Shops and Establishments Act – A Complete Guide

An establishment is a commercial entity doing trade or business such as a shop, hotel, newspaper printing, cinema theater, amusement parks, stock brokering, etc. In order to regulate these as per standard operating procedures and creating a healthy work environment , the Government provides shops and establishments licenses under the Shops and Establishments Act.

A Shops and Establishments Act is a commercial entity doing trade or business such as a shop, hotel, newspaper printing, cinema theater, amusement parks, stock brokering, etc. In order to regulate these as per standard operating procedures and creating a healthy work environment , the Government provides shops and establishments licenses under the Shops and Establishments Act.

Main Objectives of This License

• Empowering states to impose rules based on local culture: 
• To convert unorganized sector into organized
• To increase mandatory Registration of small businesses
• To Regulate Wages, work hours, and labour rights of unorganized sector Employees
• Stop Child labor
• Grant special benefits to women employees

Benefits of the Shops and Establishments License

1. Business entities can easily open a current account in the bank so you can avoid messing up the business transaction with a personal account.
2. Hassle-free inspections by the State government and local municipalities. The shop act license ensures fewer due diligence and auditing requirements.
3. The Act preserves the rights of employees and ensures their safety in terms of health and financial status, and discourages any unethical practice to create a positive working environment.
4. Enforce better wages and holiday management
5. Strengthens the entity’s roots by imparting it a legal status and provides better exposure to an uncatered segment of consumers. 

Procedure for Application for a Shop Act License

• Log on to the website of the respective state where you want your business to get registered. 
• Fill out the application form. This will include certain details like the registering procedure as individual or organization, based on the kind of establishment/business initiative getting registered.
• Fill in the details of the organization and proprietor.
• Upload the requisite documents.
• Upload the signature
• Pay the required fees.
• Inspection of the application by the labour department and an inspector might be appointed to carry out an inspection of premises if required. 
• Approval of application by the authorities and issue of a valid license (normally valid for 1 year with renewal every year).

Documents Required

1. ID Proofs (PAN Card, Drivers License, Voter Card) of Partners/Directors/Proprietor(s).
2. Scanned passport-sized photograph
3. Rental agreement/Sale deed of commercial space
4. Name and other details of the establishment. (photo, electricity bills, rent agreement, etc.)
5. AOA or MOA or CIN No. of a limited company, partnership agreement in case of a firm. 
6. Details of employees
7. Registers maintained to date
8. Additional business licenses necessary to start a business.

Procedure for Renewal of Application

• First, you need to log on to the labour department website of the respective state and select the registering procedure as an individual or an organisation.
• Login using the login ID received at the time of registration. Enter the details and fill in the application with your details and submit.
• Using the application ID, request a renewal of your license. The form will prompt you to re-upload all your documents
• The fees for renewal of license varies from state to state and also on the different categories of establishments. 
• The moment you make payment, your application status will change to ‘Under Scrutiny’. Until this status changes to ‘Completed’, your job is not done here. It usually takes up to one week for this change to happen.
• Download Certificate: Once it’s done, you may ‘Download Certificate’, which is an option you will see on the right side of your screen.
• The shops and establishments act also provides guidelines for the registration and renewal of licenses for commercial establishments to ensure compliance with labor laws.

Establishments Covered Under Shop Act License

Banking and financial businesses (insurance, NBFCs), Cinema halls, theatres and entertainment places, contractors & auditors, Hotels, restaurants, gyms,  media and broadcasting houses, private educational institutions, quarries and mines ( excluded in the Mines Act 1952), registered or unregistered trusts (charity/non-charity), any other trade or business. 

Note: the establishments covered under Factories Act are excluded. 

Eligibility

• The person must have attained the age of 18 years and
• They must not have any criminal records in their name.

Features

• In India, the structure, features, eligibility, fees, terms and conditions, and other aspects of this Act may vary from state to state.
• Within 30 days after the start of commercial activities, this licence must be secured.
• Banks demand this licence as a legal document before opening a business current account.
• This license must be renewed on a regular basis, according to state rules.
• The licence serves as proof of legal entity and grants the right to conduct business
• Central Government and state government-run businesses are exempted from this act
• All organizations need to request the approval or endorsement of the labour department and be up-to-date on their records and compliances under the Shops and Establishments Act.
• The registration certificate must be prominently displayed at the shop establishment license or commercial establishment and renewed periodically, as per the act.
• The shops and establishment act may also specify provisions related to women employees, such as provisions for maternity leave, safety measures, and prohibition of night shifts.
• Under the shops and establishments act, employers are required to maintain records related to the employment of workers, such as attendance, wages, and leave records.

Why Vakilsearch?

• Our experts provide a detailed explanation of the registration process and required documentation.
• Preparation of application and gathering all of the necessary information.
• Processing of shop registration and sending it to the labor department, as required.
• Following approval, the shop license certificate is sent via courier or in person.

Also, Read;

• Procedure For Shops & Establishments Registration
• Shops & Establishments Registration in Ahmedabad
• Business Eligibility Under the Shops And Establishments Act