Business Licenses in India

Business Licenses in India

Common List of Licenses required to run a business in India

PAN - Permanent Account Number

  • Used for income tax purposes. Mandatory if you have a taxable income. PAN has now been made mandatory to be quoted for most of the financial transactions. Tax is now deducted at a higher rate for people not having a PAN.

TAN - Tax Collection & Deduction Account Number

  • Used for deducting taxes. If you are paying a salary, or making payments for variety of purposes like consultancy fees, rent, contractual payments etc. the tax should be deducted at source and paid to income tax department. TAN is mandatory to deduct taxes.

Service Tax

  • If you offer services falling under service tax net (note that most of the services has now been brought under service tax net), then service tax is required to be paid.
  • You get an exemption from service tax payments if your gross revenue has not crossed Rs.10Lacs in a year. This is a one time shelter and once you have crossed Rs. 9 Lacs of turnover in a particular financial year, you should apply for the service tax registration.
  • Once you receive the service tax registration, you may start charging to your customers additionally for service tax. Please note that service tax is your responsibility to pay, irrespective of whether you have charged your customer service tax additionally or not.
  • The exemption of Rs. 10Lacs is only 1 time shelter and once you obtain the service tax registration, you need to pay service tax on each and every rupee of your turnover.
  • Currently export of services are exempted from service tax. This exemption extends to 10Lac limit also. This means if you have done a business of say Rs. 14Lacs and if your exports are about Rs.6Lacs, then you donot qualify for service tax registration.
  • You may choose to obtain a service tax registration before crossing 10Lac specified limit. In this case, you need to pay service tax on all your turnover after obtaining the registration
  • You get a set off of service tax. This means if you have paid service tax while availing services of another company or person, then the same can be set off from your service tax payments and the balance should be deposited with the Government. Set off is applicable for related activities only
  • Service tax returns are required to be filed every half year. If you have not done any business during a half year period then NIL returns should be filed in time else you may have to incur penalty for late returns

VAT/ CST - Value Added Tax / Central Sales Tax.

  • VAT is a State based tax. If you are dealing in taxable goods within a state, then VAT registration should be obtained.
  • Exemption limit for VAT registration vary from state to state and also on the nature of entity and activities. Please refer to state VAT laws for more details on applicability of VAT on your trade.
  • CST is applicable for inter state trades. If you are dealing in taxable goods across the states then CST is applicable and should be charged.
  • VAT can be set off. This means if you have paid VAT on your purchases the same can be set off against VAT on your sales and the net amount should be deposited to State Government.
  • CST can be set off. This means if you have paid CST on your purchases the same can be set off against CST on your sales and the net amount should be deposited to Central Government.
  • VAT and CST can not be set off against each other.
  • VAT returns are required to be filed every Month or every Quarter depending on your turnover. Please refer to your State VAT rules for exact slab for monthly returns or quarterly returns. NIL returns are required to be filed in time if there has not been any business during the period. Late returns are liable for penalty.

Shops & Establishment License.

  • State based license. Applicable if you are opening a shop or commercial establishment. Please refer to your State laws for more details.
  • Fees vary for no. of people employed

Central Excise License

  • If you are into manufacturing of taxable goods then central excise license should be obtained
  • Returns needs to be filed monthly.

Importer Exporter Code - IEC

  • If you are engaged in commercial transaction internationally, IEC must be obtained.
  • Custom formalities should be complied for any import or export of goods.
  • No regular returns required to be filed
  • Valid for lifetime
  • IEC can be obtained only once on 1 PAN. Multiple IEC are not issued to a single entity/ PAN

Professional Tax

  • State based tax for employing professionals. Many states like Delhi, Rajasthan and Union Territories etc. donot have professional tax. Check you respective tax laws for applicability of professional tax.
  • Monthly returns need to be filed, wherever applicable

Provident Fund

  • Applicable if you hire 20 and more employees
  • Monthly returns need to be filed

ESI - Employee State Insurance

  • Applicable if you hire 10 and more employees (for power using establishments) or 20 and more employees (for non power using establishments) drawing a salary upto Rs.15000 per month.

 


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