June 23, 2021

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Licenses required to start a food business in India

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This article is written by Shivank Datta who is pursuing a Diploma in Business Laws for In-House Counsels from LawSikho

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India has a massive food industry and has become one of the most lucrative and sought-after business in recent times. Due to its immense potential for value addition, particularly within the food processing industry, the food sector is turning up in a high growth and exceedingly profitable sector.

The National Restaurant Association of India (NRAI), in its India Food Services Report, 2019, has estimated the Indian food industry to grow at a compound annual growth rate (CAGR) of 9% to reach Rs. 5,99,782 crore by 2022-2023. The restaurant industry has employed 7.3 million people in 2018-2019. The organised food service sector, which accounts for 35% of the total market, contributed around Rs. 18,000 crore as way of taxes in 2018-2019.

India’s food ecosystem offers huge opportunities for investments with stimulating growth in the food retail sector, favourable economic policies and attractive fiscal incentives. The Food & Grocery market in India is the sixth largest in the world. According to the data provided by the Department of Industrial Policies and Promotion (DIPP), the food processing sector in India has received around US $ 7.54 billion worth of Foreign Direct Investment (FDI) during the period April 2000-March 2017 which envisages the ever ascending growth potential of the industry in recent times.

Retail food start-ups have been emerging rapidly with a dynamic form of business models ranging from the traditional dine-out and takeaway restaurants to the gravitating cloud kitchens, from small grocery shops to huge food processing plants, which seem to be the new normal. However, the more lucrative business option it may seem, legal compliances relating to setting up of a food business still is a huge task for entrepreneurs and it becomes essential for new businesses to follow and adhere to the requisite compliance in order to start a food business whether delivery or sale of products.

Food License

The first and foremost pre-requisite for starting a food business in India is obtaining a food license from the Food Safety and Standards Authority of India (FSSAI) for the purpose of preparing, manufacturing, distributing and transporting food products. FSSAI is the supreme authority in India which is responsible for regulating and supervising the food safety. The licensing and registration procedure is regulated by the Food Safety & Standards (Licensing and Registration of Food Business) Regulation, 2011. The FSSAI registration certificate is necessary for all food business operators i.e. from street vendor/hawker to a five-star hotel as it ensures the quality, purity, safety of the food/product for consumption and other important factors that the consumers can rely upon.

FSSAI registration can be obtained either offline or online. For obtaining the license offline, the food business owner needs to send an application to the Licensing Authority along with requisite fees. However, the license can be obtained online via FSSAI Food Safety Compliance System (FoSCoS) which is a more hassle free and convenient form of registration. 

The types of licenses are based on the annual turnover of the particular food business. There are three types of FoSCoS food licence as follows:

  1. Basic FSSAI license – Annual turnover of less than Rs. 12 Lakhs.
  2. State FSSAI license – Annual turnover between Rs. 12 Lakhs to Rs. 20 Crores.
  3. Central FSSAI license – Annual turnover of more than Rs. 20 Crores

On completion of the registration process, a fourteen-digit FSSAI license number is provided to the food business operator. FSSAI License is issued with varying validity from 1 year to 5 years and its non-registration attracts penalties under the Food Safety and Standards Act, 2006.

Registration under the Shops and Establishment Act

A food business operator is required to obtain a trade license by getting the business registered with the local government as per the Shops and Establishment Act, 1953 (hereinafter referred to as the S&E ACT). The registration for the trade license is required to for permission to conduct trade and to ensure ethical business practices and that the business adheres to the existing rules, safety measures and regulatory guidelines.

The registration can be done by sending a statement along with requisite fee and details of the business (name of business, address) to the concerned local municipality or health department (chief inspector of shops or any other inspector under S&E Act). The concerned municipality/department will send an inspector for inspection of the premises where the business is established. After due inspection and verification of the necessary documents, a registration certificate/license will be issued that should be displayed at a conspicuous part of the establishment.

Eating House Establishment

An eating house establishment license is required for the business such as restaurants, eating-houses, food trucks, small street shops, canteens, residential hotels etc. under the S&E Act. In order to obtain the license, an online application along with FSSAI license, GST certificate and other requisite documents is required to be made on the website of the police department of the concerned state.

Liquor License

A liquor license is mandatory for a restaurant or eating house establishment for the purpose of selling, manufacturing, distribution, storing or otherwise use alcoholic beverages in the premises of the establishment. There are different types of liquor licenses such as license for mild liquor or wine & beer and for various other categories. To obtain a liquor license, an applicant needs to fill an online application form at the state excise department’s website where the business or establishment is situated along with the requisite fee and documents. After the verification of the application, a public notice will be published by the state authority and displayed at the location.

Fire Department NOC

Another pre-requisite for setting up a food business is No Objection Certificate (NOC) from the fire department of the concerned area. In order to obtain a fire security NOC, an application has to be made to the concerned fire department along with necessary documents such as building plans, model of the building and certificate from the architect and also fill out a questionnaire related to compliance with fire safety rules and regulations. Post verification of the application, an inspection will be carried out by the officials of the fire department. 

