The Shops and Establishment Acts in India are state and union territory-specific laws that govern employment and labor service conditions in shops and commercial establishments, excluding factories, and require compliance within their respective jurisdictions.
The Shops and Establishment Acts are state-specific legislation in India that regulate the functioning of shops and commercial establishments within their respective jurisdictions. The respective Acts set out the rules and regulations governing the working hours, wages, and other working conditions of employees working in these establishments.
Find Business SupportWhile each state enacts its own version of the Shops and Establishment Act, core provisions remain largely consistent across the country. The Shops and Establishment Acts are implemented and enforced by the Labour Department of each state.
All commercial businesses in India, including shops, hotels, cafes and restaurants, theaters, and other venues, are subject to this act. With various exceptions based on the number of employees, the nature of the activity, and the kind of establishment, the act applies to both registered and unregistered establishments.
Unlike the Factories Act, there is no central labor act governing shops in India. The Shops and Establishments Act, rooted in 19th-century European labor laws, has been adopted by each state based on a model code since independence. Maharashtra was a pioneer with its 1948 Act and again with the updated 2016 Model Act. More states are anticipated to modernize their decades-old acts to align with current business needs.
Salient features of the Model Shops and Establishment Bill, 2016:
Shops: Under the Act, a shop is broadly defined as any premises where goods are sold, either retail or wholesale, or where services are provided to customers. This definition includes offices, godowns, storerooms, and warehouses connected with the business.
Commercial establishments: These are defined as establishments engaged in commercial, banking, trading, or insurance activities where office work is performed. This category also includes hotels, boarding houses, restaurants, cafes, theaters, and places of public amusement or entertainment. Notably, factories and industries are not covered by the Shops and Establishment Acts and are instead regulated by the Factories Act, 1948, and the Industries (Development and Regulation) Act, 1951.
All shops and commercial establishments covered under the Shops and Establishment Act must register with the relevant state authority and obtain a Shop and Establishment Registration Certificate, commonly referred to as a Shop License. This requirement extends to businesses operating from home, e-commerce entities, and online businesses. Registration is mandatory within 30 days of commencing business operations.
The Shop and Establishment Registration Certificate serves multiple purposes:
The Act covers various aspects of employment and operational standards, including:
The procedure for obtaining the Shop and Establishment Registration Certificate can be conducted either online or offline or both, varying from state to state.
The validity and fees for the Shop and Establishment Certificate vary across states. Some states issue certificates valid for a lifetime, while others may have validity periods ranging from one to five years. Renewal must be done before the expiration of the current certificate.
The Shops and Establishment Acts ensure that organizations operate within a legal framework that promotes fair labor practices and standardized operational procedures. Compliance with these regulations helps in fostering a structured and transparent business environment, which can enhance the trust and reliability of the organization among employees, customers, and financial institutions.
The Factories Act primarily focuses on regulating manufacturing processes and ensuring the welfare of workers in factories.
The Shop and Establishment Act deals with the regulation of working conditions in commercial establishments and requires businesses to obtain a license for legal operation.
Yes, registration under the Shop and Establishment Act is mandatory for all shops, offices, warehouses, restaurants, hotels, theaters, venues for public entertainment, or any location involved in the sale of goods and services, whether retail or wholesale.
Yes, home-based businesses and online or e-commerce enterprises need to obtain a license under the Shop and Establishment Act, typically within the initial 30 days of commencing operations.
The Shop and Establishment registration serves as evidence of your registered business and facilitates processes such as securing a bank loan or opening a bank account.
A factory license is required for factories with 10 or more workers involved in manufacturing with the aid of power and 20 or more workers in manufacturing without the aid of power.
Obtaining a factory license ensures that necessary safety measures are implemented to enhance worker welfare and health. It also makes owners eligible for government benefits offered through various schemes and safeguards against penalties outlined in the Factories Act.
The factory license is issued by the relevant state department of labor and remains valid for a period ranging from one to five years, with the specific duration varying among states.
Factory owners should initiate the renewal process for the factory license certificate before its expiration by submitting an application to the relevant state labor department or department of factories.
Yes, businesses operating in multiple states must register under the Shop and Establishment Act of each respective state or union territory where they conduct business activities.
The Shops and Establishment Acts play a crucial role in regulating the working conditions of employees in various establishments across India. While they impose certain compliance requirements, they also ensure the protection and welfare of employees, which can lead to a more motivated and productive workforce. Organizations need to be well-versed with the specific provisions of the Act applicable in their state to ensure full compliance and avoid legal issues.
About Us
India Briefing is one of five regional publications under the Asia Briefing brand. It is supported by Dezan Shira & Associates, a pan-Asia, multi-disciplinary professional services firm that assists foreign investors throughout Asia, including through offices in Delhi, Mumbai, and Bengaluru in India. Readers may write to india@dezshira.com for support on doing business in India. For a complimentary subscription to India Briefing’s content products, please click here.
Dezan Shira & Associates also maintains offices or has alliance partners assisting foreign investors in China, Hong Kong SAR, Dubai (UAE), Indonesia, Singapore, Vietnam, Philippines, Malaysia, Thailand, Bangladesh, Italy, Germany, the United States, and Australia.
Our free webinars are packed full of useful information for doing business in India.