- Sakshar Law Associates
Introduction to Setting up a Liquor based Business in India
Updated: Sep 26, 2022
Starting any business is difficult. Starting a liquor-based business is even more difficult. With all the legal hoops one has to jump, it can be daunting to go through the process. One will have to take care of everything from licensing to taxes to insurance. This hands-on guide will make the process easier for you.
This is the first hoop in the series of hoops that you will have to clear. Since alcohol is a state subject, each state has different rules and regulations regarding the establishment of an alcohol-based business.
Depending on the nature of your business establishment, there are several types of licenses for you to choose from.
1. Apply for a beer and wine license when you are only going to sell mild liquors. The sale of hard liquor is not allowed.
2. Apply for a Restaurant Liquor license when you want to sell both mild and hard liquors. This license is applicable as long as your income from alcohol does not exceed 40%.
3. Apply for a Tavern license when you want to sell both mild and hard liquors. In this case, your income from alcohol does not exceed 50%.
4. Apply for a Brewpub License when you are going to be brewing your own spirits such as beer and wine on your own.
Other common licenses include -
i.) L1 - wholesale supply of Indian liquor to other licensed holders.
ii.) L3 - It allows hotels to serve foreign liquor to their guests in their rooms.
iii.) L5 - Permits one to serve liquor in bars or restaurants in the hotel.
iv.) L6 - Granted to retail vendors of Beers and Indian Liquors.
v.) L19 - Given to a club registered to sell foreign liquor.
vi.) L49 - To serve alcohol in any party or function at specific premises anywhere in a state.
To apply for a liquor license, you will need to submit the following documents to your State Excise Department -
1. Identity Proof.
2. Address proof.
3. Address proof of the premise/business.
4. Municipal corporation’s and Fire Department’s NOC.
5. Application with personal and business details.
6. MOA and AOA for companies.
7. Latest ITR copy.
8. A photograph.
9. Affidavit ensuring applicant has no past criminal records.
10. An affidavit confirming the applicant has no pending dues.
The documents that you have to submit will differ based on your state’s excise department rules.
To apply for a license, visit your State Excise Department’s official website.
While conducting any business, one needs to ensure that their taxes are paid on time. After you have obtained your license, ensure that you have all your tax documents sorted. Since alcohol is a state subject, the goods and services tax does not apply to it. The states charge both an excise tax and VAT on alcoholic beverages.
The rate of interest varies from state to state. In order to check the rate of interest of your state, go through your State Excise Department’s official website.
Apart from this, you will also have to pay income tax which depends on the amount of revenue your business is generating.
Like any other business establishment, even for a liquor store, it is only wise to get an insurance cover to safeguard your business. In India, insurance companies offer “shop insurance” which provides cover to shop owners in case of a series of mishaps. This includes acts of God, fire, riots, terrorist attacks, etc.
Getting insurance is a good way of ensuring that you are protected from any loss in case any unforeseen accidents take place.
INTELLECTUAL PROPERTY RIGHTS
If you are an alcohol brewer with a unique design or name for the product which you produce, having it trademarked would help in ensuring that your rights are not violated. The number of IPR violations are on a rise in recent years. Companies have been copying each other's names and bottle designs leading to a loss of customers.
Having a registered trademark will help you in fighting for your rights in case any problem were to arise in the future.
Like any other business establishment, a liquor shop too will have a series of contracts with your suppliers and employees. These contracts will be governed by the provisions of the Indian Contracts Act. The terms mentioned in the contract are to be abided by both parties. In case of any issues, the remedy so mentioned in the contract needs to be abided by.
It might seem intimidating at first but by following a few simple steps, one can open a successful liquor-based business anywhere in the country. Following the rules laid down by the local state excise department is key in this. Having expert legal help will ensure that you clear all your hurdles seamlessly and that your business is up and running without any hiccups.
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