The Indian tourism and hospitality industry has emerged as one of the key drivers of growth among the services sector in India. Tourism in India has significant potential considering the rich cultural and historical heritage, variety in ecology, terrains and places of natural beauty spread across the country. Tourism is also a potentially large employment generator besides being a significant source of foreign exchange for the country
The hospitality sector has the potential to be the main driving force behind the growth of the economy. It, however, will be possible only with the right amount of support and incentives from the government in all categories of hotels and not only limited to the luxury and ultra-luxury segment. I believe that the government must provide its full support in incentivizing the sector and the overall taxation on the hospitality sector should be reduced to stimulate its growth and make India competitive against other internationally renowned hospitality chains.
It is recommended that a hotel to be setup under an artificial legal entity like company or LLP.
POST INCORPORATION COMPLIANCES:
Company or LLP have to comply post incorporation compliances. For details Click here
Every business carrying out a taxable supply of goods or services and whose turnover exceeds the threshold limit is required to register as a normal taxable person. This process of registration is called GST registration. Entities without GST registration would not be allowed to collect GST from a customer or claim input tax credit of GST paid or could be penalised.
GST RETURN FILING
GST return filing is mandatory for all entities having GST registration, irrespective of business activity or sales or profitability during the return filing period.
The beauty of the system is that one has to manually enter details of one monthly return – GSTR-1. The other two returns – GSTR 2 & 3 will get auto-populated by deriving information from GSTR-1 filed by you and your vendors.
There are separate returns required to be filed by special cases such as composition dealers.
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.
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.
Employee Provident Fund (EPF) Registration is required for any establishment that employs more than 20 persons/employee in India. If any Hotel have more than 20 person/employees then EPF registration is mandatory.
Employee’s State Insurance (ESI) registration is mandatory in India for Businesses that employ 10 or more employees. To maintain compliance with the ESI Regulations, the employer must contribute 4.75% of the wages for all employees earning Rs.21,000 or less toward ESI employer dues. The employee is required to contribute 1.75% of his/her wages as ESI dues.
SHOPS & ESTABLISHMENTS
Shop and Establishment is a subject matter of state to state. Different state has different Shop and establishment Act. The Shop and Establishment Act is regulated by the Department of Labour and regulates premises wherein any trade, business or profession is carried out.
The act not only regulates the working of commercial establishments, but also societies, charitable trusts, printing establishments, educational institutions run for gain and premises in which banking, insurance, stock or share brokerage is carried on.
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.
Food business license (FSSAI) 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.
Profession Tax is a tax levied on a person engaged in any profession, trade, calling and employment in India.
Other Law and regulations are also applicable on the hotel industry but applicability of other compliances is business to business of the hotel.
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