Over time, the consumption of alcohol in India has been increasing rapidly because of the shift in society aligned with the habits and preferences of today’s youth. Selling liquor in a restaurant is an absolutely great way to make profits given that alcohol, in general, has low labor costs and high-profit margins. So, if you’re all set to open up a restaurant or a bar, a liquor permit is one of the most important things you need to get as well as plan for in advance.
Before you go ahead and start chalking out fancy specials that you have in mind for Happy Hour, it’s important that you know what you’re getting into.
The Licensing Act 2003 states that one needs a permit to sell alcohol in India. Even if you want to give away alcohol for free, you’re required to have this permit. This is because the mere act of giving alcohol away for free is seen as an incentive offered to your customers to purchase from you- one that is a part of your pricing structure.
Restaurant liquor in a pub, a bar, a hotel and so on is legal only and only if the seller holds a valid liquor permit, also called a liquor permit. The agency in charge of approving this license is different in each state across India but it is heavily regulated by the government. Furthermore, cities can also have certain restrictions that are particular only to them. Each state has its own set of rules for restaurant liquor, alcohol consumption and age restrictions. Also, the government forbids home delivery of alcohol. It can solely be bought physically from a licensed shop.
A liquor permit for a restaurant is completely different from the liquor permit acquired by wholesale shops. It accounts for different aspects of sale and distribution, types of alcohol being sold, pricing and so on.
An L1 license, for instance, is granted to companies that run a licensed manufacturing unit. On the other hand, an L6 license would be granted to bottling plants or working distilleries. A P-13 license would be granted to licensed hotels and restaurants to serve alcohol on and off their premises on one specific day for a particular function.
What is the role of a Liquor Permit?
A liquor permit dictates multiple aspects:
- When can liquor be sold?
- Where can liquor be sold?
- Who can purchase liquor?
- The quantity of alcohol that can be sold at one time.
- Type of liquor beverages that are on sale.
- Alcohol charges allotted by a business.
Application Process for a Liquor Permit
You will have to apply for a permit to the Excise Department of your state government. Before you go ahead, it’s best to know the process and what to expect.
We’ve outlined this application process in 7 simple steps for you.
- Each state has its own rules and regulations regarding the sale, purchase, and consumption of alcohol. First, you need to know about all these rules laid down by your respective state government before applying for a permit. You can do so by checking out the rules and regulations laid down on the website of the state excise department or you could even enquire from nearby liquor shops in your area.
- Next, visit your state government’s website and fill out the application form for a liquor permit. You would have to create an account and login online (example of the Delhi website and application main page given in the screenshot below). The documents mentioned below will have to be shown to the concerned Excise Officer who inspects the restaurant premises. They, in turn, will submit a report to the higher liquor permit granting authorities.
- You will also have to provide your background details. This will include multiple things- your age, any prior experience in business, a clean personal record and so on. You will have to submit an existing proof for these facts too.
- You will be required to fill all the relevant details in your application form and submit the form to the state authority. This will include aspects such as the type of alcohol you plan to serve and if you intend to sell alcohol only inside the premises or off-premises too.
- Once the verification process has been carried out, the state authority will release a public notice stating your name and the type of permit you’re applying for. This will then be put up at the location you have in mind. It will have to be publicly displayed to everyone in the area for a certain amount of time. During this time, if the local residents raise any objections, the applicant has the right to defend his or her proposal. And if there is no objection, the state authority will proceed to review the application.
- Your location must be set at a certain prescribed distance from any school, hospital, park or place of worship in the surroundings.
- After the approval, the applicant will have to submit the fees as per the guidelines. Finally, the permit will be issued.
The costs involved in applying for a liquor permit vary from state to state. Every area has a specific limit to the number of liquor licenses that are granted. So, you might have to end up buying a liquor permit from an existing bar or a restaurant. This might even be at a higher cost compared to normal.
The minimum age required for a prospective applicant varies across states too. The bare minimum in India is 21 years of age, while in some states it can even be as high as 25 years.
The documents required along with your application are:
- A certificate of registration of your eating house permit (issued by the DCP).
- A No Objection Certificate (NOC) from the state Fire Service departments.
- A NOC from the local Municipal Corporation.
- List of the names of directors of the company.
- Proof about the legal status of the restaurant- whether it is a company, a partnership firm or another type of organization.
- Proof that the restaurant is in legal possession of the plot it is on.
- A certificate that validates the completion of the restaurant or the hotel building.
- Trade license from the local authority in your town or city (NDMC, GHMC, etc.).
- Document of proof regarding applicant being an Income Tax assessment and Sale Tax assessment.
- Identity proof as well as address proof of the applicant.
