Why you should obtain a shop and establishment license?

Last Updated at: Dec 01, 2020
Why you should obtain a shop and establishment license
The Maharashtra government has recently issued a notification and reduced the number of approvals/permissions for the hospitality and tourism sector to 15 from 70. The state cabinet had taken a decision in October 2020  to streamline the approval process and help revive these sectors, which have been hit hard by the pandemic. The Brihan Mumbai Municipal Corporation (BMC) will complete the registration process under the Shops and Establishment Act, 2017 by using a single-window facility.


The shop and establishment license covers all business entities such as shops, restaurants, commercial establishments, retail trade/businesses, benefit making organisations, public amusements and so on. Irrespective of any business establishment you start, you need to register it within 30 days, whether it is fully functional or not. However, this registration is not compulsory for workplaces that fall under the provisions of the Factories Act of 1948.

This license comes under the purview of the Shops and Establishment Act. Governed by the State Labour Department, this Act seeks to regulate the rights and working conditions of the employees engaged in the Indian unorganised business sector and also specifies the obligations for the employers in this regard. The primary objective of this Act is to mandate establishment registration to ensure that all the employees receive equal benefits and rights in any kind of establishment. It regulates matters such as working hours, wages/payments, leaves, holidays, enlistment of juveniles/women, hiring and termination of work, other terms of service or any such conditions related to the individuals working in shops, commercial establishments, public amusement establishments, and others.

get your shop and establishment LICENSE

Records to be maintained under the Shop & Establishment Registration

By applying for the Shops & Establishment License, business requests for the approval of the Department of Labour to operate. It is subject to periodic inspections/visits by concerned Government officials. Must keep the below-mentioned records ready for verification during such visits.

  • Hiring particulars
  • Credit reductions
  • Payments to workers
  • Employee leave records
  • Declaration for non-employment of child labour ( any child below the age of 14 years)
Check out the blog: Registration process under Shop and Establishment Act.

Besides, the shops/establishments need to ensure the safety, security, and wellbeing of their employees. They should also make provisions to ensure a reasonable level of tidiness, lighting, ventilation and suitable insurance from damage, as per provisions of law. However, these laws may vary from state to state. Some states adhere to stringent rules to prevent child labour in such shops/establishments.  There are rules for employing ‘youngsters’ (a worker who is not a kid and is below the age of 17 years) as well. According to these rules, they should not be employed after 7 p.m. and before 6 a.m. on any given day. The maximum permissible duty hours for a ‘youngster’ are 7 hours per day and 42 hours per week.

A shop/establishment will not allow an individual to work for more than 8 hours per day and over 48 hours per week. Or should provide him with adequate compensation for every additional hour at work. Further, every individual worker is entitled to receive an entire day’s leave every week. Upon completion of a year of continuous service with the establishment, he/she will also be entitled to 12 holidays in a year, with full wages. All businesses will need to fix a period to pay regular wages. Remember that this period of compensation should not surpass one month. The business should maintain the compliance records about the rules/regulations mentioned above. And should be able to produce these during periodic inspections by Government officials.

Benefits of obtaining a shop and establishment license

  • The right of doing business:

If you can submit a legal entity proof for your business (such as a partnership firm or a proprietorship firm) you will obtain the right of doing business in your location or your state.

  • Ease of opening a current business account:

As per the RBI norms, every shop and establishment needs to open a separate business account. This is to make sure that it has to reflect its day-to-day transactions. The banks require you to submit a valid entity proof to open such an account. Perhaps, the shops and establishment license will help you to open this account with ease.

  • Facilitates smooth inspections:

The local municipality and the State Government authorities conduct visits and regular inspections to check whether the shops & establishments in a particular locality are functioning properly or not. If you have the shops & establishment license in place, you can get over such inspections quickly and smoothly.

  • Government benefits:

The State DIC Department is the policy-making body for all small businesses in a State. It comes up with certain schemes to benefit small businesses from time to time and businesses having the shops & establishment license can only avail of these schemes. Therefore, it’s imperative for you to obtain this license, if you have not got one so far.

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To know more about Shop & Establishment Registration: Click here

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