Environmental Clearance

With the ever-increasing importance of environmental laws, the necessity for environmental clearances rises. The food industry also contributes to environmental pollution by way of smoke emissions from the cooking process and food waste. Therefore, for the establishment and operation of a food business, it becomes imperative to obtain an environmental clearance from the concerned State Pollution Control Board (PCB). An environmental clearance can be obtained by applying on the website of the concerned state PCB which depends on the category of establishment as provided by the Central Pollution Control Board (CPCB). The categories are as under:

  • Hotels (Big) – Red Category.
  • Medium-Scale Hotels – Orange Category.
  • Non-alcoholic Beverages (Soft drink) – Orange Category.
  • Small Bakery/Confectionery – Green Category.
  • Small Hotels – Green Category.

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Trademark License

In order to create a brand image among customers, entrepreneurs must obtain a trademark license and register their intellectual property and a unique identity. A registered trademark will facilitate a faster growth of the business in case the owner wants to start opening a chain of its food business. Trademark registration would provide ownership over the intellectual property created and help deter the use of the branding by competitors. A trademark can be obtained by registering online on the Intellectual Property India portal with the required fee and documents. Subsequently, a trademark registration/certificate will be allotted to the applicant after due verification of the application and the documents submitted.

Music License

Music license is required in places such as restaurants/café/eating-house/hotels etc. where the owner of the business wishes to play pre-recorded music at the business premises.  The license aims to protect the interest of the artists who create the music or compose the lyrics and the owners of such creative/ artistic works. Music license can be obtained by applying online to the Phonographic Performance Limited (PPL) with due fee and the requisite documents. There are two types of music license as follows:

  1. Phonographic Performance Limited (PPL) – For pre-recorded songs.
  2. Indian Performing Right Society (IPRS) – For live performance.

Permissions are granted to the holder of the PPL license to play music from the PPL repertoire or the commercially released music which are registered with the PPL. However, licensing is not required for the music that is freely licensed or is not registered with the PPL copyright terms.

Tax Registration

Tax registration is one of the most important registrations in any business. Firstly, the business, for the purpose of income tax, shall have a Permanent Identification Number (PAN) and Tax Account Number (TAN) mandatorily, under the name of the business or the owner, if the business is a sole-proprietorship. 

Secondly, Goods and Service Tax (GST) registration is mandatory for all businesses like trade, commerce, manufacture and all food businesses, be it a sole-proprietorship, partnership, limited liability partnership, company or firm, irrespective of their scale, volume, or frequency. This also includes the supply of goods and services for the start and termination of any business. GST registration is required where the financial turnover (“Aggregate turnover”) of the business is more than Rs. 20 Lakhs (Rs. 10 Lakhs for special category states as categorized under the GST Act, 2017) in a financial year which includes aggregate value of all taxable supplies, exempt supplies, exports of goods and/or services, and inter-State supplies. Businesses which do not cross the statutory threshold are exempt from GST registration.

However, there are a few scenarios where the GST registration is mandatory, irrespective of the turnover. Some of the examples are as follows:

  • Where the business involves inter-state supply of goods and services.
  • Where payment under the reverse charge mechanism has to be made. This is the mechanism where a person who receives the goods/services pays tax instead of the supplier.
  • Where the business is operated (supply of goods/services) on an e-commerce platform.

GST registration can be obtained online by submitting the GST REG – 01 registration form along with requisite documents at the GST portal.

Labour Law Registrations

Labour law registrations have immense importance wherever they become applicable. The workers in a food business are protected under the S&E Act, which regulates the conditions of employment in commercial establishments like working hours, opening and closing hours, public holidays, overtime pay etc. Some important labour laws where registration is necessary are as follows:

  • Employees State Insurance (ESI) registration – Businesses with more than 10 employees have to obtain the ESI registration for employees earning less than Rs. 21,000 per month. Establishments which are exempt must obtain an exemption certificate to that effect.
  • Employees Provident Fund (EPF) registration – Businesses with more than 20 employees have to obtain EPF registration. Employees who earn less than Rs. 15,000 per month have to be mandatorily covered under the EPF.
  • Contract Labour registration – Businesses which employ more than 20 employees sourced from a manpower supplying agency like waiters, guards, housekeeping etc. have to obtain a registration as a principal employer to those employees.

Signage License

License for signage is also necessary before setting up a food business. Hoardings, signboards and outside advertisements require sanction from the local municipal authorities. Generally, one normal signboard is allowed in front of a business, attached or installed inside the business premises after obtaining a license to function from the local authority. Additional boards need to be sanctioned from the authorities by paying the necessary fees.

The food industry is undoubtedly growing rapidly with lesser chances for a decline in the growth. With a growing preference of e-commerce platforms, home-delivered food and other food items there has been considerably lesser impact of the pandemic on the food business as compared to other industries which has led to a more evolved market for the food industry with a potential of exponential growth in the near future. Therefore, for an entrepreneur, in order to stay ahead in this competitive market, adhering to a strong legal framework and compliance with the requisite registrations and licenses can be a differentiating factor amongst competitors.


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