Various Initial Registrations & Licenses SBIL | CS Exe June 26/ Dec 26

After business establishment, obtaining necessary registrations and licenses is crucial for legal and compliant operation in India. These requirements vary significantly based on the business's nature and scale, ensuring adherence to tax laws, labor regulations, environmental protection, and industry-specific standards. Here we explore essential initial registrations like PAN, TAN, and GST, alongside vital operational licenses.

Permanent Account Number (PAN)

PAN stands for Permanent Account Number. It is a 10-digit alphanumeric number, comprising both alphabets and digits, and serves as a very important document for any taxpayer in India.

Utility of PAN

1. Uniqueness: The number is unique to each cardholder and cannot be duplicated.

2. Transaction Linking: It enables the Income Tax Department to identify and link all of a taxpayer's financial transactions.

3. Information Retrieval: PAN facilitates the retrieval of taxpayer information.

4. Identity Proof: It serves as a valid proof of identity for many official purposes.

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Mandatory Requirement for PAN

Obtaining a PAN is mandatory for:

• Any person whose total income exceeds the maximum amount not chargeable to income tax.

• All Charitable Trusts.

• Any person carrying on a business or profession where total sales or turnover is likely to exceed ₹5 lakh in any financial year.

• Any person intending to enter into specified financial transactions.

• All non-residents whose financial transactions in a financial year exceed ₹2,50,000.

Application Procedure for PAN

• Modes of Application: Applications can be made both online (through NSDL or UTIITSL portals) and offline (by submitting physical forms).

• Forms: Form 49A for Indian citizens; Form 49AA for foreign nationals.

• Documents Required: Proof of Identity, Proof of Address, Proof of Date of Birth. Offline applications also require two recent colored photographs.

• PAN for Companies: Companies can obtain their PAN during incorporation via the integrated SPICe+ form.

Linking PAN with Aadhaar

It is mandatory for Aadhaar holders to quote their Aadhaar number in the PAN application for linking. If an Aadhaar number is not yet obtained but applied for, the Aadhaar Enrollment ID must be mentioned.

Tax Deduction and Collection Account Number (TAN)

TAN stands for Tax Deduction and Collection Account Number. It is a 10-digit alphanumeric number issued by the Income Tax Department.

Mandatory Requirement for TAN

A TAN is compulsory for any person required to:

1. Deduct Tax at Source (TDS): For example, an employer deducting tax from an employee's salary.

2. Collect Tax at Source (TCS): For example, a professional collecting tax from a client on professional fees.

Relevance and Usage of TAN

The TAN must be quoted in all:

• TDS and TCS statements (returns).

• Challans for TDS and TCS payment.

• TDS and TCS certificates.

• Statements of Financial Transactions and other prescribed documents.

Application Procedure for TAN

• Form: Application is made in Form 49B.

• Modes of Application: Offline at TIN Facilitation Centers of NSDL or online through the NSDL-TIN website.

• Key Points: A single TAN suffices for both TDS and TCS. No documents need to be submitted with the TAN application. NSDL forwards the application to the Income Tax Department, which allots the TAN. Application status can be tracked using the 14-digit acknowledgment number.

GST (Goods and Services Tax) Registration

GST registration is mandatory for a supplier if their aggregate turnover in a financial year exceeds the prescribed threshold.

 Persons Not Required to Register for GST

• Those exclusively supplying goods or services not liable to tax or wholly exempt.

• Agriculturists, for supply of produce from cultivation of land.

• Specific government-notified categories.

Compulsory Registration

Certain categories must register for GST regardless of turnover:

• Persons making any inter-state taxable supply.

• Casual taxable persons.

• Non-resident taxable persons.

• E-commerce operators and those supplying goods or services through them.

• Persons liable to pay tax under the Reverse Charge Mechanism (RCM).

• Input Service Distributors (ISD).

Aggregate Turnover

The components of Aggregate Turnover can be remembered with the acronym TEGI (Memory Tip: T: Taxable Supplies, E: Exempt Supplies, Z(G): Zero-rated Supplies, I: Inter-state Supplies).

GST Registration Procedure

1. Part A: File Form GST REG-01 on the GST portal with PAN, mobile, and email, verified via OTP.

2. TRN: A Temporary Reference Number (TRN) is generated upon successful verification.

3. Part B: Use TRN to log in and file Part B of Form GST REG-01.

4. Query: If deficient, the officer issues a notice in Form GST REG-03.

5. Reply: Applicant must reply in Form GST REG-04.

6. Approval/Rejection: If satisfied, the officer grants Registration Certificate in Form GST REG-06. If not, the application is rejected in Form GST REG-05.

7. Deemed Approval: If the officer fails to act within prescribed timelines (e.g., 7 working days), the application is deemed approved.

