All those who are planning to enter the business world need to understand the provisions of Shop and Establishment Act in India. Registration of an establishment under the Shop and Establishment Act is mandatory for most businesses and since this is the first step towards the promising business world, we have tried to cover the basics of the same.
Shop and Establishment Act is covered under state legislation and each state has framed its own rules and regulations for the same. Since rules are framed by the state government, obviously, rules will differ from state to state and hence rules for the state in which registration is to be obtained needs to be followed.
Broadly, all shops, hotel, eating house, restaurants, theatres, places of public amusement or establishment and other commercial establishment etc. are covered under the Shop and Establishment Act and are required to obtain registration under the same. In addition, the government can notify other types of establishments which will be governed by the act.
In case of any failure in obtaining registration and/or following the rules and regulations of the Act, the establishment would be liable to pay the penalty. The penalty amount would vary from state to state.
The main objective of the Act is to protect the rights of both the employer and employee. The Shop and Establishment Act generally regulates payment of wages, hours of work, terms of service, wages for holidays, leave policy, work conditions, overtime work, interval for meals and rest, prohibition for employment of children, employment of young persons or women, maternity leave and benefits thereof.
What is the procedure for registration of an establishment?
If you are starting a commercial establishment or a shop, (as mentioned above), you need to file for registration under the Act, within 30 days of commencement of your establishment. While each state has set different rules and regulations for registration under the Act, the basic procedure remains the same. The Act requires every business to get approval from the Department of Labour.
The registration certificate can be obtained from the Chief Inspector of the Shops and Establishment Act, or from other inspectors delegated to the area where you run the establishment.
An application, in the prescribed format, (obtained from the official websites of different States) needs to be submitted to the inspector in charge, with:
- The name of the establishment
- Name and details of the owner (employer) and the employees (at the time of incorporation of business)
- The address of the establishment and a copy of sale deed or rental agreement for the shop
- PAN card of the business or the owner
All the above details are to be submitted in the form, along with the prescribed fees to the inspector. Once the application is received, the inspector will check the details, make a visit to the establishment, if required, and shall provide a registration certificate under the Act.
The registration certificate needs to be displayed in a prominent place in the shop, and you can renew shop and establishment license in case of any changes in the details provided (such as the number of employees and so on) or upon expiry.
The shop and Establishment Act registration is one of the mandatory requirements of all businesses which operate from an establishment or shop. Any changes made in the details or the closure of such an establishment need to be initiated to the inspector within 15 days of the said change or closure.
The registration process can be completed, and the hard copy of the certificate will be issued within 10 working days in major cities and might take a longer time (say, 15 to 20 working days) in other places.
To whom shall the application for registration of establishment be made?
The Shops & Establishment registration is a state-based labour license legislation enacted by the respective state in which the establishment is set up.
An application in the prescribed format has to be made for the registration of an establishment and must be submitted before the Chief inspector or inspector in-charge of the Shops and Establishment Act. However, the Act requires every business to get approval from the Department of Labour.
Documents required for registration of an Establishment under the Act
All you are required to do is fill a form prescribed under the Act which requires the applicant to fill in details such as the total number of employees, name, and address of the employer and manager, etc. An application form and fees detailing:
Name of the establishment, the employer and the manager, if any;
Postal address of the establishment;
Such other particulars as may be prescribed.
Other documents required to be attached (depends on the type of establishment)
A proprietary firm needs to give an undertaking,
A partnership firm would have to additionally attach the deed or partnership, etc.
When can the registration of an establishment be revoked?
There are certain circumstances when the registration of an establishment can be revoked:
In case the registering officer is satisfied that the registration has been obtained by misrepresentation or suppression of any material fact or any reference has been made to him on his behalf, otherwise, or
If the registration has become ineffective and useless because of any other reason. Then, in that case, it can be revoked.
Thus, in both cases, an opportunity for the principal employer of the establishment shall be given by the registering officer to be heard. Also, in case the registration is to be revoked, he will also obtain a previous approval of the appropriate Government.
What is the effect of non-registration of an establishment?
The registration is mandatory for any establishment or factory. Otherwise, there can be a severe effect of non-registration.
The most significant provision in the Act is that it empowers the appropriate Government for prohibiting the employment of contract labour in any process in the respective establishment.
Non-registration of an establishment invites a penalty or fine which varies from state to state. Like the Penalty for non-registration of an establishment in Haryana is provided under section 13(6) of the Punjab Shops & Commercial Act, 1958 as applicable to the State of Haryana which is given below.
In the case of contravention of or failure to comply with the provisions of this section, the employer shall be, on conviction, to a fine which shall be not less than one thousand rupees but which may extend to three thousand rupees along with the prescribed registration or renewal fee, as the case may be.
What is the time limit to complete the process of registration?
All establishments need to register itself compulsorily under this act within 30 days of commencement of work. Many other licenses require this as proof of a commercial business as this is such a basic license. Mostly, the banks require you to furnish it if you want to open a current account. So, to get establishment license, you would need to provide the PAN card of the business owner or the business itself, a copy of the rental agreement or sale deed, and details of all the employees.
If we talk about Delhi then all commercial shop/establishments are compulsorily required to register itself under the Delhi Shop & Establishment Act 1954 by sending an application to Delhi government’s Labour department within 30 days of commencement of work. For registration just go to the Registration Page.
This will also help all newly-started sole proprietorship firms as proof of registration of their business while opening a Bank Account of a firm.
At last, The Registration Certificate has to be obtained within 90 days from the date on which the establishment commences its work.
What is the process of online registration of an establishment?
The process of online registration of an establishment is more or less the same in every state i.e. you have to fill and submit a form which is available online on the labour department website of the respective state.
In Delhi, it is possible to complete the process of registration online. This electronic service of registration can be availed by submitting an e-form available on the labour department website here.
As specified under Rule 3 of the Delhi Shops and Establishments Rules, 1954, Form ‘A’ needs to be filled to get the Registration Certificate for any establishment. The form requires certain details like name and category of establishment, complete address, details of the shop/establishment and the shop owner, details of the employees and nature of business.
The online form required for the registration process can be filled in two parts. Once the registration form is submitted, the Registration Certificate will be issued automatically to you within a fraction of seconds by the Department of Labour, Delhi. This complete process of registration is cost free.
What are the fees for registration of establishments?
Fees for registration of an establishment also differs from State to State. Some base the charges on the type of establishment while others base the same on the number of workers employed. For example, annual fees charged in Maharashtra is Rs. 120 for establishment having no employees to Rs. 5400 for establishments having more than 100 employees.
Similarly in Madhya Pradesh, annual fees charged is Rs. 100 for establishment having no employees to Rs. 250 for establishments having more than 10 employees. Also, annual fees charged in Assam is Rs. 250 for establishment having no employees to Rs. 20000 for establishments having more than 50 employees.
However, No fee is chargeable to get the shops and commercial establishments registered in the state of Punjab.
What happens on Closure of Business?
In case you are planning to close down your establishment then within 15 days of closing the establishment, you will have to notify the Inspector in writing the date of such closure and return the registration certificate. After due verification, the Inspector shall remove the name of your establishment from the Register of Establishments and cancel your registration certificate.
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