The following is an overview of some of the basic licenses required for businesses in India. The existence of several enforcement and regulatory authorities, at central, state and locals levels, governing a business entity requires quite a number of licensing and approvals to be obtained before commencing operations. The licenses and permits are required besides other basic registrations such as registration for PAN, VAT, TAN, ESI, PF etc. The below article is not exhaustive.
Indian Industrial license regime has been considerably eased after progressive liberalization and deregulation since 1991. Industrial licenses are regulated under the Industries Development Regulation Act 1951. Industrial license is granted by the Secretarial of Industrial Assistance (SIA) on the recommendation of the Licensing Committee. Presently Industrial Licensing for manufacturing is required in case of –
- Industries under compulsory licensing
- Manufacture of item reserved for (Small Scale Industries) SSI sector by non SSI units
- Projects affected by locational restrictions
Following industries require compulsory industrial license under the provisions of Industrial (D&R) Act, 1951
- Distillation and brewing of alcoholic drinks.
- Cigars and cigarettes of tobacco and manufactured tobacco substitutes;
- Electronic Aerospace and defense equipment, all types;
- Industrial explosives, including detonating fuses, safety fuses, gun powder, nitrocellulose and matches;
- Hazardous chemicals
Non-SSI Units for the Manufacture of Items Reserved For SSI Units
The Government has reserved certain items for exclusive manufacture in the small scale sector. Non-small scale units can undertake the manufacture of items reserved for small scale sector, only after obtaining an industrial license. In such cases, the non-small scale unit is required to undertake an obligation to export 50% of the production of SSI reserved items.
The location of industrial units is subject to applicable local zoning and land use regulations and environmental regulations. Industrial license is required if the proposed location of the unit is within 25 km of standard urban area limits of 23 cities having a population of one million as per 1991 Census.
The restriction does not apply:
- If the unit were to be located in an area designated as an “industrial area’’ before the 25th July, 1991.
- In the case of Electronics, Computer software and Printing and any other industry, notified in future as “non polluting industry”.
Industries exempted from the provisions of Industrial License are required to file Industrial Entrepreneur’s Memorandum (IEM) with Secretariat for Industrial Assistance (SIA), Department of Industrial Policy & Promotion (DIPP), and Ministry of Commerce & Industry.
Promoters of projects, subject to conditions, are required to obtain statutory clearances relating to Pollution Control and Environment as may be necessary, for setting up an industrial project belonging to specified categories as amended from time to time, by the Ministry of Environment & Forests under The Environment (Protection) Act, 1986. Setting up industries in certain locations, considered ecologically fragile, is guided by separate guidelines issued by the Ministry of Environment and Forests.
An occupier of a factory is required to obtain a License under the provisions of respective State Factories Rules. For this purpose he is required to make an Application to the Office of the Chief Inspector of Factories, in the concerned jurisdiction in accordance with the provisions of state rules. The procedure, timeframe and fees vary according to different States.
Shops and Establishment License
This is required for businesses involving premises where any trade, profession, business or any other related activity is carried out. In certain States even private educational institutes and places of public amusement and entertainment like – restaurants, hotels, motels, teashops, resorts, spas etc are covered under the provisions of this Act. Premises, where activities of registered societies, registered or unregistered charitable trusts are carried out, also require this license.
All types of businesses require a shop & Establishment license except the following which are exempted:
- Shops and factories registered under the Factories Act, 1948
- Establishments of doctors and medical practitioners
- Offices of lawyers
- Foreign news agencies
India allows for free import of most of the goods however some categories of products are strictly prohibited and some are allowed conditional import under import license. Import License is issued by the Director General of Foreign Trade (DGFT). Typically the license is valid for 24 months for capital goods and 18 months for raw materials, components, spare parts and consumables.
An Import License consists of two copies.
- Foreign Exchange Control Copy: To be utilized for effecting remittance to foreign seller or for opening letter of credit
- Customs Copy: To be utilized for presenting to Customs authority enabling them to clear the goods.
The two types of license are:
- General Licenses : This license can be used for the imports of goods from all countries, except those countries from which imports are prohibited;
- Specific Licenses: This license can only be used for imports from a specific country
Export license are only issued for the goods mentioned in the Schedule 2 of ITC (HS) Classifications of Export and Import items. Application for Export License must be submitted to the Director General of Foreign Trade (DGFT). Exporting of items that are regulated by conditions including Minimum Export Price (MEP), registration with specified authorities, quantitative ceilings will require export license.
