiting and dealing with different departments separately.


Besides this, the registration is essential for the purpose of government record keeping. Such records are helpful for different government procedures and departments and avoid fraudulent acts by businesses. The records are also considered at the time of policy making.


Benefits to Employees:


Every month, a million Indians get eligible in terms of their age, to join the huge workforce. However, the job market has not been able to match the needs of this rising number of job aspirants so created. As a result of this, the unemployment rates have been on a rise. The employment options that are existing tend to provide low working standards and low remunerations to the workforce. This is because of the huge aspirants that aspire for one job. The situation has worsened over the years especially because of the huge influx of migrants that enter the Mumbai city from villages with an aspiration for a better life. Thanks to the slow industrial growth in India and increasing mechanical working jobs (instead of labor jobs), their dreams are not fulfilled.


The Shops and Establishments Act in each Indian state governs the labor laws. Similarly, the Bombay Shops and Establishments Act, 1948 governs the working standards, working hours, wages, and checks the exploitation of workers. Any shop or establishment that is registered and received the Gumasta license must abide by the rules of the Act. Here are some of the rules that favor employees and are mandatory for Gumasta registered employers to follow:


  1. Opening hours of the shop: No shop shall open before 7 a.m. unless the shop deals with milk, vegetables, fruits, fish, meat, bread or any other shops dealing with perishable goods. For such shops shall not open before 5 a.m. Sometimes, the state government fixes opening hours for different types of shops depending on the type of business and different areas.


  1. Closing hours of the shop: Shops are required to be closed by 8:30 p.m. Shops that sell bidi, cigarettes, matches, and other ancillary articles should close by 11 p.m.


  1. Hawking is also prohibited before opening an after closing hours of the shops.


  1. The employees working in any shops and commercial establishments must be given rest in each day. This means that the continuous work of an employee must not exceed more than 5 hours. Interval of at least one hour has to be provided. For employees involved in manufacturing processes, the rest interval should be provided for at least half an hour.


  1. The spread over of an employee in any shop or establishment shall not exceed more than eleven hours in any day. In premises that are entirely closed, the spread over should not be less than three hours.


  1. Every employer of a shop or commercial establishment must remain close once a week. The calendar detailing the list of holidays must be given at the beginning of the year to its employees. Any further change made in the holidays must be conveyed to its employees.


  1. Wages should not be deducted if the shop or establishment remains closed on any day. Since the employee is given wages for daily employment, the employee has to be paid a daily wage for the day the shop remains closed.  


  1. The opening and closing hours for residential hotels, hotels, restaurants, and eating houses are different. Separate rules have been made for them regarding spread-over, rest interval, and holidays are given in a week.


  1. Employers must provide its employees with an identity card that mentions the name, postal address, the age of the employee, hours of work, rest interval, and holidays granted. The signature of the employer and its details also have to be provided here. The ID card is a must for all employees working in residential hotels, restaurants, eating houses, theatres, public amusement places and entertainment places.


  1. No child is allowed to work in an establishment or shop. For this purpose, the child has been defined as:

'Child' means a person who has not completed his fifteenth year of age; but does not include a person who has, before the date of commencement of the Bombay Shops and Establishments (Amendment) Act, 1977, completed his twelfth year of age even though he has not completed his fifteenth year of age, if he is on the day immediately preceding the said date an employee in any establishment to which this Act applies.


  1. Young persons or a woman who does not belong to the family of the employer are allowed to work post 8:30 p.m.

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