How to Start a Catering Business
The growth of corporate India has led to a rise in demand for catering business. Catering businesses today service a number of IT Parks, Factories, Malls, Schools, Colleges, Hospitals and provide employment to lakhs of workers. With the Indian economy growing at over 7% each year and many more IT parks, malls and factories being built, the demand for catering services is set to grow in the coming years. In this article, we look at the procedure for starting a catering business in India.
Setting up the Entity
The first step in starting any business is to decide on an entity type. Since, the operations of a catering business is covered under the FSSAI Act – having stringent penalties for offenses, it is recommended that a catering business be setup as a private limited company or a limited liability partnership (LLP) or one person company. In addition, the above entities are transferable; so, the licenses or business as a whole can be easily transferred to another person for consideration. Since the above entities offer limited liability protection and are transferable, it makes them ideal for a catering business.
The catering business can be setup as a Limited Liability Partnership (LLP) if the annual sales turnover would be less than Rs.40 lakhs and capital would be less than Rs.25 lakhs – as audit would be exempted. If the LLP would have a sales turnover in excess of Rs.40 lakhs of capital contribution in excess of Rs.25 lakhs, then it is best to start a private limited company.
It is better not to start a One Person Company as it would mandatorily have to be converted to a private limited company when the annual sales turnover crosses Rs.2 crores.
Obtaining FSSAI Food Business License
A Food Business Operator License is a license granted by the Food Safety and Standards Authority of India that allows the entity to carry on activities related to any stage of manufacturing, processing, packaging, storage, transportation, distribution of food, import and includes food services, catering services, sale of food or food ingredients. FSSAI Food Business License is required for a catering business.
To obtain FSSAI Food Business License, the incorporation documents of the business must be submitted along with proof of address, identity / resident proof of the promoters and details as per the application format. The FSSAI Food Business License for catering businesses is granted by the State Government. Hence, the application must be submitted to the local FSSAI office.
The catering business may be covered under the service tax and sales tax based on the annual sales turnover and state of operation. The services of a catering business will be covered under service tax, if annual services provided by the catering business exceeds Rs.10 lakhs. When the catering business exceeds a turnover of Rs.9 lakhs, service tax registration must be obtained and service tax collection – payment should start once the turnover exceeds Rs.10 lakhs.
Based on the State’s VAT Regulation, a VAT Registration may also be applicable based on turnover for the catering business. Since, VAT regulations differ from state to state, it is best to consult the local VAT authorities to determine VAT applicability.
To start or manage a business in India, visit www.complianceindia.co.in.