Import Export Code (IEC)
IEC Code is unique 10 digit code issued by DGFT – Director General of Foreign Trade. It is mandatory for import export activities and to make remittance against purchases made to foreign sellers. Only one IEC would be issued against a single PAN number. Any proprietor can have only one IEC number and if more than one IEC is allotted to a proprietor, the same may be surrendered to the Regional Office for cancellation. An IEC number allotted to an applicant shall be indefinitely valid for all its branches/divisions/units/factories. Application for IEC must be submitted to the Regional Authority of Directorate General Foreign Trade.
Central Excise License
For the administration of the Central Excise Act, 1944 manufacturers of excisable goods or any person who deals with excisable goods, with some exceptions, are required to get the premises registered with the Central Excise Department before commencing business. Producers, manufactures and establishment that carries on trade, holds private store-room or warehouse or otherwise uses excisable goods shall get registered.
The application for registration has to be made to the jurisdictional Central Excise officer. Manufacturers who are exempted from registration have to file a declaration with the Assistant commissioner of their respective Divisions. Manufacturers enjoying exemption from the payment of Central Excise Duty are also exempted from licensing control subject to certain conditions. Once Registration Certificate is granted, it has a permanent status unless it is suspended or revoked by the appropriate authority in accordance with law or is surrendered by the person or company concerned.
State Excise License
Alcoholic beverages are a state subject in India, so rules & regulations and duties & taxes vary depending on the states. Any person dealing with excisable goods are required to register with the State Excise. All brands (locally produced or imported) have to be registered with the Excise Department of each state. Permits need to be obtained from concerned excise authorities for movement of alcoholic beverages from warehouse to the trade. Such permission is generally issued after payment of the state excise duties applicable; in case goods are being moved between two states, this would entail paying an Import Fee and an Export Pass Fee.
To ensure that the manner in which a business is being carried on is according to the relevant rules, standards and safety guidelines the municipal authority in charge of the place where trade is conducted issues a Trade License. The procedure & fees to obtain a trade license are set by the municipal authority therefore widely differs according to the location. Trade License is a certificate/document which grants permission to carry on the particular trade or business for which it is issued. It does not confer ownership of property or permission for any other activity than for which it is issued
Depending on the nature of business the promoter may have to register or apply for license with the concerned regulatory authority. Several registration, permits & license, clearance may be required before commencing a business, for instance a retail business if commencing operations on proper regulatory terms will have to acquire nearly 50 approvals depending on the nature of operations.
Licenses Required For Restaurant Business (Not Exhaustive)
|Health / Trade License||Municipal Authority/ Health Department|
|Eating House License||Police Commissioner|
|Restaurant Grade License||FDA|
|Liquor License||Excise Commissioner|
|Approval / Re-Approval of Restaurants (this is required for Liquor License)||Department of Tourism of Government of India in the State concerned|
|License to play music in
|Phonographic Performance Limited / Indian Performing Right Society|
|Environmental Clearance||Pollution Control Board|
|No Objection Certificate (NOC) from Fire Department||State Fire Department|
|Signage License||Municipal Authority|
|Shop & Establishment License||Local Municipal Corporation|
Licenses Required For Schools (Not Exhaustive)
|Certificate of Registration of Society||Concerned Registrar of Societies|
|Essentiality Certificate||Concerned Department of Education (DOE)|
|Certificate of Recognition||Concerned Municipality/ DOE|
|Certificate of Upgradation||Concerned DoE|
|Certificate of Affiliation||Concerned educational Board like CBSE or CISCE|
|Site Plan of the Building/Sanctioned Building Plan||Municipality and City or Area Development Authority|
|Building Fitness Certificate||Concerned Municipality|
|Health/ Water Testing Report||Concerned Municipality / Water Board|
|Building completion Certificate||Concerned City or Area Development Authority|
|Approved Scheme of Management||DOE|
Licenses Required For Retail Establishments (Not Exhaustive)
|Shop & Establishment License||Local Municipal Corporation|
|Labour License/7 days working permission||Ministry of Labour/Labour Commissioner|
|Certificate of Recognition||Labour Commissioner|
|License for frozen Non veg food||Local Municipal Corporation|
|Drug License for OTC Products||Local FDA & PFA / Drug Inspector|
|Freezers/Chillers 390 permit||Local Municipal Corporation|
|Illuminated showcase permit||Local Municipal Corporation|
|Weights & Measurement calibration and certification||Local Legal Metrology|
|Traffic Police NOC||RTO|
|License for sale of Cosmetics under Drugs and Cosmetics||Drug Inspector of Food & Drug Dept|
|License under Essential Commodities||Controller of Rationing|
|Valet Parking Permit||Local Municipal Corporation|
|Storage of Inflammable goods||Local Municipal Corporation|
|Food License for Storage of Food Products||MOH of Health Dept. Municipal Corporation|