Hotels have been quite a lucrative business throughout the world ever since people started travelling from one place to another. With the number of international travellers, both tourists and business, rapidly increasing over the years, demand for good hotels have increased significantly in India. Also, there has been a phenomenal rise in domestic tourists and business travellers. Lot of entrepreneurs are entering the hotel business in India. However, setting up business in India requires a lot of legal work, from registration to licenses there are quite a few legal formalities that need to be completed before you can start a business. 

Registering the business is the primary requirement to start a hotel in India. Besides, there are a number of licenses that need to be obtained before you can start operating your hotel. Further, these licenses have to be renewed on a regular basis.  Granting of licenses is subject to meeting certain fixed criteria. The license requirements depend on various factors, such as location, amenities provided, ratings, etc. Also, different states have different licensing requirements.

In this article here, we will discuss the permit and license requirements for the hotel industry.

Registration 

As is the norm with any other business, hotels should first be registered before starting operations. Though many hotels operate under sole proprietorship, it has become very popular these days to register hotels as private limited companies or limited liability partnerships where, unlike sole proprietorship, the liability of the owners or promoters is limited. Registration is compulsory for setting up business in India.

Building Permit

The National Building Code aims to standardize the building regulations across the country. The code has been endorsed by all the concerned departments and agencies. The code mandates all building owners to seek prior permission from the concerned authority for carrying out any demolition, alteration, or modification in an existing building, and to construct a new building. In this context, all hotels are required to obtain permission from the concerned departments or authority for the building layout including drainage, water supply, electricity, sewerage, etc.

Fire Safety Permit

All commercial buildings in the country are required to obtain fire safety certificate from the local fire department. Hotel buildings have to satisfy the basic safety standards as prescribed by the fire department to get the certificate.  Fire safety measures taken by the hotels are inspected by the fire department, and only if they are satisfied with the safety system put in place that a fire safety certificate is issued.

Police License 

Most public places are under the constant vigil of the police. Being a public place, hotels are vulnerable to illegal activities being conducted there. Hotels are, therefore. Required to follow certain norms and comply with the regulations laid down by the police department. For instance, hotels are required to install cctv cameras at prominent locations and maintain proper record of all the guests. Police clearance is granted by the commissioner police. 

Health Trade License 

As hotels are primarily into the business of boarding and lodging, they are expected to maintain a minimum standard of health and hygiene. The nature of the business is such that it has a direct bearing on the health of its visitors. It is, therefore, important that hotels comply with the rules and regulations as defined by the concerned department. They need to ensure that the health of the public is not compromised. Trade license is issued by the municipal corporation upon inspection by its health department.

In addition to the above, hotels are also required to obtain an FSSAI food business license. The local arm of the Food Safety and Standards Authority of India grants this license which is renewed every year.

Bar License

Most hotels have their own bar or serve alcohol to their restaurant guests. To operate this service, hotels have to obtain bar license from the state excise department. Different states have different criteria for granting the license.

ESI and PF Registration

Employees State Insurance is an autonomous body whose primary role is to ensure that employees get health and life insurance benefits. Every organization with 10 or more employees has to compulsorily have ESI registration. For employees earning less than 15000 per month, both the employer and the employee have to contribute a percentage of their wages as ESI dues.

Provident Fund registration is mandatory for all organizations employing more than twenty persons. The Employees Provident Fund Organization, or the EPFO, is tasked with managing a contributory provident and pension fund scheme for the organized sector work force.

GST Registration

Goods and Services Tax is one comprehensive tax that has replaced many indirect taxes from the old regime, such as VAT, Excise, Sales Tax, Service tax, etc. Earlier, hotels were required to register themselves for VAT and Service tax, but now only GST registration is all that is required. Both, state and central GST is applicable on food and other services that hotels provide to their guests.

To conclude, the first requirement for setting up business in India is to get it registered. For hotel business, there are various licenses and permits that need to be obtained before starting operations.

This blog is written by Amy Johnes, A legal expert at Ahlawat & Associates – Best merger and acquisition companies in India.