Hospitality Law in India

Unlike other industries and trade, Hospitality Industry requires multiple approvals from central government, such as approval from the ministry of tourism and approvals from regional authorities. It could run from Police permission to labour law compliance and then Tax liabilities to environment clearance depending upon the size and amplitude of the industry.  

Construction of hotels is primarily a private sector activity which is capital intensive and has a long gestation period. The constraints being faced by the hotel industry in addition to the high cost and limited availability of land is the procurement of multiple clearances / approvals which are required from the Central and State Government agencies for hotel projects. In some cases as many as 65 or more clearances/approvals are required by hotel projects which vary from State to State.

Hospitality Development and Promotion Board

To address the constraints being faced by the hotel industry in obtaining multiple clearances, and to streamline the system for speedy clearances of hotel projects, the Government has approved the setting up of a ‘Hospitality Development and Promotion Board (HDPB)’ for hotel projects.

In order to facilitate the clearances required by hotel projects in a time bound manner and also provide policy advice for development of hospitality sector, the Union Government has approved the constitution of a ‘Hospitality Development and Promotion Board’ (HDPB). At the Central level, the board shall be chaired by Secretary (Tourism) Government of India with Additional Director General (Tourism), JS level IAS officer, as the convener and members drawn from concerned Ministries/Department. The States/Union Territory Administrations have been advised to set up similar Boards if the same does not exist in their respective States/Union Territories.

The State Governments of Mizoram, Manipur & Maharashtra have already set up State level ‘Hospitality Development and Promotion Board’ (HDPB). It has been informed that State Government of Bihar has a similar board viz., State Investment Promotion Board (SIPB).

The ‘Hospitality Development and Promotion Board’ (HDPB) is a forum for facilitation of Hotel Projects for faster implementation and at present there is no State wise fiscal allocation involved.


(i) Monitor and facilitate the clearances/ approvals of Hotel Projects.
(ii) The Secretariat of the Board to be a single point for receiving
(iii) To review and advice on hotel development policies.

The Board operates at three levels:

(i) Clearances that are exclusively the responsibility of Central Ministries/
(ii) Central clearance incumbent upon State Government clearances and
(iii) Clearances that are the responsibility of State or other levels of State


Under the Indian Constitution, Hotels and Inns are subjected to state legislation. According to Entry No. 34 of List II of the 7th Schedule of the Indian Constitution, The individual States have the full right and legitimate authority to make laws with respect to gambling and betting. Furthermore, entry No. 62 confers authority to the States to tax gambling and betting events or activities. Thirteen states have legalized lottery, while the States of Goa and Sikkim have legalized and regulated other forms of gambling.

Following Legal Standards are basics for the operation  of Hotel Industry

  • The Approval of Project 
  • Establishment and Commissioning of Industry
  • The operation, management, and maintenance of Industry
  • Taxation, Employment, and Contracts in  Industry

See for the Industrial potentiality

The Sarai Act, 1867 is still operating in this sector and police ask for registration under section 4 of this act or supply information to the police.

SARAI  means any building used for the shelter and accommodation of travelers, and includes, in any case in which only part of a building is used as a sarai, the part so used of such building i.e all hotels, lodges, inns, guest houses, resorts come under the preview of this Act

Essential Duties under Sarai Act

The keeper of a Sarai is bound:

(i) when any person in Sarai is ill of any infectious or contagious disease, or dies of such disease, to give immediate notice thereof to the nearest police station;
(ii) to give any Magistrate (Police officers of the rank of Assistant Commissioner of Police (ACP) and above) or any other person duly authorized by the Magistrate of the District (Commissioner of Police), free access to the Sarai and allow him to inspect the same or any part thereof,
(iii) to thoroughly cleanse the rooms and verandahs, and drains of the Sarai and the wells, tanks or other sources form which the water is obtained for the persons or animals using the Sarai;
(iv) to remove all noxious vegetation on or near the Sarai and all the trees and branches of trees capable of affording to thieves means of entering of leaving the Sarai.
(v) to keep the gates, walls , fences, roofs and drains of the Sarai in repair;
(vi) to provide watchmen for the safety and protection of persons and animals or vehicles lodging in, halting at or placed in the Sarai; and
(vii) to exhibit a list of charges for the use of Sarai.

