Introduction to Idea of Shops, Establishments and the Licenses Required
This blog post aims to serve as a one-time reference guide with regard to opening new shops and commercial establishments in India. It deals with various licenses and registrations that one has to compulsorily acquire in order to set up a business. Every state in India has the jurisdiction to enact its own Shops Act to regulate every business that exists within their territories. It is one of the most powerful tools to ensure that all legal businesses are recorded with the respective state governments. Only after successful compliance with the shops registration act, the existence of the business is confirmed.
This blog post deals specifically with the license requirement for opening shops and commercial establishments in Mumbai. There is no specific reason for choosing Mumbai as a model city except that it requires one of the maximum numbers of permits from different departments of the Municipal Corporation. Giving an account of the licenses required in Mumbai would almost definitely cover the licenses required in other states in India.
Depending on the type of business one is in, the licenses vary. For example, someone who wishes to venture into the food industry, by opening a restaurant requires permits from the Food and Drug Inspector, the Fire Department, the Police Commissioner and the local municipal authorities; for a normal grocery shop, one needs approvals from the fire department, municipality and health department. This blog will cover the general requirements for opening a shop or any commercial establishment under the meaning of the Bombay Shops and Establishments Act, 1948.
Any citizen who wishes to open a shop or a commercial establishment in Maharashtra must be registered under the Bombay Shops and Establishments Act, 1948. For the purposes of registration, every business owner must send the relevant application form along with the fees to the Inspector appointed under Section 48 of the Act. The default authority under the Act is “local authority” that can be the following entities as per Schedule 1A of the Act –
- Any corporation under the Bombay Municipal Corporation Act, 1888
- A Municipality under the Bombay Municipal Boroughs Act, 1925, Bombay District Municipal Act, 1901, the Central Provinces and Berar Municipalities Act, 1922 or the Hyderabad District Municipalities Act, 1956
- A local board constituted under the Local Boards Act, 1923
An application sent to the local authority along with the following mandatory documents and registration fees would complete the registration process.
- Address proof of the premises where the shop or commercial establishment shall be set up (electricity bill/sale deed/tax receipt are considered valid for this purpose);
- Identity proof of the owner (in case of a firm/trust, then that of the partners/trustees);
- Nature of business verification – this can be of the following types:
- If Bar and Restaurant, Wine Shop or Beer Shop, then State Excise License has to be attached;
- If Medical Stores, then Food and Drug Administration License needs to be attached;
- If Cyber Café, then NOC from the Police Department -, Police Commissioner License and Man Power Supplier copy of the Work Order of the Principal Employer has to be attached;
- If Entertainment, then copy of the Collector’s permission has to be attached;
- If Transportation/Tour and Travel Agency, then RTO Transport Permit needs to be attached;
- If Import/Export/Clear Forwarding/Shipping/Cargo Industry, then licenses from the concerned department to be attached;
- For a share brokering business, SEBI Enrolment Form to be attached;
- For Trading Business, copy of the financial transaction to be attached;
- For Fire Works Shops, Municipal Corporation NOC, Fire Brigade NOC, Collector’s NOC and Police Department NOC must be attached.
Once a shop is registered under the Shops and Establishments Act, there are some basic conditions relating to work and employment that the employer has to adhere to. The objective of the Bombay Shops and Establishment Act was to regulate the conditions of work and employment in shops, commercial establishments, hotels, restaurants, eating houses, theatres and other establishments. Opening and closing hours of shops/residential hotels/restaurants/theatres, their daily weekly work hours, interval for rest, holidays. It prohibits the working of children in establishment. General rules regarding leave, paid leaves and other benefits accorded to employees are also laid down. Health Safety and precautions in case of emergency also have to be observed. Penalty for not complying with any of the provisions of the Act attracts a maximum fine of Rs 5000.
