How to start and open a Hotel in India

How to start and open a Hotel in India: Legal Requirements

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This article on ‘Legal requirements for opening a Hotel in India‘ was written by Nirmiti Ratnakar, an intern at Legal Upanishad.

Introduction

The hotel industry is worth one billion dollars as of 2019. Despite this, profits have fallen by 48% as a direct effect of the current epidemic; nonetheless, the sector is predicted to grow between 2021 and 2022 due to a variety of factors. The current trend indicates that hotel room demand is expanding at a 6% quicker pace than a year ago. On the other hand, the pace of supply growth is growing by 3% every year. As a result, anyone looking to start a new company will realize that the hotel sector is rife with opportunities.

The license standards that must be satisfied are influenced by the hotel’s kind, star rating, amenities, and location. To simplify the operation of a hotel, each state imposes its own set of rules and regulations that should be complied with to get a license to operate in the hospitality industry.

This article explains the legal requirements for opening a hotel, including the licenses and permissions necessary.

Powers Entrusted with the Responsibility of Governing and Regulating

  • The Hotel and Restaurant Approval and Classification Committee (HRACC), which is housed within the Ministry of Tourism, is the principal governing authority; and
  • The Hotel Association of India is the center governing corpses for hotels throughout the country, even though it has numerous zonal/sub-associations. The Hotels and Restaurant Association of
    • Western India,
    • Eastern India,
    • Northern India,
    • Southern India.

Authorizations and permits required for opening a Hotel in India

  1. Formal Authorisation from the Tourism Ministry:

If a person is interested in starting their own hotel business, the first step is to get an exemption certificate from the ministry of tourism. To get a certificate confirming that there are no objections, the applicant must first register on the Ministry of Tourism’s website.

  1. Site Permit:

Following receipt of the NOC from the Ministry of Tourism, the Applicant must file a construction permit application. In line with the relevant city or town’s planning, development, or municipal Act, every hotel is needed to get the proper construction permission.

  1. No Objection Certificate from Fire Department :

Before beginning operations, you are needed to get a NOC from the fire department that is responsible for the area. An application should be filled out by the applicant, and it should be accompanied by all of the relevant papers, such as construction plans, a building model, and a certificate from the architect. In addition to this, the applicant will need to fill out a questionnaire on their adherence to the laws and regulations concerning fire safety. After the paperwork has been checked through, the authorities from the fire department will examine the premises.

  1. License for Food Establishments:

An Eating House License is the legal authorization required to run a company in which any kind of food or beverage may be lawfully provided for consumption by paying customers. The Delhi Police Act stipulates that one must get this license to comply with its requirements. For a person to be able to engage in the food industry, they are required to possess not only the essential licenses but also the Eating Restaurant license.

  1. A License from the Police Department:

As hotels are considered public spaces, the Police Department maintains a watchful presence inside them. As a result, all hotels are expected to keep an accurate record of all Guests who have been there, comply with all applicable regulations, and get permission from the Police Department to do so. Hotels are the major establishments for which the Commissioner or Additional Commissioner of Police may grant permits for Public Entertainment Establishments.

  1. Trade License or Health Trade License:

Oftentimes, restaurants and hotels are needed to get a health trade license from the Health Department of the applicable municipality. In the majority of instances, the Municipal Corporation is responsible for granting health trade licenses. Any business that has a direct impact on the health of the general public is obliged to get a health trade license. Before a health trade license may be given, compliance with fundamental public health hygiene and safety standards is necessary. These criteria are meant to safeguard the health of the general public.

  1. Business Registration:

It is highly recommended that a hotel be established under the auspices of a fictitious legal entity, such as a company or an LLP. By doing business under an incorrect legal structure, the promoters of the company may restrict their liability for the company’s debts and obligations, and ownership of the firm as a going concern can be readily transferred to another individual.