Kohima -Dated 17th November 2014, and in exercise of the power conferred by paragraph (3) of section 2 of the Sarais Act, 1867 (22 of 1867) the Governor of Nagaland is pleased hereby to confer on the Commissioner of Police, Dimapur, the power to exercise all the functions of Magistrate of the District in respect of the district of Dimapur with regard to the said Act. Any licensing power emanating from the said Act shall be exercised by the Police Commissioner.

Section 7: Duties of keepers of Sarai. The keepers of a Sarai shall be bound.

(1) When any person in such Sarai is ill of any infections of contagious disease, or dies of such disease, to give immediate notice thereof to the nearest Police Station.
(2) At all times when required by any magistrate of the Metropolitan Area in this behalf to give him free access to the Sarai and allow him to inspect the same at any part thereof ..
(3) To thoroughly cleanse the rooms and verandahs, and drains of the sarai and the wells, tanks, or other sources from which water is obtained for the persons or animals using it to the satisfaction ofand so often as shall be required by the Magistrate of the Metropolitan Area, or such person as he shall appoint in this behalf.
(4) To remove all noxious vegetation on or near the sarai, and all trees and branches of tree capable of affording to thieves means of entering or leaving the sarai.
(5) To keep the gates, walls, fences, roofs and drains of the sarai in repair.
(6) To provide such number of watchmen as may, in the opinion of the Magistrate of the Metropolitan Area subject to such rules as the state Government may prescribe in this behalf, be necessary for the safety and protection of and animals or behalf, be necessary for the safety and protection of persons or animals or vehicles lodging in halting at or placed in the sarai ,and
(7) To exhibit a list a charge for the use of the sarai at place and in such from and languages as the Magistrate of the Metropolitan Area shall from time to direct.

Information Slip for Bhubaneswar police ( Orrisa)


Hotels are an important component of the tourism product. They contribute in the overall tourism experience through the standards of facilities and services offered by them.

With the aim of providing contemporary standards of facilities and services available in
the hotels, the Ministry of Tourism approve Star Hotels/Restaurant/Other category of Hotels, Motels/Guest House Convention Centre and others at project stage. The number and category of these hotels therefore are collected as a byproduct of this activity of the Ministry of Tourism.

The Ministry of Tourism approves hotels at project stage based on documentation. Project approval is given to 1, 2, 3, 4, 5 Star and Heritage (Basic) categories. Hotel projects approved under 5 Star and Heritage category after becoming operational may seek classification under 5 Star Deluxe / Heritage Classic / Heritage Grand category if they fulfill the prescribed norms. . Project approvals are valid for 5 years. However, hotels seeks Re-classification at least six months prior to the expiry of the current period of classification. The table in this Chapter give list of only those hotels which have applied for approval at the Ministry of Tourism. The approval or classification of these hotels is mandatory and not necessary.

In 2010, maximum number of 5star and 5 star deluxe hotels are in Maharashtra (62), followed by Goa (34) and Rajasthan (31). Maximum number of rooms (27%) in Fiver Star Hotels are in Maharashtra followed by Delhi (21.1 %). [Statistical year book 2011]

Central approval


Approvals based on broad classifications

Approval of Convention Centres 

Ministry of Tourism has decided to grant approval to convention centers to encourage investment and standardize facilities at the convention centers for Meetings, Incentives, Conference and Exhibitions (MICE) etc..

Approval of Motel Projects [ Dhaba]

Motels are an important segment of the hospitality sector which provide budget accommodation. Motels cater to the hospitality requirements of road travellers through the facilities and services offered by them. With the aim of recognizing this segment as a component of the overall tourism product, and with the aim of benchmarking the standards of facilities and services of Motels, the Ministry of Tourism has formulated a voluntary scheme for Approval of Motel Projects

Approval of Heritage Hotels

Heritage Hotels’ cover running hotels in palaces/castles/forts/havelies/hunting loges/
residence of any size built prior to 1950.


With the liberalization of Air Tax Services, charter policy, more International Airlines operation and also increased domestic flights, several Air Catering Units have been set up in order to cater to the requirements of such air passengers. Keeping in view the specialized professional inputs and outputs in this segment, matching the international standards, the Ministry of Tourism approves and classifies Standalone Air Catering Units in the country.


