What is Trade License - Benefits, Documents, Procedure, Renewal

What are the main purposes of a Trade license? For example, the government issues a trade license to meet business requirements. Other than that, the commercia

What is a Trade License?

Trade license is simply a license or certificate that a company or individual needs to conduct business. This approval is usually granted by the respective state government for a specific municipal boundary. This license allows the applicant to open a business in a specific region. The applicant must ensure that the business is conducted in accordance with the requirements of the license.

This license does not entitle the applicant to engage in any business other than that for which it was issued. Apart from that, the license does not permit the person to secure ownership or any form of legal ownership in the place of business.

Why do I need a trade license?

For 40 years, the government has enacted regulations on how private companies can operate. Therefore, this form of license is only used by a company to carry out a specific activity. These  licenses would only be issued by the government to individuals to carry out specific activities in a specific location.

The government of a particular municipality or state would issue these licenses to companies to allow them to operate. Obtaining a business license is mandatory for a specific person. This license is an essential and mandatory document issued by a specific municipality. Companies can carry out specific activities in a specific area. These licenses are also provided to verify that the company is acting in accordance with legal requirements.

     Trade License

What are the main purposes of a Trade license?

For example, the government issues a trade license to meet business requirements. Other than that, the commercial license is granted for the following reasons:

  1. Regulate business in a given locality or community.
  2. Ensure that anti-competitive practices are not used in a particular locality or community.
  3. Monitor the activities of a company. Apart from this, local authorities can constantly monitor the activities of a company.
  4. The issuance of such a license would indicate the company's compliance with government regulations.
  5. A local authority can verify whether the business is breaking any law or causing harm to society through this license.
  6. Companies with such a license are more respected in the eyes of consumers. Consumers would have more confidence in their services.
  7. By obtaining a license, companies would not use their home to do business. This form of regulation thus ensures the regulation of companies.
  8. This form of license also regulates the use of environmentally friendly substances to conduct activities in a given location. Hazardous chemicals and the like are not permitted as far as residential and community boundaries are concerned.
  9. Companies with this form of license would take necessary precautions when carrying out a particular activity. Companies that hold this license also follow guidelines issued by the city or state government from time to time.

 Types of businesses requiring a Trade license

    Trade License business

Food Business

Food companies are all companies that deal with food. This includes a facility that offers food and serves food. The following businesses require a commercial license to operate:

  • Hotels, restaurants, canteens
  • Shopping centres, theatres and nightclubs
  • Bakeries, pastry shops and cafeterias
  • Dairies, retailers and any other establishment that serves food

Trade and Other Related Services

Any trade or profession that involves personal services will also require obtaining some type of license. The following trades require this license:

  • Hair salons and barbershops
  • Internet cafes and lounges
  • Small production units
  • Average production units
  • Small industries

Manufacturing Industries

Any type of industry involved in manufacturing products would also need this license. The following industries would need this license:

  • Medium manufacturing industries
  • Large manufacturing units and industries
  • Classification of commercial licenses

Depending on the level of risk posed by the organization, Trade licenses are classified as follows:

         Classification of Trade License

Low Risk License

This form of license would cover any form of business that does not involve high risks. Restaurants and other types of eating places usually take this license into account.

License based on medium risk

This type of license is usually issued to establishments such as small and medium-sized businesses.

License based on high risk

This type of license is usually granted to industrial companies and large companies. Normally, this type of operation would carry a higher risk of handling other types of materials and substances. Normally the standards of supervision in these premises would be higher than a low and medium risk license.

Primary regulator of trade licensing authority

As mentioned above, this form of license is governed by the state agency or local authority. Therefore, an applicant must apply to the competent authority of a specific state in order to obtain the Trade License.

Only government and local authorities are required to issue these types of licenses. For example, if an applicant needs to apply for a Trade License to start a catering business in Bangalore, they need to apply to the Bruhat Bangalore Mahanagara Palike (BBMP). This application must be submitted online.

Therefore, depending on where the applicant wants to incorporate the company, a corresponding application must be made. Trade License applications can be made in more than 28 Indian states and union territories.

Eligibility criteria for applying for a Trade license

In order to apply for the above license, the applicant must ensure that the following criteria are met:

  • The candidate or person must be of legal age. This means that the applicant must be over 18 years old.
  • Applicant must not have a conviction form or criminal record.
  • The applicant's business must not violate applicable law.

Trade license application process

Depending on where the applicant is based, the following requirements must be met:

  • Applicant must apply online or offline for Trade License certification. For the online modality, the applicant must submit the application and attach the required documents. In the offline procedure (face-to-face), the applicant must bring all documents to the competent authority. At the same time, the applicant must fill out the application form with the information on the respective license.
  • Depending on the requirements of the applicant, different states would have different procedures for applying for a license. However, the government has launched initiatives to make each state's systems electronic.
  • The applicant must go to the prescribed website to submit the e-commerce license.
  • After that, the applicant will receive a pop-up notification about the conditions that need to be met in order to obtain the Trade License.
  • The applicant must click the “Accept” button in the Terms and Conditions.
  • The next step in the process would be to request the applicant to provide the required Trade License information and details.
  • The online license registration system has a special way in which document authentication can be done electronically. The applicant must carry them out and provide the relevant documents.
  • After completing this process, the applicant will receive confirmation of successful business registration.
  • The applicant will receive a confirmation and the applicant will receive the license within eight to eleven business days.
  • In general, the process of obtaining a Trade License is faster in big cities than in rural areas.

Violations or Penalties for Not Obtaining a License

The consequences are serious if the applicant does not get the license:

  • Once an applicant receives a Trade License, you must ensure that the applicant monitors and maintains compliance.
  • If the applicant does not receive the Trade License, the competent authorities can impose different consequences.
  • If the company is incorporated without the appropriate licenses, a fine or fee must be paid.
  • The debtor can also be sued if the breach continues.

Trade License Renewal

The license can be renewed under the following conditions:

  • Generally, these permits are renewed between January 1 and March 31 of each fiscal year.
  • This license is valid for 1 year.
  • The applicant must apply for a Trade License in India.
  • The request can be made 30 days before the expiry date of the certificate.
  • When renewing the certificate, the documents must be presented to the competent authority.


  • License application.
  • If the applicant is a legal person, he must present the PAN card as well as the documents of incorporation of the corresponding company.
  • Documents like Aadhaar card are required for an individual applicant.
  • Property tax documents for the property.
  • The lease must be presented. Copies of the rental contract.
  • Any form of khata extracts and certificates.
  • Work documents.
  • Neighbourhood authorization certificate if the business is in a residential area.
  • Sanctions documents.

Also Read: Highest Paying Jobs in India in 2022
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