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Shops and Establishment

What Is the Difference Between Shop Act License and Udyog Aadhar?

The Shops and Establishments Act, 1947, and the MSMED Act, 2006 are extremely different from one another. Although a few commercial establishments fall in the area of the intersection of both the Acts, the purposes of the legislation vary to a great extent.

The setting up of any kind of business, large or small, indigenous or multinational, is governed by the stipulated legislation in India. This is true, regardless of the genre of the business, the amount of investment, and its turnover.  The business might be a commercial establishment or might be one that’s operating in the entertainment industry, it can be pursuing manufacturing and production of specific goods or might be involved in the rendering of services. Every business, depending upon the sector it is operating in, is therefore regulated and administered by the rules put forward by the government. Read more to know about shop act vs udyog aadhar.

Additionally, the businesses most often should also procure the required licenses to operate. For instance, hotels and restaurants require the FSSAI (Food Safety and Standards Authority of India) license to operate. These businesses should also take the appropriate licenses under the Shops and Establishments Act, 1947, the Prevention of Food Adulteration Act, 1954, etc. Likewise, other businesses might also be required to be registered under multiple Acts.

When it comes to small-scale industries, most of them require authorisation under both the Shops and Establishments Act, 1947 and the Micro, Small, and Medium Enterprises Development Act, (MSMED) 2006 through the Udyog Aadhar registration. Although there are similarities between both the legislations, they are quite different from each other. Also, the registration under one does not equalise the registration under the other. Therefore, the businesses must get themselves registered under the Acts separately.

Registration of Businesses Under the Shops and Establishments Act, 1947:

This is a State Act, which is unique for every state in India. The Act regulates the operations of businesses wherein any trade, or profession is practiced. In addition to commercial establishments like small and petty shops, the Act also governs trusts, societies, educational institutions, IT (Information Technology) and software companies, banking, and financial institutions, etc. The Act aims to regulate various factors such as the hours of employment, weekly holidays, leave policy, deductions from salaries, etc in the shops and commercial establishments.

The Shops and Establishments Act, 1947 aims to regulate the following areas for the business entities:

  • To enable the peaceful operation of the businesses in accordance with the respective State rules. The Act, being a State Act, would vary from State to State in India
  • To enable the businesses to comply with the guidelines pertaining to the hours of work, adequate wages to be paid to the employees, leave and termination policy of employees, etc.
  • To regulate and provide guidance for those entities that do not fall under the Factories Act of 1948.

Registration of Businesses Under the Micro, Small, and Medium Enterprises Development Act, (MSMED) 2006:

Basically, Small Scale Industries (SSI) or Micro, Small, and Medium Enterprises are governed by the MSMED, 2006 Act. The government of India had formulated the Act to boost small-scale industries and had rolled out several benefit plans to help such businesses. The Act had laid out the minimum threshold levels of investment and turnover for various industries in the manufacturing and servicing sectors to be eligible to be classified as Micro, Small, or Medium Enterprises.

These businesses in turn had to get themselves registered under the Udyog Aadhar portal to avail of the schemes put forward by the government. The registration is fairly simple as the businesses only need to furnish the Udyog Aadhar Memorandum (UAM), a self-attested declaration, in which the business establishment self-certifies its existence, mentioning the basic information that is required.

The Act governs the businesses in the following aspects:

  • Validates the businesses registered in Udyog Aadhar, to check if they belong to the MSME category and if so enables them to avail the benefits of various governmental schemes
  • To formulate various financial aids and marketing strategies to aid MSMEs
  • Offering uninterrupted support for the MSME industries by staging entrepreneurship development programs, especially for the minority population.

While both the Acts regulate and govern the activities of businesses, indisputable differences do exist between them.

