Understanding the Difference Between Shop Act and Udyog Aadhar.

difference between shop act and udyog aadhar

Difference Between Shop Act and Udyog Aadhar

In every field of business, companies must adhere to the rules and regulations established by the governing body. The majority of small and medium-sized enterprises are required to register under the Micro, Small, and Medium Enterprises Development Act, 2006, through the Udyog Aadhar registration process. Additionally, they may also need to register under the Shop Establishments Act, of 1947. Despite some minor similarities between the two, they have significant differences. This often leads to confusion among business owners. This article aims to clarify the difference between Shop Act and Udyog Aadhar.

Udyog Aadhar

A single platform empowers small and medium-sized enterprises to initiate their company registration and gain government benefits like funding, subsidies, and access to government projects, which is the core mission of Udyog Aadhar. The entire Udyog Aadhar registration process can be completed online, involving the provision of fundamental company information such as name, address, type of organization, and bank account details. One of the primary benefits of Udyog Aadhar is its capacity to provide small and medium-sized businesses with numerous advantages, including improved financial access, which is sometimes a challenge for small businesses.

Benefits of Registering with Udyog Aadhar

When MSMEs obtain their Udyog Aadhar registration, businesses can access a wide range of benefits. Here are some advantages of registering with the Udyog Aadhar:

  • MSMEs can benefit from numerous government initiatives, including microbusiness loans, subsidized rates, easy loans, unsecured MSME loans, and more.
  • MSMEs engaged in international trade may be eligible for financial support.
  • They can obtain trademark and patent filings at discounted rates.
  • Opening current bank accounts becomes more straightforward.
  • Exemption from indirect and excise taxes is granted.
  • Aadhar holders can participate in credit assurance initiatives.
Udyog aadhar registration online

Shop and Establishment Act

The Indian government enacted the Shops and Establishments Act, at times referred to as the Shops Act, to govern the operation of retail stores and other commercial establishments. Any business that employs ten or more people is liable to the Act, and that includes retail stores, lodging facilities, dining establishments, and other service providers. The protection of employees’ rights in commercial businesses is the primary objective of the Shops Act. This legislation outlines the criteria for businesses, covering overtime, leave policies and other aspects of working conditions. Additionally, it requires the maintenance of specific records, such as wage records and attendance logs, that can help to safeguard employees’ rights and prevent misconduct.

Benefits of Registering with the Shop and Establishment Act

  • Businesses falling under the jurisdiction of the Shops Act must fulfil their legal obligation to register. Obtaining registration ensures the uninterrupted operation of businesses, helps them avoid penalties, and allows them to comply with the Act’s legal requirements.
  • Registration under the Shop Act provides businesses with a legal identity that can be used to establish their brands. This serves as evidence of the company’s trustworthiness and commitment to compliance with the law, fostering trust and confidence among both suppliers and customers.
  • The regulatory framework established by Shop Act registration effectively safeguards the rights of customers and employees. It acts as a deterrent against unethical corporate practices that may harm the workforce’s best interests.
  • Shop owners can also benefit from various government incentives by obtaining a license for their shop and establishment.

Differences Between the Shops Act and Udyog Aadhar

BasisShops and Establishment ActUdyog Aadhar
AuthorityState GovernmentState as well as Central Government
The causesTo formulate rules for various commercial establishments on working hours, leave policies, employee benefits, and so forthTo promote MSMEs’ growth using an array of advantageous government initiatives
EligibilityEvery store and facility engaged in business, includes lodging facilities, nightclubs, and other entertainment venues.Businesses which satisfy the minimum criteria for registration for both investment and turnover are qualified.
Enforcement of the RulesAny organisation operating any kind of business, including MSME, is subject to specific rules and regulations. (Except for those listed under the 1948 Factories Act)Only businesses that have been officially recognised as MSMEs are subject to specific regulations and policies.
Tax BenefitsNo tax advantages are obtained by the establishments that apply for licences under this Act.The key objective of the Act is to help MSMEs, consequently, it guarantees them particular benefits under the Income Tax and the Goods and Services Tax (GST).
RenewalDepends on the state.Every five years, entities renew it.
Mandatory/ OptionalMandatory of all entities, with a few notable exceptions.MSMEs have no obligation to register with Udyog Aadhar.

What’s the difference between a Shop Act and a Gumasta Licence?

There is another confusion between a shop & establishment licence and a gumasta licence; A Shop Act license and a Gumasta License are essentially identical, although the terminology may vary from state to state. Both licenses are mandatory registrations that enable businesses to operate legally and adhere to labour laws. While the registration process and requirements may differ from one state to another, the core purpose remains consistent.


The Shops and Establishments Act of 1947 and the MSME Act of 2006 share a common feature: both regulate business operations. However, as mentioned earlier, these Acts have distinct objectives. To avoid legal complications, businesses must enlist experts to guide them through the intricate registration process and fulfil their compliance requirements. This blog has explained the difference between shop act and udyog aadhar, as well as the difference between a Shop Act and a Gumasta Licence. Having the appropriate registration can significantly aid businesses in reaching their objectives. At Taxxinn, we assist you in selecting the right registration and completing it without any hassle.

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