Time Share Resorts (TSR) are increasingly becoming popular for leisure holidays and family holidays, etc. With the aim of providing standardized world-class services to tourists, the Government of India, Ministry of Tourism has a voluntary scheme for classification of fully operational Time Share Resorts.


Guide Lines for stand-alone Restaurants, they serve only food and nothing more. Restaurants range from inexpensive and informal lunching or dining places catering to people working nearby, with modest food served in simple settings at low prices, to expensive establishments serving refined food and fine wines in a formal setting.

To stay with an Indian family to understand Indian culture and heritage

In order to meet the rising demand of hotel accommodation for budget tourists both domestic and foreign, Ministry of Tourism has decided to standardize and ensure good, clean, hygienic, fair and upgraded facilities and practices in a large number of Guest Houses and unregulated accommodation units that spring up in cities and towns

Apartment hotels are best for family holiday and staying for long time.


Guidelines for Tented Accommodation

To meet the increasing demand of tourists, camping facilities and tented accommodation would need to be developed. There is, therefore, a need to promote and facilitate setting up of campsites while ensuring adherence to quality, standards and safety norms.


  • Adventure tourism projects; and
  • Amusement parks
  • Arts and crafts villages
  • Caravan tourism
  • Golf courses
  • Health farms and SPA
  • Ropeways (cable cars)
  • Water parks
  • Watersports complexes
  • Miscellaneous Projects

Category of Hotels

Hotels are an important component of the tourism product. They contribute in the overall tourism experience through the standards of facilities and services offered by them. With the aim of providing contemporary standards of facilities and services available in the hotels, the Ministry of Tourism has formulated a voluntary scheme for classification of operational hotels.

Unapproved Hotel
1 Star
2 Star
3 Star
4 Star
Heritage – Heritage Grand, Heritage Classic & Heritage Basic
5 Star
5 Star Deluxe
  • Classification for newly operational hotels if approved by Ministry of Tourism at project stage, must be sought within 3 months of completion of the project. Operating hotels may opt for Classification at any stage. However, hotels seeking Re-classification should apply for reclassification at least six months prior to the expiry of the current period of classification
  • Once a hotel applies for Classification/ Re-classification, it should be ready at
    all times for inspection by the inspection committee of the HRACC. No request
    for deferment of inspection will be entertained
  • Classification will be valid for a period of 5 (Five) years from the date of approval of Chairman HRACC or in case of Re-classification, from the date of expiry of the last classification, provided that the application has been received six months prior to the expiry of the current period of classification, along with all valid documents. Incomplete applications will not be accepted.

Regional approval

Municipal Licence and Registration

New Delhi Municipal Council (Regulation of Hotels, Lodging houses and Similar Places) bye-laws

  • Lodging house.—  For the purpose of bye-laws 4 to 8 a “lodging house” shall mean a sarai, hotel, boarding house for the public, rest house, or unlicensed emigration depot or any other place where the public are admitted and provided with sleeping accommodation on payment and shall include religious and charitable institutions or “Ran Baseras” maintained and supervised by the Government or the Council.
  • Registration of a licensee.—  Every licencee of a lodging house shall cause his name to be registered as such in the Office of the Council and shall also furnish to the Chairperson the following information in writing:-(a) The postal address of his lodging house.(b)  The number of rooms reserved for lodgers in such house, along with dimensions of each room.

Registration and licence under regional Shop and Establishment Act

Bombay Shop and Establishment Act, 1948

  • SEC 41. Lighting.-(l) The premises of every establishment shall be sufficiently lighted during all working hours.
    (2) If it appears to an Inspector that the premises of any establishment within his jurisdiction are not sufficiently lighted, he may serve on the employer an order in writing specifying the measures which in his opinion should be adopted and requiring them to be carried out before a specified date.

Delhi Shop and Establishment Act, 1954

 SEC-25 The premises of every establishment shall be kept clean and free from effluvia arising from any drain or privy or other nuisance and shall be cleaned at such times and by such methods as may be prescribed. These methods may include lime washing, colour washing, painting and disinfecting.

