What Is a Factory License?
A Factory License is a mandatory legal document issued by the State Government’s Labour Department or Directorate of Factories, authorizing the lawful operation of a manufacturing unit under the Factories Act, 1948.
It is intended to:
- Ensure worker health and safety
- Enforce compliance with labor laws
- Regulate working hours, hygiene, and welfare standards
Obtaining this license is the first step in setting up a compliant and responsible manufacturing unit in India.
Who Needs a Factory License?
You must obtain a factory license if your establishment qualifies as a "factory" under Section 2(m) of the Factories Act, 1948:
| Category | Definition |
|---|---|
| Using Power | 10 or more workers |
| Without Power | 20 or more workers |
| Also Applies To | Units with hazardous or dangerous processes |
Types of Bookkeeping Methods
| Method | Description |
|---|---|
| Single Entry | Simple recording method; tracks only income and expenses |
| Double Entry | Standard method; each transaction affects two accounts (debit and credit) |
This includes all types of manufacturing or processing units—chemical, textile, engineering, food processing, etc.—that meet the above criteria.
Documents Required for Factory License Registration
| Type | Documents |
|---|---|
| Basic Information | Name, address, and contact details of the factory |
| Ownership Proof | Partnership Deed / MOA & AOA / Proprietor Certificate |
| Layout Plan | Site plan and factory layout duly approved by local authority |
| Worker Details | Number of workers, nature of work, work shifts |
| Machinery & Power | Description of machinery and power capacity |
| ID Proofs | Aadhaar and PAN Card of Factory Occupier & Manager |
| Other Licenses | Pollution Control Board Consent (if applicable), Fire Safety NOC, Health Safety Plan |
How to Apply – Online Process
Most states in India provide an online Single Window System for factory-related registrations and approvals. Here's the general process:
Step-by-Step Procedure:
Validity & Renewal
- License validity ranges from 1 to 10 years, based on applicant preference and state-specific rules.
- Renewal should be done before the license expires.
- Renewal is typically done via the same online portal with minimal documentation.
Fees (Indicative)
| Factory Size | Fees (Per Year) |
|---|---|
| Small (10-50 workers) | ₹1,000 - ₹5,000 |
| Medium (50-100 workers) | ₹5,000 - ₹20,000 |
| Large (100+ workers) | ₹20,000 and above |
Fees vary by state, risk category of manufacturing, and power usage.
Penalty for Non-Compliance
| Violation | Penalty |
|---|---|
| Operating without a license | Up to ₹1 lakh fine + possible imprisonment |
| Non-renewal of license | Monetary penalty + factory closure order |
| Unsafe or hazardous conditions | Heavy fines + prosecution under labor laws |
Key Benefits of Obtaining a Factory License
- Legal Authorization to operate your factory
- Mandatory for bank accounts, industrial approvals, and subsidies
- Improves credibility among vendors, employees, and stakeholders
- Ensures compliance with labor, environmental, and safety regulations
- Enables smooth factory inspections and audit clearances
Need Help with Factory License Registration?
At VETRI AUDIT SERVICES PRIVATE LIMITED, we specialize in end-to-end assistance for:
- New Factory License Applications
- Factory Plan Approvals
- License Renewal & Amendments
- Safety & Environmental Compliance
Contact us today to ensure your factory is compliant, safe, and future-ready.
Contact us today for a consultation!
