Business Licenses you need for business in India

When a new business is started, the most important thing is getting all the business licenses which are crucial and mandatory for running business in India. These licenses are more important than planning business strategies, marketing or financing etc. Most of the business licenses nowadays are online where you need to fill the form and submit necessary documents on the Government portals.

Some licenses are specific to industries such as when you are initiating a pharma business, you need to obtain drug license, for tea packaging you need to be registered with Tea Board. Even some business licenses are state specific. If you are starting a business in the state of Maharashtra, you need to obtain Professional tax Registration which is not the case in the state of Rajasthan. Obtaining the licenses is very crucial as after obtaining the licenses, the business gains significance in the market as the licenses are government regulated.

What is a Business License?

A Business License is a permit or authorization given by a particular Government authority to conduct or operate any business activity within the locational jurisdiction of such authority.

Why are Business Licenses important for a company?

There are number of reasons due to which it is important for a business to get licenses as follows:

• Legal Status: Obtaining business licenses gives legal status to a business as these licenses are issued or approved by the Government authorities.
•  Enhances credibility: Some licenses like ISO, FSSAI license, Hallmark licensing provides credibility to business products and services. These licenses are issued after a due diligence which helps in building customer trust on the products or services of the business.
• Tax benefits: In India, the companies or LLPs which intend to get tax exemptions need to register as a start-up with DPIIT & with Income Tax Department. Registering under section 80IAC of the Income Tax Act will save income tax for a startup. In case, you intend to register an NGO in India, you need to have 12AB/80G registration to avail tax benefits.
• Legal Protection: Registering a business provides protection to the owners against any legal dispute. A registered business can file an official claim regarding the theft of brand, logo or the like.

Types of Business Licenses in India

There are a number of business licenses in India based on the nature, requirements and location of business. Some of these are:

• Company/ LLP Registration: If you are intending to register a start-up, there are two options namely a private or public limited company and Limited Liability Partnership (LLP). Both company/ LLP are entities registered with Ministry of Company Affairs (MCA). MCA issues an incorporation certificate along with a Corporate Identification Number (CIN) to every registered company or LLP.

• Partnership Registration: If you want to run business under partnership, you first need to get a partnership deed drafted from an expert and then get the deed registered with Registrar of Firms (RoF) of the state where your business is located. RoF will issue a certificate of registration which is duly recognized by the bankers, courts and other Government bodies.

• Udyam Registration: Udyam registration can be obtained by Micro, Small and Medium Enterprises (also known as MSME) On registration, you will get a 12-digit unique registration number. The entire process of Udyam registration is online. Udyam registration provides a number of benefits to a business entity like subsidized loan schemes, fast payments from customers, faster dispute resolution, subsidized trademark fees etc.

• GST Registration: GST registration is one of the most important registrations if you intend to sell any goods or provide services in India. Even the exporters need to obtain GST registration if they wish to export goods outside India without payment of GST.

Any person or entity with an annual turnover exceeding Rs. 20 Lakhs (in case of service providers) must be registered under GST Act. In some states, the threshold limit is Rs. 10 Lakhs. Whereas in case of goods, the threshold turnover limit for compulsory GST registration is Rs. 40 Lakhs (Rs. 20 Lakhs in some states). To Check the complete process of GST registration, read the article here.

• Shop & Establishment Act Registration: The Department of Labour in each state regulates the Shop and Establishment Act. Every business entity irrespective of its size should be registered under the Shop and Establishment Act. The purpose of this Act is to ensure that working conditions and employment regulations of workers improve in shops, factories and other commercial establishments. Since, Shop Act registration is state-wise, you need to apply for registration online in the state where your establishments are situated.

• FSSAI License: FSSAI stands for “Food Standards and Safety Authority of India”. FSSAI is the regulating body for food safety in India. FSSAI prescribes the rules and regulations related to quality standards of food & food packaging business. If you operate a food business in India, you must be having an FSSAI license. The process of FSSAI license registration is online and can be done through FOSCOS portal.

In India, there are three types of FSSAI licenses namely FSSAI Central License, FSSAI State License and Basic FSSAI Registration. The type of FSSAI license you need depends on the nature of business activity you intend to undertake.

• Import Export Code: Import Export Code commonly known as IEC is a 10-digit unique alphanumeric code based on the PAN of the entity. Without IEC code, no export and import activities can be undertaken in India. So, if want to run your business beyond the borders of Indian territories, you must apply for IEC with Director General of Foreign Trade (DGFT). It should be noted that IEC needs to be renewed by the business entity on an annual basis.

• Factory License: The Factory Act 1948, requires a license to be obtained by certain factories subject to the conditions prescribed in the Act. There are certain factories which must obtain the factory license: first, when the factory has ten or more workers involved in manufacturing activity with the aid of power, second, when the factory has 20 or more workers involved in the manufacturing activity without the aid of power.

• Niti Aayog & CSR Registration: If you intend to start an NGO in India, there are three different constitutions to choose from:

(a) Trust

(b) Society

(c) Section 8 Company

After registering the NGO, you also need to get yourself registered with Niti Aayog. The process of Niti Aayog registration is online and can be done through Darpan portal. Further, if your NGO wish to undertake CSR funding and CSR projects, your NGO must be registered with MCA. For this, you need to file CSR-1 with MCA.

• Other licenses and registrations: Besides these, there are various other licenses or registrations you might need such as Apeda, Agmark, Hallmark, pollution control certificate, Fire Safety NoC, CMHO license, ESI, PF, drug license, IRDA license etc. Some of these licenses or registrations are industry specific and thus dependent on the nature of business. It is therefore advised to connect with experts to know about these licenses.

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