- Income Tax returns.
- An affidavit stating that the person applying has no history of a criminal record or pending dues to the government.
Types of Liquor Licenses
There are four different types of Liquor Licenses found in India. This largely depends on what kind of liquor you’re selling, where you’re selling it, and how much profit you derive from it.
Beer and Wine Liquor License
This is the license you’ll need to acquire if you intend on selling only beer and wine to your customers. Sale of any other liquor or distilled spirits of any kind is prohibited. Normally, small restaurants acquire this license.
Brewpub Liquor License
If your restaurant is in charge of making its own beer and wine, a brewpub liquor license if what you need to arrange for. Some states will also require a separate license altogether for you to serve this beer or wine to your customers.
Restaurant Liquor License
This type of liquor license is also known as an “all-liquor license”. It is required if your restaurant intends on selling beer, wine, and liquor to customers in its own premises. Generally, a restaurant that derives its principal income from selling food items and only a certain part of that revenue from selling alcohol, requires this license.
Tavern Liquor License
This type of license needs to be acquired by a restaurant where half of the business is derived from selling alcohol and the other half from selling food items. However, this license is functional only in certain states. Depending on the state government’s regulations, it might not exist at all.
Liquor laws across Indian states
In our country, the legal drinking age for customers differs from state to state. Ranging from 25 years in New Delhi to 21 years in Meghalaya and just 18 years in Goa, the legal drinking age is barely uniform throughout India.
The consumption of alcohol is also banned altogether in the states of Bihar, Gujarat, and Nagaland as well as the union territory of Lakshadweep. In states such as Manipur, there is a partial ban on alcohol. Moreover, there are sometimes certain kinds of alcohol banned in a state. Each state witnesses its own dry days when the sale of alcohol is completely prohibited.
The cost of alcoholic drinks can also vary throughout different states. For instance, liquor is taxed at different rates in union territories from the way it is taxed in other states. This means that the overall price charged for the same alcoholic drink has a possibility of varying from state to state.
Cost incurred in acquiring a Liquor permit
Generally, you’d be required to pay a sum ranging anywhere from Rs. 5000 – Rs. 15,000, when you submit all the necessary documents along with your application. You will also need to pay an amount of Rs. 50,000 for every additional spirits brand that you wish to offer to your customers- whiskey, vodka, rum and so on.
The Delhi Court also states that there is no service tax of any kind to be levied on liquor license fees, in accordance with the GST Council’s decision. In Pondicherry, for instance, an FL 2 license costs Rs. 10,00,000 per year.
Each state in India has its own laws around alcohol and the requirements concerning liquor permits. For example, the sale and distribution of liquor in Delhi is governed by the Delhi Liquor License Rules, 1976 which mention all the different kinds of licenses one would need in order to be allowed to serve liquor in the city. It also states other rules to ensure quality liquor as well as the safety of the consumers. So, each state has its very own local authority that looks into the authorization of licenses. This authority is also known as an Alcoholic Beverage Control Agency (ABC Agency) whose job is to regulate all sales and distribution of liquor. It also might have a specific license quota dictating the possible number of restaurants and other places selling liquor within a certain city at a specific time. Sometimes, there might be no licenses available for sale at all, leading to problems in acquiring a liquor permit or a restaurant permit.
Renewal of Liquor Permit
Once a liquor permit is granted, it does not last forever. Normally, a restaurant owner needs to renew his restaurant’s liquor permit every year. This will be done by paying a renewal fee for the permit. It is advisable that one be familiar with all these costs in detail beforehand to run their restaurant well. This would safeguard them against meeting with unforeseen difficulty in managing finances.
There is also a chance of your permit being revoked if you’re found guilty of selling alcohol on dry days prescribed by the state, selling alcohol to underage customers or not following the guidelines that have been laid down by the local authorities.
Generally, you will be required to apply for a permit renewal at least thirty days before your permit expires. Along with this, you will have to show the following documents:
- Proof of the payment of application fee
- Liquor permit renewal fee fixed by the concerning state government
- Application fee challan of Rs.25
- Original license
- Ownership/ tenancy of the location
- License fee challan
- A copy of partnership deed or declaration that says that there have been no changes made in the ownership of the restaurant
- Income tax or sales clearance
The process of applying for a liquor permit for your restaurant is among the most demanding as well as the most time-consuming parts of opening up a business. But as cumbersome as it is, it is extremely rewarding too. Offering alcohol will increase your profits and turn your restaurant into a preferred place to hang out in.
All you need to do is make sure that you have your documents in check and other things in order prior to your application and you will be well on your way to being the owner of a dream restaurant everyone wants to dine in.
You might also want to read: