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Know All About Trade License

  • Posted By SuperCA
  • On 02 September

Know All About Trade License



A Trade License is simply a license or certificate issued by a municipal corporation in order to grant permission to any individual for carrying out any particular business in a defined area or location. A trade license is needed by a business in order to legally carry out various activities. It acts as a document that provides legitimacy to a company and gives it the ability to perform certain actions within the area for which the license was generated. This type of license does not provide any special permission to carry out an activity other than the one it was issued for.The applicant will have to ensure that the business is carried out as per the requirements of the license. Also, this license does not pass on any kind of property ownership to the holder of the license.


Trade License was introduced in India 40 years ago and now it is being regulated through municipal corporation acts by the state governments. The key motive behind this is to ensure that the residents are not adversely affected by health hazards and nuisance by the improper carrying of trade. It has been made necessary by the government to carry out any particular business or trade in a particular area and to ensure that no one is carrying out any unethical business practices.


Key objectives of a trade license


➤ 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 business environment and locality environment.

➤ For monitoring the activities conducted by any particular business.

➤ Issuing a license would show that a business is following compliance with respect to the government.

➤ The authorities can check if the business is breaching any law or causing any nuisance in the society through this license.

➤ It builds trust and goodwill among the customers. Businesses with such licenses are more reputed in the eyes of consumers

➤ For creating harmony in the society. The license ensure that every business is following relevant rules, guidelines and obeying the safety measures. This license was made obligatory to make sure that the government can regulate various trade activities in the country.

➤ It also regulates the use of nature-friendly substances to conduct activities within a particular locality. Businesses having this form of license would take the necessary precautions while carrying out a particular


Various categories of trade license


Industries license: Small, medium- based and large scale manufacturing units/factories

Shop license: Dangerous and offensive trades like a sale of firewood, cracker manufacturer, candle manufacturer, barber shop , laundry shop etc.

Food establishment license: Restaurants, hotels, food stall, canteen, the sale of meat & vegetables, bakeries etc


Eligibility Criteria for Getting a Trade License


The person needs to submit an application for a trade license before actually starting to  conduct business. He/She has to ensure the following criteria in order to be eligible before applying for the license:


➤ The applicant or individual must be a major i.e He/She must be more than 18 years of age.

➤ The applicant should not have a form of convictions or criminal past records.

➤ You must be able to execute require legal work, such as reporting income and expenses

➤ The business of the applicant must not be against any provisions of law in force.


Documents Required

➜ Business’s Address proof

➜ Applicant’s ID proof (Aadhaar card)

➜ PAN of the individual (in case of proprietorship, else PAN of the firm of company)

➜ Memorandum of Association (MOA) and Certification of incorporating (in case of Companies)

➜ A latest municipal property tax receipt in case the premises are owned, else lease document or consent letter of the owner of the property where the business is registered.

➜ Any form of Khata Extracts and Certificates.

➜ NOC of the neighbours (nearby property owners)

➜ Certified layout plan of your trade building showing the business, working or washing or resting areas.


For getting a trade license, the applicant is required to submit the application either online or offline to the concerned Municipal Corporation along with all the necessary documents listed above. In general, it takes 7-10 days to process the application for a Trade license in metropolitan cities. However, it takes a longer time period in other small cities and rural areas.


Penalties provisions for not taking License


There are severe legal consequences if the applicant does not take the license:

In case the applicant does not apply for the trade license, and the business has started its operations without relevant licenses, then a penalty or fee would have to be paid by the concerned individuals. The defaulter can also be prosecuted if non-compliance is continued.

Also, there are different consequences which can be imposed by the relevant authorities. Ignoring trade license may lead to unnecessary and unpleasant consequences. Hence, being an honest citizen of our country, individuals must obtain the license before actually starting to conduct their business. Due to our technological advancements, getting a Trade License is not a time-taking process. They should also ensure that once a trade license is taken by him/ her,  compliance is followed and maintained.