Business Licenses in India: Registration Process and Types

All Indian businesses need a commercial permit from the government to start their business and engage in commercial activities. The state municipality issues this permit for any business to begin its operations after verification and checking if the business has complied with the state laws. If you are getting to start your business and need to know how to obtain your business license, this blog will be informative for you.

What is a Business License?

Let’s first ease out the answer to what is a business license. In India, a business license is a legal document that is issued by the state municipality, which allows a business to manage and operate its trade in a defined territory. A business license serves as the gateway for a business towards a smooth and legal business domain. The need for a corporate license is that it safeguards the reputation of the business and also avoids all types of penalties. Without having a suitable license, your business can run into strong risks and may also halt its operations. Licenses act as legal approval for conducting business. It thus provides strong support to the business for running its operations such as logistics, recruitment and manufacturing within the legal jurisdiction.

Benefits of License

A business is not permitted to run without authorisation from the state law or the central government approval. But that may not be all. The advantages of holding a license extend to multiple other points too:

Active Legal Compliance

A license is a proof of complying with state law. Companies are required to obtain a license or else their business may be declared as an illegitimate trade and may face governmental penalty. A license is a written proof of state compliance for carrying out any business activity permitted by the law.

Builds Public Trust

A business exhibiting trade permits enjoys higher consumer credibility. You must have seen various businesses exhibiting a GST certificate within the business premises, which usually makes the customer increase their reliability on the business. Moreover, consumers feel safe to buy products and services from the business as a business license refers to proof of legal compliance.

Types of Business Licenses in India

There are various types of licenses that businesses have to procure and adopt, based on their locations, nature of business and activities. For example, let’s say you are running an electrical component manufacturing business in Karnataka. You will require a special factory license as mandated under the Factories Act, 1948 for getting approval to start manufacturing. The different types of licenses are required to provide workers safety and make sure that environmental violations are not taking place. Here are some of the key business licenses that a business would require:

Trade License

A trade license is a legal document provided by the state municipality for letting a business engage and operate in its regular business activities. Usually procured by the MSMEs as well as small-scale businesses, trade licenses are required for routine business operations. These licenses however may differ from city to city, as they depend on the state municipality laws.

Documents required to apply:

• Proof of identity such as an Aadhar Card, Voter’s ID Card
• Property Tax Receipt
• Property Lease Agreement
• NOC Certificate from property/building owner
• Partnership Deed Agreement
• Memorandum of Association (in case of dealer)

GST Registration

A Goods and Services Tax (GST) registration is needed for any businesses that are involved in the intrastate supply of goods and services. For taxation and being a responsible business, every type of business needs to possess a GST registration certificate. However, only those businesses whose revenue crosses the threshold limit of 40 lakhs. Obtaining a GST certificate is mandatory by the Goods and Services Tax Act, 2017, hence below are all the details of the documents needed:

Documents required to apply:

• Identity proof of business owner such as Aadhar/Voter ID Card
• Certificate of Incorporation
• Letter of Authorization
• Ownership document
• Property Tax Receipt
• Partnership Deed
• Electricity Bill
• Rent Receipt with NOC Certificate

Learn in detail about how to register for GST for your business.

Shops and Establishment License

If your business has physical shops or outlets and runs physically, your business will be required to possess a license for that. The Shops and Establishment License is a formal document that allows any businesses to run and manage their businesses. This license varies across states though. For example, in Karnataka, the license for running a business will require an e-karmika license that can be applied online. This license ensures that your shop employees are getting adequate wages, and also the shop is complying with all state laws.

Documents required to apply:

• Business address proof
• Identity proof of business owner
• Authorization Letter
• Payment receipt/Challan
• Signed Registration Form

Professional Tax Registration

A professional tax registration certificate is a compulsory certificate issued by the state government to every taxpayer. The payment for this type of corporate tax is mandated by the state law and is different from income tax registration. Every employee in an organisation needs to pay this tax, otherwise their employment can be terminated or declared as not legal.