 West Bengal Shops and Establishment Act 1987       

Hospitality ethics


Hotel Taxation

  1. VAT: Value added tax is applicable on sale of food items and beverages as per state VAT act. The VAT on restaurants serving food and beverages are governed by respective state laws. The rate of VAT may vary from state to state.
  2. Luxury tax: It is applicable on luxuries and for the matter incidental thereto as per state Luxuries Act. The rate of luxuries tax may vary from state to state.
    The luxury tax in DELHI under Delhi Tax on Luxuries Act, 1996  is levied on the turnover of receipts of a hotelier at the notified rate not exceeding 15%.  The Govt. may notify different rate(s) from time to time and for the different classes of hotels. At present the rate of Luxury Tax is on the room tariff of Rs.750/- and above but less than Rs.1000/- and 10% on room tariff and above on per room per night basis on residential accommodation provided by way of business in a hotel a lodging house, an inn  a club, a resort,  a farmhouse,  a public  house or a building or part of building. In the case of services provided in the Banquet Hall Gyms Health Clubs and Spas. The rate of tax is 3% Services only.
  3. Luxury tax: It is applicable on luxuries and for the matter incidental thereto as per state Luxuries Act. The rate of luxuries tax may vary from state to state. It is applicable on stay charges (i.e Room Rent) and is not applicable on food charges.


  4. Service Tax: Service Tax is different from Service Charge levied by Hotel management. services charges normally range between 5% to 10%.

Liquor Bar Licence for Hotel etc


Restaurant Bars at Rajasthan

To promote tourism, Rajasthan Government has removed the restriction for Restaurant Bars in accordance with the new Excise Policy 2004-05. The good quality Restaurant would be able to sell Beer, Wine and Ready to Drink Liquor.


“Star Hotel” includes a beach resort hotel which satisfies the following criteria and is certified as such by the Director of Tourism of the State Government
(a) that it has twenty lettable bedrooms and forty beds with attached bathrooms;
(b) that it has separate dining room and restaurant;
(c) that it has good quality cuising both Indian and Continental;

(d) that it has clean kitchen and washing facilities;
(e) that it has well trained staff with uniform;
(f) that it has special facilities like conference hall, recreation
facilities (indoor games) and the like; and
(g) that it has adequate parking space

West Bengal

Gambling in Hotels etc

Goa and Sikkim are well-known gambling destinations within India.

Gambling in GOA

Goa Public Gambling Amendment Bill to amend 1976 Act.

Legal Gambling In Sikkim

Sikkim is a second Indian State that has legalized gambling:

Sikkim Casino Games (Control and Tax) Act, 2002 (4 of 2002)

1) The Sikkim Casino Games (Control and Tax Rules), 2002 gives the Sikkim Government the authority to grant licenses to individual and business interested in operating casinos.

2) The Sikkim Regulation of Gambling (Amendment) Act, 2005 gives the Sikkim Government the authority to authorise gambling on certain days and to make specific gambling houses legal at their own discretion by way of a license.

In exercise of the powers conferred by section 18 of the Sikkim Casinos (Control and Tax) Act, 2002, (4 of 2002), the State Government hereby makes the following rules further to amend the Sikkim Casino Games (Control and Tax) Rules, 2007

Hotel Associations in India

FHRAI is the voice of the Hospitality Industry and provides an interface between the Hospitality Industry, Political Leadership, Academics, International Associations and other Stake Holders.

Eastern Region comprising 12 States and a Union Territory, the association upholds common voice for hotels, restaurants and associates for unhindered progress of hospitality industry in the country’s Eastern Region.

Hotel and Restaurant Association of Northern India (HRANI) – a Northern outfit of FHRAI is an apex body representing Hotel & Restaurant Industry of the 9 North Indian States.

SIHRA constitutes the Southern Region of Federation of Hotel and Restaurant Associations of India (FHRAI), the Apex Trade Association for the Hospitality industry in India.SIHRA’s Membership comprises the smallest Restaurants to the Five Star deluxe Hotels in the Southern States of Andhra Pradesh, Telangana, Karnataka, Kerala, and Tamil Nadu and the Union Territory of Puducherry

Since February 1951, when the Hotel and Restaurant Association (Western India) was incorporated as a Company limited by guarantee and not having share capital, the Association has served the interests of the hotel and restaurant industry.The Association over the last several years has taken effective steps to encourage, promote and protect the interest of member establishments. It has been rendering professional assistance from time to time to all its members on topics of vital importance.

Hotel Association of India (HAI) is the apex organization of the Indian Hospitality industry. With its membership extending from the major hotel groups, boutique hotels, heritage hotels, large, medium sized and smaller hotels, it represents the entire spectrum of the industry.