Regulation of Hotel Industry in Compliance Management By CS Annu Sharma

Dear Professionals,

With opening up of the Indian economy after 1991 and the adoption of globalization, there has been a steep rise in the operational activities of various sectors that were earlier very dormant. One of the best examples of this is the hospitality industry. One of the major parts of this sector is the hotel industry. The Indian tourism and hospitality industry has emerged as one of the key drivers of growth in 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.

Until recently, there were not many stringent requirements of compliance attached to these laws. Due to the rise in the number of cases of food poisoning, raising concerns and public conscience, these laws now demand a stringent compliance. Apart from regulating the areas mentioned above, hotels are also obliged to protect their customers from harms that are criminal in nature such as thefts, bodily harms, and even potential harms from terrorist groups.


In the large/ luxury hotels segment there are about 11 long-standing players such as ITC Hotels, Asian Hotels, the Oberoi Group of Hotels, Hotel Leela Ventures, ITCD, Indian Hotels, the Park Hotels, Taj Group, Inter-Continental, Welcome Heritage Group of Hotels, etc.

In addition, there are about 90 listed hotels and resorts in the small/mid-sized segment including Country Club, EIH Associate Hotels, Kamat Hotels and Mahindra Holidays and Resorts. 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.

Apart from certain laws, there are certain industry associations that govern the working of hotels in India:
  • The Federation of Hotels and Restaurants Association of India
  • The Hotel and Restaurant Association of Eastern India
  • The Hotel and Restaurant Association of Northern India
  • The Southern India Hotel and Restaurant Association
  • The Hotels and Restaurant Association (Western India)
  • Hotel Association of India
Following are some main registration, return, and compliance which are applicable on Hotel industry.

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 penalized.


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.


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 a 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 has more than 20 person/employees then EPF registration is mandatory.


Employees 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.    

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 renewable at the end of each year.


It is recommended that a hotel is set up under an artificial legal entity like a company or LLP.


Company or LLP have to comply post incorporation compliances.


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 to the hotel industry but the applicability of other compliances is business to business of the Hotel.


Hospitality law is a legal and social practice related to the treatment of a person's guests or those who patronize a place of business. Related to the concept of legal liability, hospitality laws are intended to protect both hosts and guests against injury, whether accidental or intentional.
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