Documents required to apply:

• Certificate of Incorporation
• Organization PAN Card
• Address proof of business owner
• Identity proof of business owner
• Shop Registration Certificate
• Memorandum of Association
• Bank Account Statement

Food Safety and Standards Authority of India (FSSAI) License

The companies that are manufacturing and dealing in food items, have to compulsively obtain a license from the Food Safety and Standards Authority of India (FSSAI). The Food Safety and Standards Act, 2006 (FSS Act) has made it mandatory for every food business to obtain this business license registration for assuring food safety compliance. Businesses such as retail food businesses, food bakeries, dairy units, slaughterhouses, wholesalers and retailers of food products and e-commerce food suppliers have to get the FSSAI registration.

Documents required to apply:

• Declaration of Business Proprietorship
• Registration Certificate
• Food Recall Plan and Guidelines
• BIS License (required for mineral water manufacturers)
• CGWA NOC certificate

Importer Exporter Code (IEC)

This is a unique number provided by the Government of India for all those businesses that are engaged in the trade of imports and exports. If your business runs imports and exports, IEC number registration is a compulsory requirement. This license is issued by the Director General of Foreign Trade (DGFT) and is presented as a numeric code to the business.

Documents required to apply:

• PAN Card of business
• Business owner identity proof (Aadhar Card/Voter’s ID Card)
• Certificate of Incorporation
• Proof of Address
• Lease Agreement Document
• Rent Agreement Deed
• Bank account statement of business

Read about how to start an import-export business in India with easy steps.

Industry-Specific Licenses

There are several specific trade licenses for every industry. Pharmaceutical, education, food industry and a few others. If you are building your brick-and-mortar shop or an online business in any of these industries, you would be requiring a business licensee to operate.
Here are some of the industries that require a trade license for operating:

Medical Shop Trade License

This is a specific licence issued by the state municipality board, for all businesses that are running a pharmaceutical store or a medical store. Moreover, a health license provides the legal authority to trade all pharmaceutical items as well as specialised drugs which require a trade license to sell.

Documents required to apply:

• PAN Card of business
• Aadhar or any similar identity proof of the business owner
• Plan of shop premise
• NOC from the City Councillor or Police Commissioner
• Rental or lease agreement papers
• Site sanction papers

Acid/Poison Shop License

Acid or poison businesses are highly corrosive materials and require a proper trade license to be sold to the public. According to the Poisons Act, 1919 any person willing to start their acid or poison factory may first apply for a stock or a seller account. The District Magistrate will inspect the nature of the business and safety measures before granting permission.

Documents required to apply:

• PAN Card of business
• Aadhar or any similar identity proof of the business owner
• Proof of Address
• Lease Agreement Document
• Rent Agreement Deed

Business License Registration Process

Applying for is different, and depends on the nature of business. Here is a general outline of all the steps that you need to follow to apply for a trade license:

Step 1: Visiting Official Portal

The first step to applying for a specific business license is to visit a government portal and check out the online application process. Often government sites show all the necessary steps and requirements that one has to follow for applying for a license. For example, in case you are willing to apply for a license from a poison shop, you have to apply online in the seller account and get verified by the district magistrate.

Step 2: Collect Required Documents

After you know the required documents, you may have to get scanned copies of each or simply collect them in a specific place. Proof of documents includes proof of address, identity proof, business registration information, and a few other necessary documents.

Step 3: Fill Application Forms

Fill out all the application forms correctly and carefully. Any discrepancy may result in processing delays or even rejection. Usually, you may have to fill in details such as address, full name, age and other things.

Step 4: Submitting Application

• Application Submission: Apply, with all the documents required, to the concerned authority (online or offline). One has to submit their application online along with the required documents. The submission process can take a longer time, sometimes a few hours for successful submission. During submission, you may also have to pay the required fees as prescribed by the licensing authority.
• License Issuance: After processing and approval of the application, the license will be issued. It may take a few weeks or months, depending on the concerned authority.

Conclusion

Getting a business license in India is the initial step to starting a business with legal approval. As for MSMEs or SMEs, applying for a business license is different from applying for a private or public limited company. The need for a license is that it acts as a legal adherence and also improves customer trust in the business. A business needs to comply with municipality and state laws before beginning its venture, for which a business license is an indispensable part. Consulting a professional business consultant or legal professional will greatly ease the process and guarantee that you're meeting all of the necessary regulations.

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