Composition Scheme

This optional scheme simplifies compliance for small taxpayers with an aggregate turnover up to ₹1.5 crore. They pay tax at a flat, fixed percentage and file quarterly returns.

• Tax Rates:

• Manufacturers & Traders: 1% of turnover.

• Restaurants (not serving alcohol): 5% of turnover.

• Other Service Providers: 6% of turnover.

• Persons NOT Eligible: Suppliers making inter-state supplies, casual/non-resident taxable persons, suppliers of non-taxable/certain notified goods, persons supplying via e-commerce operators, ISDs, and those liable for TDS/TCS.

Import Export Code (IEC)

An Import Export Code (IEC) is mandatory for any person undertaking the import or export of goods. It is a 10-digit number issued by the Directorate General of Foreign Trade (DGFT). IEC is not necessary for the export of services. The code has lifetime validity and requires no renewal.

Procedure for Obtaining IEC

1. Application: Apply online on the DGFT portal.

2. Documents Required: Proof of Address (utility bills, rent agreement), Proof of Constitution (Certificate of Incorporation, Partnership Deed), Proof of Bank Account (cancelled cheque, bank certificate).

3. Verification: Requires an active Digital Signature Certificate (DSC) or Aadhaar-based verification.

4. Issuance: After verification, DGFT issues the IEC electronically.

Registration under Shops and Establishment Act

Definitions

• Shop: Any premises selling goods or rendering services, including offices, storerooms, godowns, and warehouses, but excluding factories.

• Commercial Establishment: An establishment engaged in any trade, business, profession, or related work.

Registration Requirement

Any person establishing a shop or commercial establishment must obtain a registration certificate under this Act.

Procedure

1. Application: Submit an application to the Chief Inspector of the area within 30 days of commencing business.

2. Details: Include employer's name, establishment's name and address, business category, number of employees, etc.

3. Verification and Issuance: The inspector verifies details, records them, and issues a Registration Certificate, typically valid for 5 years and renewable.

ESI (Employee State Insurance) Registration

ESI is a social security scheme providing medical benefits to employees for sickness, maternity, disablement, or employment injury. Both employer and employee contribute.

Applicability

• Factories employing 10 or more persons.

• Other notified establishments employing 20 or more persons.

Registration Procedure

• Employer Registration: Employers register on the Unified Shram Suvidha Portal, receiving a 10-digit Labour Identification Number (LIN).

• Employee Registration: Employers register employees on the ESIC portal upon joining. Registration and benefits are transferable.

EPF (Employee Provident Fund) Registration

EPF is a retirement benefits scheme providing insurance and post-retirement financial security. Both employer and employee contribute a percentage of the employee's salary.

Applicability

• Compulsory: For establishments employing 20 or more persons, within one month of reaching this threshold.

• Voluntary: Establishments with fewer than 20 employees can opt for voluntary registration.

Registration Procedure

• Employer Registration: Done on the Unified Shram Suvidha Portal.

• Employee's UAN: EPFO allots a Universal Account Number (UAN) to each employee. This 12-digit unique number remains constant regardless of job changes.

Pollution Control Consent

Industries require two types of consent from the State Pollution Control Board (SPCB):

1. Consent to Establish (CTE): Obtained before commencing any project activity, valid for 1 to 7 years.

2. Consent to Operate (CTO): Obtained before starting actual production, typically valid for 5 years.

Procedure

1. Apply online on the respective State Pollution Control Board (SPCB) website.

2. The SPCB must respond within 4 months. Rejection requires written reasons.

3. Penalty: Operating without valid CTE/CTO can lead to imprisonment for 6 months to 1 year.

Exemption for White Category Industries

Industries in the White Category are exempted from obtaining CTE and CTO, provided:

1. Established in a demarcated locality for such industries.

2. No discharge of trade effluents into water bodies.

3. No emission of toxic or hazardous substances.

4. Total investment in plant and machinery does not exceed ₹1 crore.

Drug License

A drug license is required for businesses involving drugs and medicines (e.g., pharmacies), governed by the Drugs and Cosmetics Act, 1940. Primary authorities are CDSCO and SDSCO, with licenses generally issued by the SDSCO.

Types of Drug Licenses

1. Retail Drug License: For general chemists or retail pharmacies.

2. Wholesale Drug License: For wholesale distribution agencies.

Prerequisites for a Drug License

1. Area: Minimum 10 sq. meters for retail only; 15 sq. meters for combined retail and wholesale.

2. Storage: Premises must include refrigeration and air conditioning for cold storage drugs, vaccines, and insulins.

3. Technical Staff:

• Wholesale: Managed by a registered pharmacist OR a graduate with 1 year of drug experience OR a person with 4 years of experience post-SSLC.