  1. ESI registration:

ESI is a government-owned organization that is under the authority of the Ministry of Labour and Employment. Companies with 10 or more employees in India are obliged by law to register for Employee State Insurance (ESI).

  1. PF registration:

Every Indian business with more than 20 workers is obliged by law to register with the Employee Provident Fund (EPF) (PF). The Provident Fund Board manages a contributory provident fund, a pension system, and an insurance program for India’s organized sector employees (PF Board).

  1.  Bar License:

If the hotel wishes to operate a bar or serve alcoholic drinks in its eating outlets, it must get a bar permit from the relevant authorities. Typically, agencies under the control of the state government provide bar licenses. As a direct result, the requirements for obtaining a bar license may vary greatly from one state to the next.

  1. FSSAI license to operate a food company:

After registering a business entity, one of the fundamental requirements is to get a government license or permission. Before beginning operations, you must obtain an FSSAI Registration or FSSAI License if you are in the food industry, such as a hawker, itinerant vendor, temporary stallholder; or food distributor at religious or social gathering events (except caterers); or if you are involved in the manufacturing, transportation, storage, or distribution of food products or small food business. The lone exception to this rule is a caterer. The following is a list of the categories developed by FSSAI to separate License/Registration based on the firm’s turnover constraints. Every owner of food business, including street vendors and hawkers, is obliged to hold an FSSAI food license. The Food Safety and Standards Authority of India is often referred to by its acronym, FSSAI.

The FSSAI license may be issued in one of three forms:

Applications for FSSAI Registration / License may be submitted in person or online. Both formats may be used.

To get the license in a non-digital version, the owner of the food business must apply along with the relevant fees to the Licensing Authority. The Food and Drug Administration of India created the Food Licensing and Registration System (FLRS), via which an online license or registration may be acquired (FSSAI). After completing the FSSAI registration process, a license number will be granted to the food company operator.

  1. Compliance With the Shops and Establishments Act Each state has its Shops and Establishments Act sometimes referred to as “the Act.”:

In terms of its broad provisions, the Act makes no distinction between the states; they are all the same. The Shop and Establishment Act is a piece of law that must be enforced, and it falls under the jurisdiction of several state Labor Departments. The Act applies to and controls all retail and commercial establishments in the state. Because registrations are granted by the states themselves in compliance with the Act, there are differences across the states. The Act defines a shop as any establishment that operates in the retail or wholesale sale of items to consumers or provides services to those customers. It includes places such as offices, godowns, storerooms, and warehouses that are used for doing business or commerce.

  1. Clearance Certificate for Environmental Operations:

Environmental clearance is the process of gaining environmental clearance to obtain government approval for actions that harm the environment. The government has compiled a list of projects requiring environmental approval, including mining, thermal power plants, and infrastructure.

Depending on their environmental effect, the EIA Notification classifies the projects as either Category A or Category B. Category

  • Category A:  get permission from the Ministry of Environment, Forestry, and Climate Change, whereas
  • Category B:  projects receive approval from the State Environmental Impact Assessment Authority.
  1. Authorization to Lift:

To ensure the safety of elevator users, electrical lift systems in commercial, residential, and office complexes as well as other locations (except for those covered by the Factories Act of 1948) are examined and licenses are issued or renewed.

  1. GST Registration:

The process in its entirety may be completed online, making it very convenient. On the GST Portal, you will also be able to acquire the GST rates that are relevant to your firm, as well as step-by-step guidance for the process of registering your business.

How to start and open a Hotel in India
How to start and open a Hotel in India

Conclusion

Establishing and operating a hotel business in India calls for the acquisition of several different permissions and registrations. For the hotel to start a business, several permissions and registrations need to be obtained, as well as maintained on an ongoing basis. In addition, the majority of licenses include language that specifies the hotel’s need to uphold a certain set of norms or standards to continue to operate lawfully. Because of this, company owners in the hospitality industry need to be aware of the licenses and registrations that are necessary to run their companies effectively.

Bibliography

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