Difference Between Shop Act vs Udyog Aadhar

S.No Characteristic Shops and Establishments Act, 1947 MSMED Act, 2006, through Udyog Aadhar
1 Governing Authority State Government Both State and Central Government
2 Purpose To govern the working hours, leave policies, employee benefits, etc for various commercial establishments To enable the MSMEs flourish through various beneficial schemes put forward by the government
3 Eligibility All commercial establishments like shops, hotels, clubs, amusement centers etc are eligible to apply for license under the Act Business entities that are in consonance with the minimum registration threshold with respect to investment and turnover are eligible
4 Compliance of Rules The rules laid out in the Act are to be complied with by commercial establishments including MSMEs The rules laid out in the Act have to be complied with by the MSMEs registered in the Udyog Aadhar portal
5 Mandatory/Optional The registration of shops and commercial establishments under the Act is mandatory with very few exceptions The registration of MSMEs under Udyog Aadhaar is optional
6 Tax Privileges The establishments that claim licenses under this Act, do not reap any tax benefits The Act’s predominant intention is to provide benefits for MSMEs and therefore offers special privileges under the GST (Goods and Services Tax) and Income Tax

Thus, the similarity between the Shops and Establishments Act, 1947, and the MSMED Act, 2006 is that both deal with commercial establishments and regulate and govern their activities. But the Acts serve completely different purposes as elucidated above and they are undoubtedly as different as night and day.

What is the Gumasta License?

In Maharashtra, Gumasta licenses are required for any business involving trade, commercial, or industrial activities.For all businesses operating within the state, including shops, restaurants, hotels, theatres, and other commercial establishments, it’s a shop and establishment registration. If you get a Gumasta license, you know your business’s legally registered and follows all labour laws.

Gumasta License vs Udyog Aadhar

Criteria Gumasta License Udyog Aadhar

Registration Authority

Maharashtra Government Ministry of Micro, Small and Medium Enterprises (MSME)


All businesses operating in Maharashtra Small and medium-sized businesses across India

Nature of Registration

Shop and Establishment Registration MSME Registration


Mandatory Voluntary


Ensures compliance with labour laws and legal registration of the business Provides various benefits and incentives to MSMEs

Eligibility Criteria

All businesses operating in Maharashtra Businesses with turnover or investment in plant and machinery within MSME limits


N/A Access to credit facilities, government schemes, subsidies, and other incentives


Annually Lifetime registration (no renewal required)

FAQ’s on Shop Act vs Udyog Aadhar

How to do Shop Act Registration?

The process for Shop Act Registration may vary depending on the state. In general, you must fill out the application form, attach the required documents (such as PAN card, ID proof, rental agreement, etc.), and pay the applicable fees. Depending on the state's regulations, you may need to visit the concerned government office or apply online.

How to renew a Shop Act License?

The renewal process for Shop Act License also varies by state. Generally, you must apply for renewal before the expiry date and provide the necessary documents and fees. The renewal period may vary depending on the state, but it is usually one year. Failure to renew the License may result in penalties or fines.

Is the shop act mandatory for small shops also?

Yes, Shop Act Registration is mandatory for all businesses operating within the state, regardless of their size or nature of operations. However, some states may exempt certain businesses from registration, such as home-based or micro-enterprises. Checking the local laws and regulations is recommended to know the exact requirements.

What's the difference between a Shop Act licence & Gumasta?

Shop Act and Gumasta License are essentially the same, but the name may differ by state. Both licenses are mandatory registrations that allow businesses to operate legally and comply with labour laws. The registration process and requirements may vary by state, but the purpose remains.

Can we get a Shop Act license without an Aadhar card?

Yes, you can obtain a Shop Act License without an Aadhaar card. You may need to provide alternative ID proofs such as a PAN card, Voter ID, Passport, Driving License, etc., per the state's regulations.

Does a new business require a Shop Act licence?

Yes, any new business that involves carrying out trade, commerce, or industry within the state requires Shop Act License or equivalent registration as per the state laws. It is mandatory to obtain the License before starting the operations.

How much time is needed for Shop Act Registration?

The time taken for Shop Act Registration may vary depending on the state's regulations and the completeness of documents provided by the applicant. Generally, the registration process takes around 7-15 days to complete. However, the exact time may vary, and it is recommended to check with the local authorities for the estimated time frame.

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