• Retail: All sales must occur in the presence of a registered pharmacist.

Documents Required

A mnemonic for required documents is "ABCD POCA" (Memory Tip: The key documents include Application form, Blueprint/site plan, Challan for fee, Declaration form, Proof of Ownership, Proof of Constitution, Affidavit against conviction under Drugs & Cosmetics Act, Affidavit from registered pharmacist, and Appointment letter of registered pharmacist).

FSSAI (Food Safety and Standards Authority of India) License/Registration

Any Food Business Operator (FBO) must obtain FSSAI registration or a license, based on operational scale.

When is FSSAI REGISTRATION Required?

Registration is for petty FBOs like hawkers and small-scale businesses with:

• Annual turnover up to ₹12 lakh.

• Food production capacity up to 100 kg/liters per day (excluding milk and meat).

• Milk procurement/collection up to 500 liters per day.

• Slaughtering capacity up to 2 large animals, 10 small animals, or 50 poultry birds per day.

• Note: Caterers require a license, not registration.

When is an FSSAI LICENSE Required?

A license is required for mid- to large-scale food businesses:

• State License: For annual turnover more than ₹12 lakh but up to ₹20 crore.

• Central License: For annual turnover more than ₹20 crore.
  The license is issued in Form C and is valid for 1 to 5 years.

Banking License

To operate as a banking company, an entity must first be incorporated as a company and then obtain a license from the Reserve Bank of India (RBI).

Conditions for Grant of License

1. Subscribed capital must be at least half of authorized capital.

2. Paid-up capital must be at least half of subscribed capital.

3. Voting rights of any single shareholder must not exceed 10%.

4. The managing executive must disclose their shareholding to the RBI.

Insurance Business Registration

Capital Requirements

• Life, General, or Health Insurance: Minimum paid-up equity capital of ₹100 crore.

• Reinsurance Business: Minimum paid-up equity capital of ₹200 crore.

Eligibility and Restrictions

• The applicant must be a Public Company or a statutory body.

• The company name must include "Insurance" or "Assurance".

• An entity cannot apply if its previous application was rejected, its registration cancelled, or foreign investors exited in the last two years.

Registration Procedure

1. File R1: Applicant company files Form IRDAI/R1. Rejection can be appealed to the Securities Appellate Tribunal (SAT) within 30 days.

2. File R2: Upon R1 acceptance, applicant files Form IRDAI/R2 with fees. Rejection can be appealed to the Central Government within 30 days.

3. Grant R3: If R2 is accepted, IRDAI grants a Certificate of Registration in Form IRDAI/R3.

4. Commencement: Business must commence within 12 months from registration, extendable up to a total of 24 months.

Industrial Licensing

Generally, an industrial license is not required for new industries. However, compulsory licensing is required in specific cases.

Cases Requiring Compulsory Licensing

The industries requiring a license can be remembered with the acronym ACHE (Memory Tip: A: Alcoholic drinks, C: Cigarettes and tobacco products, H: Hazardous chemicals, E: Electronic aerospace, defense equipment, and Explosives).

Other cases include:

• SSI Reservation: Non-small scale units manufacturing items reserved for the small-scale sector (unless they export a minimum of 50%).

• Locational Restrictions: Industries within 25 km of the standard urban area limits of a city with a population over 1 million.

Procedure for Obtaining a License

1. Apply online on the G2B portal.

2. Application is scrutinized by DPIIT and forwarded to relevant ministries for comments.

3. The application and comments are presented to the Licensing Committee.

4. If approved, the license is granted with a 3-year validity, extendable.

Telecom License (OSP License)

A telecom license is required for business entities providing services as an Other Service Provider (OSP), including:

• Call Centers / Business Process Outsourcing (BPO)

• Tele-banking, Tele-education, Tele-trading

• E-commerce and other IT-enabled services.

Authority and Types

• Authority: Issued by the Department of Telecommunication (DoT).

• Types:

• Domestic OSP: For services to clients within India.

• International OSP: For services to clients outside India.

Application Procedure for OSP License

• Applicant Entities: Can be a Company or a Limited Liability Partnership (LLP).

• Application Form: Submitted in Form 1 to the Department of Telecommunication.

Key Characteristics of OSP Registration

• The OSP license is location-specific, requiring a separate license for each operational location. An entity can obtain multiple registrations.

• Any change in the Point of Presence (PoP) must be communicated to the DoT.

• Entities functioning as an extension of an existing OSP must also register.

Validity and Extension

• Initial Validity: 20 years.

• Extension: Can be extended for an additional 10 years.

Mandatory Documents for OSP Application

The required documentation varies by entity type (Memory Tip: Logically deduce documents by considering legal requirements for a Company vs. LLP).