Hotel & Restaurant Business Setup in India
India's hospitality industry is one of the fastest-growing sectors, contributing over $250 billion to GDP and employing more than 42 million people. With the rise in domestic tourism, medical tourism, and business travel, the sector offers lucrative opportunities for entrepreneurs.
This comprehensive guide covers the complete registration process for hotels, restaurants, cafes, and food service businesses in India, including licenses, tourism approvals, and compliance requirements.
Industry Overview and Market Potential
Market Statistics
- • Hospitality market: $250+ billion
- • Hotel industry: $32 billion by 2025
- • Foreign tourist arrivals: 11+ million
- • Domestic tourist visits: 2.3 billion
- • Employment: 42+ million workers
Growth Drivers
- • Rise in domestic tourism
- • Medical tourism growth
- • Business travel expansion
- • Wedding and MICE tourism
- • Experience economy trend
Step-by-Step Registration Process
Company Registration
Register as Private Limited Company for hotels and restaurant chains, or LLP for standalone restaurants. Pvt Ltd recommended for raising funding and brand building.
FSSAI License
Mandatory for all food service establishments. Apply for State License (₹2,000-7,500/year) or Central License (₹7,500/year) based on turnover. Must be obtained before commencing operations.
Police Eating House License
Apply for Eating House License from the local Police Department. Required for all establishments serving food and beverages. Police verification of premises and owners conducted.
Fire NOC
Obtain Fire No Objection Certificate from the State Fire Department. Mandatory for hotels, restaurants, and any commercial establishment with public access. Requires fire safety equipment installation.
Liquor License (if applicable)
Apply for liquor license from State Excise Department if serving alcohol. Various types: FL-2 (on-premises), P-10 (beer and wine), L-16 (hotel license). Fees vary by state (₹5 lakhs to ₹50+ lakhs).
GST Registration
Mandatory GST registration for hospitality businesses. GST at 5% (non-AC restaurants), 12% (AC restaurants), and 18% (hotels above ₹7,500/night). Composition scheme available for small restaurants.
Essential Licenses for Hospitality
| License/Permit | Issuing Authority | Timeline | When Required |
|---|---|---|---|
| FSSAI License | FSSAI/State FDA | 30-60 days | All food establishments |
| Eating House License | Local Police | 15-30 days | All restaurants/hotels |
| Fire NOC | State Fire Department | 15-30 days | Hotels, restaurants |
| Liquor License | State Excise | 60-120 days | If serving alcohol |
| Music License (IPRS) | IPRS/PPL | 7-14 days | If playing music |
| Health Trade License | Municipal Corporation | 15-30 days | All establishments |
Hotel Classification by Ministry of Tourism
The Ministry of Tourism operates the voluntary hotel classification system to standardize quality across India. Classification is available from 1-star to 5-star deluxe categories.
Classification Benefits
- • Government empanelment eligibility
- • Marketing by tourism department
- • Credibility and trust
- • International recognition
Classification Process
- • Online application submission
- • Document verification
- • Physical inspection
- • Classification committee review
Key Requirements
- • Minimum room sizes
- • Amenities as per category
- • Staff training
- • Sustainability practices
Taxation for Hospitality
GST Rates for Hospitality
- • 5%: Non-AC restaurants, takeaways
- • 12%: AC restaurants with liquor license
- • 12%: Hotels (room rent ₹1,000-7,500/night)
- • 18%: Hotels (room rent above ₹7,500/night)
Composition Scheme
Restaurants with turnover up to ₹1.5 crores can opt for composition scheme at 5% GST (without input tax credit). Simplified compliance with quarterly returns.
Liquor License Types and Costs
Liquor licenses are state-specific and among the most expensive licenses for hospitality businesses. Costs vary significantly by state and license type.
| License Type | Description | Typical Cost Range |
|---|---|---|
| FL-2 | On-premises consumption | ₹10L - ₹50L+ (varies by state) |
| L-16 | Hotel license | ₹5L - ₹30L+ |
| P-10 | Beer and wine license | ₹2L - ₹10L+ |
| CL-2 | Club license | ₹5L - ₹25L+ |
Government Schemes and Support
Tourism Registration
Register with Ministry of Tourism for benefits like HRAWI membership, training programs, and government empanelment opportunities.
MSME Benefits
Small hotels and restaurants can register under Udyam to access collateral-free loans and credit guarantee schemes.
State Incentives
Many states offer incentives for heritage hotels, eco-resorts, and hotels in designated tourist circuits.
Key Takeaways
Essential Licenses
- ✓ FSSAI license for all food operations
- ✓ Police Eating House license
- ✓ Fire NOC
- ✓ Liquor license (if applicable)
Best Practices
- ✓ Ministry of Tourism classification
- ✓ Online aggregator tie-ups
- ✓ Udyam registration for MSME benefits
- ✓ Music license for playing copyrighted music