What are the different licenses and Permits required starting a business in India?

In this article, I will discuss the importance and List of essential Business License and Permits required to start a Business in India, including Company Registration, FSSAI Licenses, GST Registration, Shop Act Licenses, Import Export Code, ISO certification, and Pollution Permit. A business license and Permits are legal documents issued by government agencies that permit you to engage in a specific type of business activity per the juridical guidelines of the land in which the business is located. The procedure for obtaining a license and Permits to start a Business differs by industry, based on factors like the total number of employees, the kind of business, the sector, the location of the organization, and so on. In this informative post, we’ll look for and discuss some of the most common company licenses and Permits in detail and depth.

Company Registration

In India, company registration is the first and foremost step toward establishing a legal business entity. There are different types of company registrations in India, including Sole proprietorship, Partnership Company, private limited company, public limited company, one-person company, and limited liability partnership. Choosing the right type of registration depends on the size and nature of your business. Registering your company also allows you to open a bank account in the name of the company, apply for loans, and obtain necessary licenses and permits.

  • Sole Proprietorship Company (SPC):

A Sole Proprietorship firm is a business entity that is owned, controlled, and managed by a single person. The owner of the business is called the sole proprietor of the firm. The promoter himself receives all the profits.

  • Partnership Firm:

A Partnership is an agreement between two or more persons to manage and operate a business and to share the profits of a business according to the Terms and Conditions set forth in the Partnership Deed. The business can be carried out together by all the partners or any one partner representing the others.

  • One-Person Company (OPC):

A One Person Company is defined in Sub- Section 62 of Section 2 of The Companies Act, 2013, as a form of a private company with a separate legal entity that is formed with only one person as its member. Since such companies have only one member, these companies enjoy certain privileges or exemptions as compared to other companies.

  • Private Limited Company (Pvt. Ltd.):

A type of company that offers limited liability or legal protection for its shareholders but places certain restrictions on its ownership. These restrictions are defined in the company’s bylaws or regulations and are meant to prevent any hostile takeover attempt.

  • Public Limited Company:

A Public Limited Company differs from a Private Limited Company in that it is able to invite the entire public to become shareholders without expressing any preference for any particular group.

  • Farmer Producer Company:

A Farmer Producer Company (FPC) can be formed by any 10 or more primary producers or by two or more producer institutions, or by a contribution of both. An FPC is a hybrid between cooperative societies and private limited companies. The Farmer Producer Companies, registered under the Indian Companies Act, 2013, have democratic governance, each producer or member has equal voting rights irrespective of the number of shares held. The main objective of the farmer producer company is to facilitate the formation of co-operative businesses as companies and to make it possible to convert the existing co-operative business into companies.

Also Read: 15 Best Passive Income Business Ideas in India

Registration for GST

Goods and Services Tax (GST) Registration

Goods and Services Tax (GST) is a comprehensive tax system introduced in India to replace multiple indirect taxes such as Value Added Tax (VAT), Service Tax, and Excise Duty. GST Registration is mandatory for businesses with an annual turnover of over Rs. 20 lakhs and Rs. 10 lakhs in reserved category states. It is also mandatory for businesses engaged in the supply of goods and services across state borders.

Udyam Registration Certificate (Udyam or MSME)

udyam registration certificate

This license is available to Startup that wishes to start and manage a small business in India – small, medium, and micro firms. The qualifying requirements for obtaining this registration are dependent on the investment in machinery and plant of a manufacturing firm or the investment in the machinery of a service provider. Once a company has obtained a Udyam Registration Certificate, it’s eligible for a variety of government advantages and programs aimed at assisting small businesses in India.

A License under the Shop and Establishment Act

shop act license

Shop Act License, also known as the Shops and Establishment Act, is a state-level registration required for businesses involved in commercial activities such as shops, offices, and other commercial establishments within the jurisdiction of the Government of Maharashtra, has to register itself under The Bombay Shops and Commercial Establishment Act, 1948.

