Licenses Required to Open a Restaurant/Food Business
According to the Indian Food Services Report (2016), the restaurant industry in India is worth approximately 3 lakh crore and is estimated to reach 5 lakh crore by 2021. A lucrative industry, it contributes 2.1 percent to the country’s Gross Domestic Product (GDP). With a growth of 7.7 percent, it scores high on employability as it is expected to create 5.8 million direct jobs. However, one shouldn’t let the picture of profitability cloud the legal obligations to be undertaken as a single fallacy can cost you your dream. The licenses and the registrations are legal requirements that one needs to fulfill. Failure to do so have legal repercussions one would rather avoid. This article covers the licenses/certificates required to start a restaurant in India.
One of the most important licenses required for a new restaurant is the FSSAI or Food Safety and Standard Authority of India license issued under FSS (Licensing & Registration of Food Businesses) Regulations, 2011. It is a unique 14 digit registration or license number given to manufacturers, traders (of food business) and restaurants which should mandatorily be printed on food packages. It gives the assurance that the food products traded or used are of good quality and debilitates cases of adulteration and usage of substandard products. This license can be registered in any of the four given categories- Central, State, Registration and Konkan Railways depending upon the location and the turnover of the company.
If you are looking to obtain an FSSAI license for your food product, simply send us your requirements and we will help you understand the document requirements, pricing estimates and time required in obtaining an FSSAI license. Over the last 2 years, our lawyers have helped more than 100 businesses obtain FSSAI licenses.
Talking about restaurant industry being a profitable business, one factor which may help in increasing the profit margin is serving liquor. With low labour cost but fairly large consumer base, it surely boosts restaurant profits. For restaurants planning to serve their customers with beverages like alcohol, have to apply for liquor license. It is issued by the local Excise Commissioner and the forms are available at the respective state government websites.
Don’t you love when your favourite song plays in the restaurant? Well, restaurant owners need a license for that too! Under the Copyright Act of 1957, those who play pre-recorded music in non-private, commercial or non- commercial establishments without a license issued by Phonographic Performance Limited will have to face legal penalties.
The 11th schedule of the Municipal Corporation Act (1957) is about Health Trade license. Public health should be of utmost concern for restaurants and the government ensures this through the Health Trade license. Issued by State’s Municipal Corporation or Health Department, it ensures that the restaurant follows hygiene and safety norms. This license is issued within 60 days of submitting the application form. Municipal corporations hold the power to shut down restaurants which do not have this license. The forms for registration are available at the state’s municipal corporation website or at Zonal Citizen’s Service Bureaus.
Restaurants have the duty to protect their customers be it from food products of substandard quality or hazards such as fire. A restaurant needs to register for a No Objection Certificate or NOC from the State Fire Department before the commencement of the building’s construction. Applications can be found online on the state government websites. Once the application is submitted an inspection would be conducted for the grant of NOC.
Health and safety of the customer is not the only duty of restaurants. They are legally and morally bound to do their share in protecting Mother Earth. Restaurants are also expected to apply for the Certificate of Environment Clearance (CEC).
In 2013, the National Green Tribunal (NGT) shut down 34 restaurants in Hauz Khas Village (HKV) and Delhi for not following environmental norms. These eateries, according to NGT did not treat the wastewater before disposing it and therefore faced this penalty. Of the 32 restaurants in HKV, only 20 had applied for Consent to Operate or the CTO license issued by the Delhi Pollution Control Committee. However, the Committee was satisfied with only 8 of the 20 who had applied for the license.
Getting the clearance certificate involves screening, scoping and evaluation of the project to examine its impact on environment. To obtain CEC one has to submit an application along with the Environmental Impact Assessment Report (EIA) or the Environment Management Plan (EMP), details of public hearing and NOC granted by state regulators.
The workers of a restaurant are protected by the Shop and Establishment Act which regulates the terms and conditions of employment in commercial establishments. Under the Ministry of Labour, this act regulates working hours, overtime pay, intervals for rest, opening and closing hours, public holidays, paid leaves, maternity leaves etc. An application has to be submitted to the area Inspector along with the following information-
Name as the employer and the manager (if any)
Address of the establishment
Name of the establishment
Number of employees, etc.
The submission of the application has to be done within 30 days of commencement of work. The Inspector will verify the application and if satisfied, will issue the certificate. The certificate is valid for 5 years after which it has to be renewed.
Restaurants are also expected to register themselves for Service Tax and Value Added Tax or VAT. Service tax is an indirect tax levied on businesses which they recover from the consumers they render their service to. For every person or business providing taxable services exceeding 9 lakh, registration for Service Tax is mandatory.
VAT is one of the most important legal aspects for restaurants. It is a tax levied on the final products or services before reaching the customers. Since it is regulated by State Governments, each state may have slightly different rules depending upon the goods and services manufactured in the respective states.
Each state government has provisions for online application for VAT registration. After submission of the form an officer would inspect the premise. If satisfied will issue a TIN (Taxpayer Identification Number) and VAT certificate. The following documents have to be submitted along with the application form-
Central Sales Tax registration certificate(Form A)
Professional tax registration certificate(Form 2)
Copy of important documents such as the address proof, ID proof of the Proprietor/Partner/Director
4 passport size photographs of the Proprietor/Partner/Director
PAN No. & Bank Account No of the Proprietor/Partner/Director
Copy of the rental agreement of the business place
Details of business activities
Partnership deed (in case of a partnership firm)
Memorandum of Association and Articles of Association (in case of a Private Limited company)
Eating house license is issued by the state police headquarters and the Licensing Police Commissioner. Applications can be found online. Delhi based applicants can register here.
For advertising your business through the use of words, symbols and pictures you need a legal permit called the Signage license which is issued by the Municipal Corporation.
For restaurants in multi-story buildings, safe operation of lifts should be ensured. For this they have to register for Lift Clearance License. It is issued by the Electrical Inspector from the office of the Labour Commissioner after verifying installation of lift, layout, safety gears etc. State wise applications are available for the same.
Domestic and legal factors like over-priced rentals, inadequate supply chain, price sensitive consumer base which is limited to a few pockets of the country resulting in intense competition along with complex legal formalities to be fulfilled are hindering the potential of the restaurant industry. With major growth potential, making the process of registrations and licensing easy can give a fillip to this rapidly developing industry.
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