Every place of business in India requires a valid Trade Licence to carry out its specified business activity. Such a Trade Licence is issued by the Municipal Authority in whose jurisdiction the place of business is located. The Authority issues these licences based on directives given to it by its State Government. Background
Business operations can often be either a nuisance or hazard to neighbours. For instance, a service set-up operating late hours could be a source of noise pollution, parking problems in a residential colony while a trader dealing in chemicals could be a potential health or fire hazard. Trade licences certify that local authority is:
It is thus a regulation to safeguard common citizens from the adverse effects of business activities and to see that these are conducted in proper areas.
But thevery possession of trade license implies that the business is aware of the relevant rules, standards and safety guidelines. This further implies that the business will not deviate from these guidelines OR will seek to amend / apply for a fresh licence in case of change (of product/service OR change of premises).
Unauthorisedrunning of trade is an offence inviting penalty and prosecution. There is a great deal of variation from city to city and even within cities on such action. It should be noted though that in September 2018, BBMP in Mumbai fined 41 businesses found to be operating in residential zones, Rs.31,000 each as reported in the Deccan Herald of 26th September.
Owners are supposed to apply for their trade license before the start of the activity. Licences require periodical renewal on an annual basis andapplication for renewal must be filed at least 30 days before expiry of the current licence. Registration of Trade licences can often be a time consuming and expensive process. Charges also vary according to location.
Different categories of Trade Licences
Again, there is variance in requirement from Municipality to Municipality. In general what is required is:
The business to be run must be appropriate in Permitted Areas. Categories include: Commercial, Local Commercial, Notified Commercial, Mixed Land Use and even Residential Area (usually reserved to small shops of maximum 20 sq.m. and confined to the ground floor).
Trade License(s) are issued by the municipal corporation after clearance by its departments such as the fire brigade, sanitary, engineering, water, and in cases even land & estate departments (if encroachment/legality of occupation issues raise their head).
The two purposes of a Trade Licence are: to protect citizens’ interests (from nuisance and hazards) and ensure that business operate in zones earmarked or without objection to – said activity to safeguard against unethical practices The purpose of the Shops & Establishment Act Licence is: to protect worker interests e.g. issues of child labour, working hours and conditions, minimum wages, holidays and so on Both are almost invariably required.
There are significant variations depending on the Municipality with jurisdiction over the location. In MCD area, fees are linked to Circle Rate Category coupled to size of premise. A ceiling of Rs.50,000 has been set for the “A” category. A processing fee of Rs.1,100 (plus an online payment charge) is additional.