Shops and Establishments vs Factory Licence: Which Applies to You
How to tell whether your business needs a Shops and Establishments registration, a factory licence under the OSH Code, or both, compared side by side.
Whether your business needs a Shops and Establishments registration, a factory licence, or both depends on what actually happens at the premises - not on how the business is described on paper.
Key facts at a glance
- Shops and Establishments registration covers commercial premises such as shops, offices, and service businesses; it is administered at the state level.
- A factory licence applies where manufacturing takes place, generally triggered by a defined worker-and-power threshold.
- A common threshold is 10+ workers with power, or 20+ workers without power, though exact figures can vary by state rule.
- Both registrations are premises-specific, so a business with multiple locations may need separate registrations per site.
- The Occupational Safety, Health and Working Conditions (OSH) Code consolidates factory-related safety law, but state-level notification is still catching up as of mid-2026.
- All four Labour Codes came into force 21 November 2025 nationally, but operational effect varies by state until each state notifies its own rules.
- Renewal cycles, fees, and specific thresholds differ by state, so the same business type can face different rules in different states.
What Shops and Establishments registration actually covers
The Shops and Establishments Act (a state-level law, with variations in name and detail across states) governs working conditions in commercial premises that are not factories - shops, offices, IT companies, restaurants, and most service businesses. It typically covers working hours, holidays, leave, and basic conditions of employment, and requires registration of the premises with the state labour department.
Almost every commercial business in India, regardless of sector, needs this registration unless a more specific law (like a factory licence) applies instead.
What a factory licence actually covers
A factory licence, historically under the Factories Act and now being folded into the OSH Code framework, applies specifically to premises where a manufacturing process is carried out, and where the headcount and power-usage thresholds are met. Factory licensing is stricter than Shops and Establishments registration because it addresses higher physical risk: machinery safety, working conditions around manufacturing hazards, and stricter inspection regimes.
The key trigger is the nature of the activity (manufacturing) combined with the scale (worker count and power usage), not simply the size of the business in revenue terms.
Side-by-side comparison
| Feature | Shops and Establishments | Factory Licence |
|---|---|---|
| Applies to | Shops, offices, service businesses, restaurants | Premises where manufacturing takes place |
| Trigger | Any commercial premises employing staff | Worker count + power usage threshold (commonly 10+ with power, 20+ without) |
| Governing level | State law | Central framework (OSH Code), with state rule notification required |
| Focus | Working hours, holidays, leave, basic conditions | Machinery safety, hazard controls, stricter inspection |
| Renewal | Periodic, state-specific | Periodic, state-specific |
| 2026 status | State-administered, largely business-as-usual | Consolidated under OSH Code; state notification still uneven as of mid-2026 |
How to tell which one applies to you
Ask two questions: does the premises carry out a manufacturing process, and if so, does it meet the worker-and-power threshold for that state? If the answer to the first question is no, Shops and Establishments registration is almost certainly the relevant requirement. If yes, a factory licence is likely required in addition to, or instead of, Shops and Establishments registration, depending on the state's specific rules.
A business that has both an administrative office and a separate manufacturing unit may need to register each premises under the law that actually applies to it - registration is generally tied to the specific location and activity, not the company as a whole.
Why this gets missed
Founders sometimes assume that because their business is "small," neither registration is urgent, or they register once under Shops and Establishments and never revisit the question as the business adds a production or assembly function. Since factory licence thresholds are based on worker count and power usage at a specific site, a business can cross into factory licence territory without a formal announcement - it is worth rechecking whenever headcount or the nature of on-site activity changes.
If you are not sure which state-level registrations and licences apply to your business, ComplianceCheck's state-wise compliance assessment gives you a clear picture in a few minutes.
Sources
- Ministry of Labour and Employment - labour.gov.in
- Respective state labour department portal
- Directorate/Chief Inspector of Factories for your state
This guide is general information, not legal advice. Requirements vary by state, sector and headcount - confirm specifics with a compliance professional or the relevant authority.
Frequently Asked Questions
- What is the difference between Shops and Establishments registration and a factory licence?
- Shops and Establishments registration covers commercial premises like shops, offices, and service businesses, while a factory licence covers premises where manufacturing takes place using power or a minimum headcount, as defined under the applicable law.
- Does an office or retail store need a factory licence?
- No, an office, retail store, or typical service business is generally covered under Shops and Establishments registration, not a factory licence, unless manufacturing activity takes place on the premises.
- What triggers the need for a factory licence?
- A factory licence is generally triggered by manufacturing activity carried out with the aid of power involving 10 or more workers, or without power involving 20 or more workers, though exact figures can vary by state rule.
- Can a business need both a Shops and Establishments registration and a factory licence?
- It is uncommon but possible for a business with both an administrative office and a manufacturing unit at different locations to need separate registrations for each premises type.
- Is Shops and Establishments registration handled at the state level?
- Yes, it is a state subject, so the exact rules, forms, fees, and renewal cycles vary by state and are administered by the state labour department.
- Do the Labour Codes change these requirements?
- The Occupational Safety, Health and Working Conditions Code consolidates factory and related safety laws, but since labour is a concurrent subject, states must notify their own rules before the Code is fully operational, so employers should track their specific state's status rather than assume immediate change.
Check your status
State-Wise Compliance Check
Identifies which state-specific laws apply to your business — Professional Tax, Labour Welfare Fund, and Shops & Establishment deadlines.