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What Is Shop and Establishment Act: 4 Benefits Of Shop And Establishment License For MSMEs

what is shop and establishment act

In India, around 90-94% of employment is in the unorganized sector, which is unlicensed, not registered, and without any statutory laws or regulations.

This poses a huge problem for the Govt: The income and the tax calculation goes haywire, and there is protection for the employees working in such unorganized sectors.

The Government understood the problem and enacted The Shops and Establishments Act, 1953, which provides a license to operate for shops and small businesses. 

What Is a Shop Establishment License?

An establishment is a commercial entity such as a shop, hotel, restaurant, newspaper printing, cinema theatre, public amusement parks, stock brokering, trading services, etc. 

In order to operate and regulate these commercial establishments, Govt provides Shop Establishment Licenses, which comes under The Shops and Establishments Act, 1953.

What Is Shop and Establishments Act, 1953

The primary objective of enacting this act was safeguarding the labour who are engaged in unorganized sector and provide the shops and commercial establishments with a legal framework for regulation.

Every state in India has their version of Shop and Establishment licence since it involves a thorough and deep understanding of the local sentiments, and work culture. 

Here are the reasons why the concept of Shop And Establishment Act License was introduced:

  • Empowering States To Impose Rules Based On Local Culture: The Act specifically empowers the states to frame their regulations and rules pertaining to labor workforce engaged in such commercial establishments and make necessary exceptions as and when required.
  • To Convert Unorganized Sector Into Organized: By bringing in rules and regulations related to conducting business, Govt aims to convert unorganized sector into organized sector.
  • Registration Becomes Mandatory: The very nature of granting Shop and Establishment Act license makes business registration mandatory for the entrepreneur, which is the biggest push towards organizing and monitoring this sector. As more and more small shops and commercial establishments are registered, the Govt will be able to provide them with better help, and better resources.
  • To Regulate Wages Of The Employees: Earlier, any shop or commercial establishment could have fixed any salary/wage for the employees, and there was no way to regulate it. Labourers and daily wagers often received substantially less money, and the business owners were not held accountable. Now, Shop Establishment Act Certificate holders need to comply with the Govt rules regarding the wages and provide the care which every employee deserves.
  • Stop Child Labour: One of the biggest and socially most important features of the Shop and Establishment Act is making child labour illegal, and a punishable offence. Before the introduction of shop establishment license, child labours were common, and this destroyed lives. But with Govt regulations and rules related to shop and establishment licence, this has become illegal.
  • Healthy Working Conditions: Irrespective of the state of business, the Shop and Establishment Act makes it mandatory for the business owners to create and maintain a healthy working condition, and to ensure availability of washrooms, baby care rooms, and more. 

Other features include the introduction of health care for all employees, regulating the working hours, ensuring a safe and hygienic working space, and more for the employees working with shops and commercial establishments.

One exception which you should know: Factories registered under Factories Act 1948 are exempted from following the directives under Shop Establishment Act.

4 Benefits Of Shop And Establishment License For MSMEs, Startups

The features and policies under shop and establishment licence have been designed and programmed to benefit the employees and to ensure safe working conditions for them.

However, there are several advantages and benefits for business owners as well, if they understand what the Shop and Establishment Act is, and if they realise that the Act benefits both the employers and the employees.

Here are 4 major benefits of getting shop establishment license, under Shop Establishment Act:

  • Legal Right Of Conducting Business: By availing Shop And Establishment License, and by furnishing proof of business such as partnership or proprietorship, the business owner gets the legal right of conducting business, within the jurisdiction of the Act. He/she cannot be hassled and troubled by law enforcement authorities.
  • Banking Account For Business: As per the RBI rules, every business needs to have a separate business account for handling the finances of the business. And this business account can be opened only with an under shop establishment act certificate. Hence, for following RBI rules related to business, having a Shop And Establishment License is a must.
  • Fair Inspections Without Any Hassles: Local municipality authorities and other statutory bodies such FCCAI etc. have the right to conduct inspections and checks. If you don’t have the shop and establishment act license, then such audits and inspections can snowball into a massive issue, and your shop can be forced to close down. The best way forward is to get a shop establishment license and conduct your business with legal means.
  • Avail Govt Benefits & Schemes: In order to promote and encourage small shops, and commercial establishments, Govt of India regularly comes out with interesting schemes and offers, which can only be availed if you have the shop and establishment act license. Besides, there are attractive bank loans, financial plans and schemes, with low-interest rates, applicable only for the businesses which are registered under shop and establishment act.

If you are still wondering why you should apply for a shop establishment license, and how to get one, then we at MSMEx can provide you with the right help.

We are a micro-advisory platform, wherein you can consult and seek mentorship from some of the sharpest, most knowledgeable business minds. We have small business experts, who can guide you for obtaining Shop act license online, and explain the benefits of getting the shop and establishment act license, and more.

You can seek guidance from Govt loan experts, MSME business veterans, funding gurus, marketing and sales ninjas, and more.

Book your appointment at MSMEx, and give wings to your business vision right away!

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