A number of licenses and registrations are required for starting and operating a hotel business in India. Many of the licenses and registrations must be obtained prior to starting the hotel and renewed while the hotel is operational. Further, most licenses require the hotel to meet certain rules or criteria’s for maintaining validity. Therefore, it is important for Entrepreneurs in the hotel industry to be aware of these licenses and registrations – to operate a hotel business smoothly.
A lot of the license requirements depend on the type of hotel, star rating, amenities and the location of the hotel. Further, the rules and regulations to obtain license for hotel industry differs according to the states.
The National Building Code of India was prepared by the Bureau of Indian Standards to unify the building regulations throughout the country. The National Building Code is adopted by all Government Departments, Municipal Bodies and other Construction Agencies. As per the National Building Code, no person shall carry out any development, erect, re-erect or make alterations or demolish any building or cause the same to be done without first obtaining a separate permit for each such development/building from the Authority. Therefore, all hotels must have a proper building permit as per the relevant Town Planning Act or Development Act or Municipal Act or any other applicable statutes for layout, building plans, water supply, sewerage, drainage, electrification, etc,.
Fire Safety Permit
A fire safety certificate or permit is required for the Fire Department is a must for operating a hotel business. Fire safety certificate is usually provided if the building has incorporated proper fire prevention and fire safety measures as required under the relevant fire safety rules and regulations.
Police License for Hotel
Hotels are public places that are monitored closely by the Police Department. Therefore, all hotels must maintain proper log of all Guests who have stayed at the hotel, follow relevant regulations and maintain a valid permit from the Police Department. Police license for hotels usually falls under the power of licensing of Places of Public Entertainment held by Commissioner or Additional Commissioner of Police.
A trade license is usually required from the local Health Department for restaurants and hotels. Health trade licenses are usually issued by the Municipal Corporation. The health trade license is required for businesses that have a direct impact on public health. Compliance with the relevant hygiene and safety norms, which are important for public health, is a prerequisite for issuance of a health trade license.
It is recommended that a hotel be setup under an artificial legal entity like company or LLP. By operating a company under an artificial legal entity, the liability of the promoters with respect to the business can be limited and the business as a going concern would be easily transferable to another person.
ESI is an autonomous corporation under Ministry of Labor and Employment, Government of India. Employee’s State Insurance is mandatory in India for Businesses that employ 10 or more employees.
A Employee Provident Fund (PF) Registration is required for any establishment that employs more than 20 persons in India. The PF Board administers a contributory provident fund, pension scheme and an insurance scheme for the workforce engaged in the organized sector in India.
If the hotel operates a bar or serves alcohol in the restaurants, a Bar license will be required from the relevant authorities. Bar license is usually provided by departments operating under the State Government. Hence, the requirement for bar license varies from state to state.
FSSAI Food Business License
A FSSAI food business license under the Food Safety and Standard Act is required for operating a restaurant in India. The FSSAI food business license is usually provided for one year and is renewal at the end of each year. FSSAI license for restaurants are managed by the local FSSAI office. FSSAI license for restaurants does not fall under the purview of the Central Government.
The VAT and Service Tax regime ended with the introduction of GST on 1 July 2017. Every new business has to acquire GST registration in order to commence business activities for taxation purposes. Businesses with low turnovers can also avail the composition scheme in order to be free from intricate return compliances and rules under the GST regime.