Commercial establishments of various types come under the purview of the Shops and Establishments Act. Hence, business owners need to ensure they obtain a Shops and Establishments License to stay on the right side of the law before commencing operations.
The Shops and Establishments Act is applicable nationwide and all commercial establishments, including hotels, eateries, amusement parks, theatres, entertainment houses, and public amusement places come under the purview of this Act. As a result, business owners need to obtain the documentation and licenses required if they fall under this Act. Hence, business owners need to first understand what a commercial establishment is as per the guidelines of this Act. Here’s a quick look at the eligibility criteria for registering under the Shops and Establishments Act.
What Is a Commercial Establishment?
As per the Act, a commercial establishment is defined as one of the following;
- Any commercial sector undertaking, such as banking, trading, or insurance establishments.
- Any establishment wherein individuals are employed or engaged to do office work or provide various services.
- Hotels, eateries, boarding houses, small cafés, or refreshment houses.
- Amusement parks and entertainment places, such as theatres and cinema halls.
Hence, all the commercial establishments mentioned above fall under the purview of this Act and must adhere to the regulations specified by it. The exceptions to the Act differ between states, and each state in India has a list of commercial establishments that must register under the Act. Hence, business owners need to meet with legal experts to understand local laws and run their business legally in any area.
When to Obtain Registration?
Any individual who plans on starting a commercial establishment that falls under the purview of the Act must file for registration within 30 days of commencing their business. This registration is mandatory for several reasons, including being necessary for opening a current account in a bank. The Shop Establishment License works as an essential license or proof of business that companies need to apply for other registrations and loans.
What to Know About the Shops and Establishments Act Registration?
Business owners need to provide an address proof for the establishment and a copy of the sale deed or rental agreement for the shop. Additionally, they must also furnish copies of their PAN card and pay the prescribed fees to complete the registration process. Inspectors will verify the details on the application and might visit the establishment to cross-check everything. Once you receive the registration certificate, it must be displayed in a prominent place in the shop and renewed in case of any changes or upon expiry.
The Shops and Establishments Act registration is a mandatory requirement for all businesses which operate as an establishment or shop. Hence, business owners must update their license if any changes are made to the establishment. In case of closure, or renewal, an application for the same must be made within 15 days of the said change or closure. Any business that has an office or establishment, even if run by a sole proprietorship or freelancers will require this license when trying to raise investment through loans or from venture capitals.
The license helps prove the validity and credibility of the establishment, making it an integral part of running any business. The registration process takes around ten days for completion, following which the business receives a hard copy of the registration certificate. However, the process might take around 20 days in major cities due to a large number of applications.
Eligible businesses under the Shops and Establishments Act
The specific businesses covered by the Shops and Establishments Act vary depending on the state or region. However, here’s a general overview of the types of businesses typically covered:
- Retail and Wholesale Shops:
- Stores selling goods of any kind, including:
- Clothing and accessories
- Electronics and appliances
- Groceries and food items
- Furniture and home goods
- Building materials and tools
- Pharmacies and medical stores
- Jewelry stores
- Stationery shops
- Hardware stores
- And many more
- Commercial Establishments:
- Offices of various industries:
- Banking and finance
- Communication and media
- Legal firms
- Accounting firms
- Consulting firms
- Government offices
- Educational institutions (in some states)
- Hospitality and entertainment:
- Hotels and guest houses
- Restaurants and cafes
- Cinemas and theatres
- Amusement parks and arcades
- Gyms and fitness centres
- Service Providers:
- Businesses offering services to customers:
- Salons and beauty parlours
- Laundry and dry cleaning services
- Repair shops (electronics, appliances, etc.)
- Travel agencies
- Courier services
- Printing presses
- Internet cafes
- Other Establishments:
- Depending on the specific state law, other types of establishments may also be covered, such as:
- Factories (in some states)
- Warehouses and godowns
- Transport companies
- Mines and quarries (in some states)
Exempted Businesses Under the Shops and Establishments Act:
Similar to the eligibility criteria, the specific businesses exempted under the Shops and Establishments Act vary depending on the state or region. However, here’s a general overview of the types of businesses typically exempted:
- Government Organizations and Offices:
- Offices under the central, state, or local government, including:
- Departments and ministries
- Public corporations and undertakings
- Educational institutions (directly managed by the government)
- Police stations and other law enforcement agencies
- Courts and judicial offices
- Essential Services:
- Businesses considered essential for the public good, such as:
- Electricity, water, and sanitation companies
- Hospitals and medical facilities
- Fire and emergency services
- Public transport services (buses, trains)
- Airports and ports
- Small-Scale Businesses:
- In some states, small businesses with limited employees or operating hours may be exempted, such as:
- Home-based businesses
- Street vendors
- Small shops with few employees
- Small family-run businesses
- Specific Businesses:
- Depending on the state law, some specific types of businesses may be exempted, such as:
- Agricultural farms and businesses
- Religious institutions and places of worship
- Educational institutions operated by private trusts or societies (in some states)
- Charitable organizations and NGOs
- Newspaper and media establishments (in some states)
- Temporary Establishments:
- Stalls or shops set up for temporary events like fairs or festivals may be exempted for a limited period.
