Business PlanShops and Establishment

What Is the Purpose of Shop and Establishment Act

A commercial entity that engages in trade or commerce, such as a shop, hotel, newspaper publishing, movie theatre, amusement parks, stock brokerage, and so on, is known as an establishment. In order to regulate these as per standard operating procedures and creating a healthy work environment, the Government provides shops and establishments licences under the Shops and Establishments Act. In this article we shall see what is the purpose of the shop and establishment act.

Voiced by Amazon Polly

What Is The Purpose of Shop and Establishment Act: Introduction

The Shop Act was enacted to improve the management of working conditions and employment in shops, commercial establishments, restaurants, dining establishments, hotels, theatres, and other public places of amusement. It was utilised to maintain certain conditions for welfare of the labourers like regulating leaves, paid leaves, holidays, work hours, maternity benefits, conditions of child employment, termination of employment, etc. Further the shop act even provides an authentic ground of legal status to the business and benefits its owner by serving as a license to many other business related transactions. Hence each business establishment falling under the ambit of this act must get itself registered with a shop act license for enjoying better benefits and credibility of their business. 

 What Is the Purpose of Shop and Establishment Act : Main Objectives of This License

At present each state has its own shop act laws and regulations based on which the businesses must operate. The establishment must obtain their license within 30 days of commencing their businesses. The act caters to certain objectives such as:

  • Empowering states to impose rules based on local culture: 
  • To convert unorganised sector into organised
  • To increase mandatory Registration of small businesses
  • To regulate wages, work hours and labour rights of unorganised sector Employees
  • Stop Child labour
  • Grant special benefits to women employees

Purpose and Benefits of the act:

  • Legitimacy: The legal right to do business under the Act’s authority is obtained by getting a shops and establishments license and submitting proof of business, such as a partnership or proprietorship. He/she will not be disturbed or harassed by police enforcement.
  • Encourages better employee management: A business registered under a shop act has to follow certain code of conduct and guarantee certain rights and benefits to its employees under the act. Thus it fosters a healthier work culture and ensures peace of mind of both the employers and employees. 
  • Business Banking Account: Every business must have a separate business account to manage its money, according to RBI requirements. Only a certificate obtained under the Shops and Establishments Act can be used to open this business account.
  • Hassle-free Inspections: Local municipalities and other statutory agencies, such as the FCCAI, have the jurisdiction to conduct inspections and checks. Audits and inspections can easily turn into a significant problem if you don’t have a shop and establishment act license, forcing you to close your firm. Obtaining a shop license and operating your business lawfully is the best line of action.
  • Advantage of Government Benefits: A Shops and Establishments Act license gives you access to a number of government initiatives and incentives aimed at promoting small businesses. Businesses that are registered under the shop and establishment regulations can also take advantage of low-interest bank loans, financial plans, and programmes.
  • Checking unethical business practices: Child labour and women exploitation is frequent in the unorganised sector. Despite the fact that such activities are illegal, teenagers may be found working for extremely low wages in a variety of businesses, ranging from a café to the fabrication industry. The Shop and Establishment Act has some tough anti-child labour and pro-women provisions. It is illegal for any firm operating under the influence of such a license to hire a juvenile to do their business.


Documents Required for Shop and Establishment License:

The documents required for the registration under Shop and Establishment Act are as follows:

  • Employer’s identity proof in the form Aadhar card, PAN card, driving licence, voter ID
  • Employer’s passport-sized photograph
  • Photo of the establishment
  • Copy of rent agreement or lease deed is required in case of rented property
  • Copy of the MOA or AOA and details of the company’s ownership.
  • Any utility bill in the form of electricity bill, water tax receipt of the working premises. However, the said utility bill should not be two months older.

Conclusion: To be more explicit, when conducting business, every start-up and small firm must adhere to the terms of the Shop and Establishment Act. Those who choose to disregard the need of obtaining a Shop Act licence will be fined. You should get expert guidance if you have any issues concerning the Shop & Establishment Act. Vakilsearch offers top-notch financial and compliance services for a variety of compliance issues.

Also, Read:


Back to top button


Remove Adblocker Extension