Shop & Establishment Act License: Meaning, Registration, Types & Benefits
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29 JANUARY, 2024

Businesses in India must adhere to the Shop and Establishment Act. Enacted by each state, this pivotal legislation governs various aspects, including working hours, leave policies, and service terms for employees in commercial establishments. Regulated by the Department of Labour, The Shop Act registration extends its reach beyond commercial spaces to encompass an array of entities. In this article, you will learn the essential aspects of this Act with insights into its significance for businesses nationwide.

What is a Shop Act License?

The Department of Labour oversees the Shop and Establishment Act. It governs new businesses' diverse activities. Registering under this Act is essential when initiating ventures like wholesale/retail stores, offices, restaurants, hotels, theatres, showrooms, or godowns. Although government-introduced regulations may differ by state, they generally apply to all commercial establishments except for factories and production units, which are governed by a separate set of rules.

Why is it Essential for Businesses?

This Act aims to protect employees by regulating working conditions, hours, maternity leave, weekly holidays, and wage payments. It ensures fair treatment and helps improve working conditions. Plus, it prevents the potential misuse and exploitation of working professionals by business owners.

How do you apply for a Shop Act license? 

Here is the process* to apply for a Shop Act license 

  • Visit the Website: Go to your state's Labour Department website and create a user ID and password.
  • Profile Creation: Provide details like establishment name, employer information, employee details, registered address, and PAN card details.
  • Form A: Complete the Shop and Establishment Registration Form A.
  • Details Submission: Choose your state and district and complete the required information.
  • Document Upload: Attach the necessary Shop Act license documents after completing the form.
  • Fee Payment: Click on the fees button and complete the payment.
  • Check Status: Monitor your application status under the "under-scrutiny" option.
  • License Issuance: The certificate will be issued if all documents align with the requirements.

Documents Required for a Shop Act License Application

For a Shop and Establishment License, the following documents* are essential: 

  • Employer's ID proof (Aadhaar card, PAN card, voter ID, or driving license)
  • Passport-size photograph of the employer
  • Affidavit, cancelled cheque, and bank statement
  • Photo of the establishment/shop with the employer
  • Copy of the rent agreement for the rented property
  • Utility bill for the working premises

Additional documents vary based on the Establishment Type:

Information on the Associated Fees and the Renewal process

Learning about the fee structure* is vital as it varies based on the state. Now, let's look at the hassle-free renewal process:&

  • Renew the license annually, a crucial responsibility for every business owner.
  • The process is streamlined and user-friendly, allowing online renewal through the state government's website.
  • Gather essential documents, including PAN cards, passport-sized photos, rental/lease agreements, employee count, establishment name, and up-to-date registers.
  • Remember to initiate renewal 15 days before the license expires.
  • Once the fee is paid, anticipate your renewed license within a week, ensuring seamless compliance.

Types and Contents of Shop Act License

The Shop Act License has various types, each catering to specific activities. These types include:

Form A License: 

  • For new businesses.
  • Covers registration details and the nature of the business.

 Form B License: 

  • For existing businesses.
  • Includes business name, address, and type of business. 

Form C License: 

  • Issued for specific categories like food, drugs, or entertainment.
  • Outlines specific regulations relevant to the business type. 

The contents of a Shop Act License encompass vital information like the business name, address, and details of employees. It acts as an official document, ensuring compliance with labour laws.

Advantages of Shop Act License and Its Importance

Registering under the Shops and Establishment Act isn't just a legal requirement; it comes with its perks: 

  • Legal Recognition: The license offers the establishment or shop legal standing.
  • Business Proof: It serves as crucial proof for subsequent business registrations in India.
  • Bank Account Opening: Essential for tasks like opening a current bank account in the business's name.
  • Investment Platform: Facilitates fundraising through loans or venture capital for the business.
  • Government Benefits: Unlocks access to various government benefits at different business stages.
  • Time Efficiency: The online registration process saves time and streamlines operations.

Hopefully, this article has clarified what about Shop Act licenses and the Shop and Establishment Act, the documents required for its registration and other details. For businesses looking to open a current account, Kotak Mahindra Bank offers a variety of options to choose from. Apply now!

Read also: what is Ebitda meaning?

*Subject to change from time to time as governed by the Act.

Frequently Asked Questions (FAQs)

1) What are the associated fees for obtaining and renewing a Shop Act License?

Obtaining or renewing a Shop Act License involves nominal fees, varying by state regulations and the type of establishment. Fees usually cover processing charges, verification, and the license duration.

2) Can the Shop Act License be transferred if there is a change in ownership or location?

Yes, the Shop Act License is transferable. In cases of ownership change or relocation, updating the license is necessary. This ensures legal compliance and maintains the business's regulatory status.

3) What are the penalties for operating a business without a valid Shop Act License?

Operating a business without a valid Shop Act License can lead to severe penalties, including fines and legal actions. Compliance is crucial, as the license not only legalises business operations but also safeguards against penalties.

4) How does having a Shop Act License contribute to a business's credibility?

A Shop Act License enhances a business's credibility. It signifies legal recognition, compliance with labour laws, and adherence to ethical business practices. This, in turn, fosters trust among customers, partners, and regulatory authorities.

5) Are there specific guidelines for businesses regarding Shop Act License compliance?

Yes, each state has specific guidelines outlining Shop Act License compliance. These guidelines cover working hours, employee conditions, premises regulations, etc. Adhering to these guidelines is essential for maintaining the validity of the license.

6) Can a Shop Act License be modified, and under what circumstances? 

Yes, a Shop Act License can be modified, typically in cases of changes in business structure, ownership, or premises. Any alterations to the information provided during the initial registration require updating the license for accurate records.

7) Is the Shop Act License different from other business licenses, and do I need multiple licenses?

Yes, the Shop Act License is distinct from other business licenses. While some businesses may require multiple licenses based on their activities, the Shop Act License explicitly regulates working conditions and hours within the establishment. 

8) Where can I find additional resources and support for Shop Act License queries and concerns?

Additional resources and support for Shop Act License queries are available through state labour departments, official government websites, and local business associations. Seeking guidance from these sources ensures accurate information and assistance for any concerns.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.