The Shop Act License ensures that businesses comply with labor laws and regulations such as working hours, wages, and working conditions. It also provides the necessary protection to employees and ensures that they receive their entitled benefits.

FSSAI License for Food Business

According to Sections 31(1) and 31 (2) of the FSS Act, 2006, every FBO (Food Business Operator) in the country is required to be licensed/registered under the Food Safety & Standards Authority of India. Any business involved in the manufacturing, processing, storage, distribution, and sale of food products must obtain an FSSAI License. FSSAI Licenses are essential for ensuring the safety and quality of food products and protecting public health.

FSSAI Licenses are divided into three categories based on the size and nature of the business:

  • FSSAI Basic Registration: For turnover up to Rs 12 lakh
  • FSSAI State License: For turnover between Rs 12 lakh and Rs 20 crore
  • FSSAI Central License: For turnovers of more than Rs 20 crore

Pollution Certificate/License

A pollution license/certificate is written official consent from the State Pollution Control Board to establish or operate any business that has the potential of generating pollutants or ‘trade effluents.’

Required consent certificates for Pollution license:

  • Consent to Establish: Prior to the commencement of activities of starting the business, like construction, it is mandatory to acquire official consent to establish a business from the State Pollution Control Board. Only after acquiring this CTE (consent to establish) can any individual initiate the construction or set up the business phase.
  • Consent to Operate: Once this setup phase is completed, that is to say, the construction is completed, and the building is ready to function as the headquarters of the business, the individual must mandatorily acquire a second official consent from the State Pollution Control Board that is, the consent to operate or the CTO.

Categories of Industries:

All existing industrial sectors are classified into four categories, namely, red, orange, green, and white categories. The Ministry of Environment carries out this classification, Forest and Climate Change, to differentiate between industries with the highest pollution index and those with the lowest.

Import Export Code

import export code

Import Export Code (IEC) is a unique 10-digit code required for businesses engaged in the import and export of goods and services. It is issued by the Directorate General of Foreign Trade (DGFT) Ministry of Commerce and is mandatory for businesses involved in international trade.

IEC is essential for facilitating international trade and obtaining benefits such as clear customs and shipment, duty exemptions, export incentives, and subsidies. It also enables businesses to expand their operations globally and explore new markets.

ISO certification

iso certification

ISO Certification is a globally recognized certification that ensures that a business follows international standards in its operations and processes. It is not mandatory, but it is a mark of credibility and quality that can help businesses stand out in the market. There are various objectives of ISO some of which are: to increase the quality and productivity of the organization, make the organization hub for profitable opportunities, customer and employee satisfaction, and best quality products and services.

There are different types of ISO Certifications, including ISO 9001 for quality management, ISO 14001 for environmental management, and ISO 27001 for information security management

Conclusion on Business Licenses and Permits in India

In conclusion, proper company registration and permits are essential for doing business in India. It ensures that your business is recognized as a legal entity, protects your interests, and helps you comply with legal and regulatory requirements. Failure to comply with regulations can result in penalties, legal action, and damage to your reputation. It is important to seek the help of a professional consultant or lawyer to ensure that you comply with all the legal requirements and operate your business successfully.

 

Also Read: How to Start a Business in India in 2023?

 

FAQs on Business Licences and Permits in India

 

Que1: What are the basic licenses and permits required to start a business in India?

Ans: Basic licenses and permits include business registration certificates, tax registrations (such as GST), and a PAN card.

 Que2: What industry-specific licenses and permits may be required?

Ans: Examples include shops and establishments license, food license, drug license, FSSAI license, and pollution control license.

Que3: How do I obtain the necessary licenses and permits for my business?

Ans: Apply to the relevant government department or agency responsible for issuing the license, and seek guidance from local consultants or lawyers.

Que4: Are there any other licenses or permits to be aware of?

Ans: Yes, additional permits can include environmental clearances, building permits, fire safety certificates, and labor-related registrations.

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