These requirements are more on part of the employer to accord certain basic work conditions to his employees. The workers have been left completely out of the purview of this legislation. Rightly so, the author feels, since the requirements of the employee differs from case to case basis, and it is the employer who can best decide the qualification of his employees. It is important to understand the legislative intent behind the enactment of Shops Act; it is not to balance the rights of employers and employees, it is a clear pro-worker legislation aimed at regulating various details about the business like work hours, holiday’s list, overtime rule, joining and termination criteria etc. Therefore, it is a democratic jurisdictional act that is established by every state in India in order to guide their business segments.
License Requirements for opening a Small-Sized Restaurant in Mumbai
Just to give a perspective, it would be interesting to take a look at the licenses/permits/certificates to be obtained by a small-sized restaurant in Mumbai.
There are five major departments that need to be approached – Brihanmumbai Municipal Corporation (BMC), Police Department, State Government, Excise Department and Sales Department. The Central Government also needs to be approached for Food Safety and Standards Authority of India license and recorded musical performance licenses.
|1.||BMC||Shops and Establishment Certificate|
|2.||BMC||Health License (to serve food)|
|3.||BMC||Madira License (to serve Liquor)|
|4.||BMC||Grading Certificate, Sign Board License under License Department, Medical Certificate of Kitchen Staff, Water Connections, Drainage Inspection Certificate, Neon Sign certificate, Pollution Clearance Certificate, Weights and Measures Certificates etc.|
|5.||BMC||Permission to operate more than two gas cylinders at a time (fire department and health department), permission to operate heavy machinery (PWD)|
|6.||State Government||Professional Tax Certificate of employees and employers|
|7.||Police Department||Police Registration Certificate and under the Bombay Police Act, Noakarnama|
|8.||Sales Tax Department||Sales Tax Registration Certificate under Bombay Sales Tax Act|
|9.||Income Tax Department||PAN for Restaurant Business|
|10.||Excise Department||Dance Permits (if any), Accounts Register, Customer’s Drinking Permit etc.|
Critique of the Application Procedure and Suggestions
Shops and Establishments Act has been one of the effective tools to protect the illegitimate and illegal acts in the employment segment of particular state jurisdiction. It is compulsory for all business houses to register under various authorities mentioned under the Act before starting their business. Waiver under the Act is not an option under the Indian Laws.
Most of the other states have their own Shops and Establishments Act that lay down the long list of authorities to be approached for opening a single shop. While each of these licenses are necessary keeping in mind the safety and regulatory aspect, the actual procedure of procuring a license from so many departments is very cumbersome.
India is counted among the fastest growing economies in the world today, and if we are to live up to our name, it is imperative that we incentivise the domestic production, manufacturing and service sectors. Opening a restaurant, or a hair-saloon or a simple grocery store would definitely contribute to the GDP of our country, albeit in a smaller scale. Therefore, the process of acquiring licenses by these small scale enterprises must be made easier and hassle-free. Some of solutions are suggested below.
- A much needed reform in the system is to create a centralised nodal agency for procuring licenses, where all forms can be submitted together, and the approval would also be given from that nodal centre. This would ensure a one stop solution for the license seekers while at the same time not compromising with any of license requirements.
- Another solution can be to create different sets of licenses, with each set pertaining to the licenses required by one particular entity, for example, all the licenses required to open a restaurant will be in Set-A, all licenses required to open a medical store in Set-B, for a cyber café Set-C and so on. This would help the license seekers get a clearer and cleaner understanding of all the regulations they are supposed to comply with. This would also aid the concerned government department to regulate the licensees according to their establishment-type.
More than the above mentioned solutions, it is the present system that needs to be strengthened; the extent of red-tapism existing in our bureaucratic framework is staggering. The culture of collecting files needs to be replaced with a positive culture of clearing files. Every department needs to be proficient in its working, so much so that prospective business houses should feel hopeful about their licenses getting approved at the earliest and believe that their government is supportive of their ventures. It is only with a change in attitude can we really expect a change for real.
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