Exempted Businesses Under the Shops and Establishments Act

Exempted Businesses Under the Shops and Establishments Act

Both online and offline businesses are covered by the Shops and Establishments Act. A few exceptions do exist, however. For example, if you sell food, clothing, or household items, you do not have to display prices on your website.  

What Is an Exempted Business?

Commercial businesses selling tangible goods are required to obtain licenses from their municipalities under the Shops and Establishments Act. In most cases, this means that a retail shop will have to obtain a shop and establishment license and pay a municipal business tax. There are, however, exceptions to this rule. The municipality will not require a license for a retail shop located in a rural area (where there are no other shops) or if it is otherwise exempt from licensing requirements.

The business is exempt from tax. Several types of businesses fall under these terms, which are defined broadly under the Act. Your local tax consultant can help you determine if your business is exempt.

What Is the Shops and Establishments Act?

Businesses that sell goods or services are regulated by the Shops and Establishments Act. A license is required by the authorities for anyone setting up a commercial establishment. Many aspects of the Act are regulated by the Act, including prices, employees, location, hours of operation, and wages. Due to the law, businesses are ensured that they are operating fairly and consistently.

Businesses that are Exempt Under the Act

Business that engage in certain retail activities are protected under the Shops and Establishments Act. Sales and uses taxes are exempt from most businesses under the Act.

Under the Act, certain businesses are exempt. These businesses will also be discussed in regards to what activities they are allowed to engage in and what limitations they may have.

Several sales and uses taxes are exempt from the Act for most businesses. Business that sells goods, services, or both is included here. Exempt businesses include the following:

Any state or central government offices and any local authorities need not have this license. Establishments that provide care for sick or mentally unfit persons as well as any banking establishments, along with the offices of the post office, the water company, and the electricity company. Any businesses which supply power and water to the public are not included.  

However, all these exceptions vary from state to state. Thus, each state has declared its own set of rules and regulations, along with the excepted and non-exempted businesses under their states’ Shops and Establishments Act.


The Shops and Establishments Act applies to most businesses and retail establishments like stores, malls, warehouses, restaurants, hotels, multiplexes, and amusement parks. This Act applies to service organisations like finance, healthcare, pharma, hospitality, and IT companies. 

It’s made extremely clear that the Shops and Establishments Act is a piece of legislation designed to safeguard employees’ rights irrespective of the type of business or the organisation. 

Every individual intending to open a shop or other commercial establishment must apply for registration under the shop act within the state’s rules and stipulated time frame. The application for setting up an establishment is submitted to the chief inspector according to the respective state regulations. 

The application must have the following:

  • Name of the establishment and the employer
  • Address and the category of the establishment 
  • The number of employees and other relevant data as requested by the respective governments. 

Registration is the responsibility of the respective state governments, not the federal government. According to the rules set by the appropriate government agencies, this registration certificate needs to be renewed periodically. 

Registrants benefit from smooth inspections by the respective authorities under the Shops and Establishments Act. An account for your business can be opened through it. Various government schemes that benefit organizations are also introduced by the state and federal governments.

If you own a business, you should be familiar with the Shops and Establishments Act. Imagine there is a violation of set regulations by a business establishment. Any punishment can be imposed by the respective government. There are three types of punishment: monetary, operational, and even imprisonment in some cases. It is a requirement that the chief inspector of the establishment be notified in writing 15 days before the closure. Records will be purged when the establishment is officially closed.


A license from your municipality is required for any commercial business that sells tangible goods or services. For most businesses, this won’t pose any significant challenges. You’ll have to handle things a little differently if you run an exempted business – either due to the lack of retail shops in your area or because of some other special reason. The purpose of this blog post is to provide a general overview of the rules and regulations in areas where retail shops are not required to obtain licenses. Consult with your local tax consultant if you are unsure how to handle these issues in an exempted business. 

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