For all the queries you have, feel free to contact our Vakilsearch experts.
Why Register Under the Shops and Establishments Act?
The primary objective of such a registration is to secure uniform benefits for employees serving different establishments across the country. The Act also regulates work hours, payment of wages, terms of service, and holidays that employees receive. It also lays down guidelines regarding the conditions of work, the number of people employed and helps in ensuring their wellness.
The registration acts as a basic license that helps in securing further registrations and certifications. All commercial establishments, except those that fall under the purview of the Factories Act, 1948, must register under this Act. However, since the Act is a state-specific regulation, each state has its laws and guidelines regarding operating such establishments.
Documents Required for Shops and Establishments Registration
- Photograph of the shop and its name board
- Certificate of incorporation/ Memorandum or Articles of Association/ LLP Agreement
- Copy of PAN Card
- List of directors and partners
- Identity and address proof of all directors and partners
- Copy of partners consent or board resolution
- Address proof of the establishment
- Details of all employees
Requirements to Obtain the Shop and Establishment Act Registration
To obtain registration under the Shop and Establishment Act, businesses typically need to fulfil certain requirements, which may vary slightly depending on the specific state or region. However, here are the common requirements:
Application Form: Fill out the prescribed application form provided by the respective state’s labour department or authorities responsible for administering the Shop and Establishment Act.
Business Details: Provide details about the business, including its name, address, nature of business activities, number of employees, etc.
Ownership Proof: Submit proof of ownership or occupancy of the premises where the business is located. This could include rental agreements, lease deeds, or ownership documents.
Identity Proof: Provide identity proof of the business owner or proprietors, such as an Aadhar card, PAN card, passport, voter ID, etc.
PAN Card: Furnish a copy of the Permanent Account Number (PAN) card of the business entity.
Employee Details: Submit details of employees working in the establishment, including their names, addresses, employment contracts, etc.
Fee Payment: Pay the prescribed registration fee, which varies from state to state. The fee is usually nominal.
Compliance with Rules: Ensure compliance with all the rules and regulations specified under the Shop and Establishment Act, such as working hours, weekly holidays, provisions for overtime, etc.
Inspection: Upon submission of the application and required documents, authorities may inspect the premises to verify compliance with the Act’s provisions.
Registration Certificate: After successful verification, the authorities will issue a registration certificate under the Shop and Establishment Act.
How to Apply for the Shops and Establishments License
Individuals can apply for the Shops and Establishments license through forms available online on the government’s official website. However, each state has a different set of rules regarding the process of registration and the eligibility criteria for the same. Hence, entrepreneurs must seek legal help to ensure they get the required documentation ready for registration. Additionally, business owners will have to obtain the required approval from the Department of Labour; and a registration certificate from the Chief Inspector of Shops and Establishments.
The application form for the same must contain details regarding the establishment’s name, owner’s address, and employees. These details must be in a format to the inspector in charge of your locality for the application to receive approval. Vakilsearch can help you register your business with ease, as we have decades’ worth of experience in this field. Our legal experts will collect the required details from you, file the application in the prescribed format. Further, they will send you the registration certificate at the earliest.
In conclusion, eligibility for businesses under the Shops and Establishment Act varies based on the specific laws of each state or region. Generally, a wide range of businesses, including retail shops, commercial establishments, service providers, and entertainment venues, fall under the purview of this Act. Businesses must familiarise themselves with the regulations applicable in their respective areas to ensure compliance with working hours, holidays, and other provisions aimed at promoting employee welfare and operational efficiency.
Are IT companies covered under the Shops and Establishment Act?
The coverage of IT companies under the Shops and Establishment Act varies depending on the specific state laws. In many states, IT companies are considered establishments and are thus covered under the Shops and Establishment Act. However, it's essential to check the specific provisions of the Act in the state where the IT company operates to determine its applicability.
What is the definition of establishment under the Shops and Establishment Act?
The definition of establishment under the Shops and Establishment Act typically encompasses any place where trade, business, profession, or any work related to intellectual activities is carried out. This can include shops, commercial establishments, residential hotels, restaurants, eating houses, theatres, and other places of public amusement or entertainment.
What is the applicability of S&E in India?
The Shops and Establishment Act (S&E) is applicable to various types of commercial establishments and shops operating in India. Its applicability extends to businesses such as retail stores, offices, educational institutions, entertainment establishments, service providers, and others. The Act sets regulations regarding working hours, weekly holidays, employment conditions, and other aspects to ensure the welfare of employees and smooth operation of businesses. However, specific provisions and applicability may vary from state to state, as each state has its own Shops and Establishment Act with its own set of rules and regulations.