Is Trade License Mandatory for GST Registration? 

No, a trade license is not mandatory for GST registration in India. There are a lot of myths regarding registration for GST in India; a trade license is mandatory while getting registration for GST is one of them. Trade License and GST registration are two separate needs of a business. Just because a trade license is not mandatory while getting registration for GST does not mean a business will not require a license for trade in India. To make this point more clear, we will discuss the trade license and GST registration in detail in the current blog post. Both of them are important for a business owner; hence, proper knowledge regarding each of them is crucial for a business and the business owner. 

What is GST Registration? 

Registration under the Goods and Services Act of 2017 as a taxpayer is known as GST registration. There are two variables of registration for GST in India. On the first comes the regular GST scheme.  The second one is related to small businesses, and that is known as the composite GST scheme. Getting registration for GST has many advantages with respect to businesses. Therefore, it is suggested to every business owner to get registration for GST. If a business falls under the goods and services tax but does not take the registration and does not pay the GST, then heavy fines and penalties can be levied upon it. Therefore, to save your business from any sync penalties and fines, one must get registration under the GST laws.  

What is a Trade License? 

Permission to do a particular type of business in a particular area by the competent authority as per the jurisdiction of the business is known as a trade licence in India. This licence is also known as a business licence in some places. To get this licence, one needs to figure out the jurisdiction of the competent authority, and that can be decided as per the business address proof. Mostly, this licence has been issued by the state government or municipal authority. 

After starting any kind of business, one must take this licence within 30 days of commencement of business. After making the application and submitting it, one will get this licence within 7 to 15 days only. This license is not a one-time license hence, it will need renewal from time to time. To get this licence, one must be an adult, which means he or she must attend the age of 18 years and must not have a criminal record. Also, the business for which one is getting this license must be a legal business with lawful objectives. 

Under trade license, there are three further categories. This license has been categorised on the basis of the risk involved in a business. Given below is the list of all three categories: 

Is Trade License Mandatory for GST Registration?  

As such, there is no direct relationship between trade license and GST registration, but that does not mean one can run a business without having either of them. Although during the time of registration for GST, a trade license is not mandatory, one must take this within 30 days of the commencement of the business. Also, if one registered for GST after the commencement of business, as when he or she started the business, it does not fall under the ambit of the GST law, then the department of GST can ask for the trade license. Hence, it is general advice to take a business license, which is another name for the trade license. Trade license and GST registration have different utilities with respect to business. GST is for indirect taxes, and a business license is for running a business lawfully in a particular area. Both have different functions to perform. 

Benefits of Trade License and GST Registration  in India 

There are various benefits of trade license and GST registration in India. Let us discuss them one by one for a better understanding and knowledge of the advantages and benefits of trade license and GST registration. 

Advantages of Trade License 

Some of the important benefits attached to a trade license are given below: 

• To track the activities of the entity, which can be a public limited company, a private limited company, a limited liability partnership firm, a proprietorship firm, etc. 
• To check that the company is not working or running beyond the permitted scope of work.
• Determine that the business is not running or working in violation of any law.
• To control the activities of the business so that it can not cause any nuisance to the general public
• Compliance with the law and order 

Advantages of GST Registration 

Some of the key advantages or benefits of the registration for GST are given below: 

• It gives reliability to the business in the market between the competitors 
• It helps to get credibility among the consumers of the goods and services of the business 
• To build trust among the consumers 
• Business owners can get various tax benefits 
• Minimising tax evasion in the market and the GST department can keep an eye on businesses 

Conclusion 

While a trade license is not a mandatory requirement for GST registration in India, both trade license and GST registration serve distinct and essential purposes for businesses. GST registration is crucial for complying with the Goods and Services Tax system, facilitating smoother operations, and ensuring tax benefits. On the other hand, a trade license issued by state governments or municipal authorities is essential for operating a business legally within a specific jurisdiction. It helps monitor and regulate businesses to prevent violations of laws and maintain public order. Ultimately, obtaining both a trade license and GST registration is essential for a business owner, as they serve complementary roles in ensuring lawful and compliant business operations, promoting credibility, and minimising tax evasion.