"It is a win for the local community that is concerned with the over-supply of cheap, bulk alcohol in the town."
The organisation said it showed the new laws around alcohol, which came into force last year, were starting to work.
Committees now must consider whether there will be an increase in alcohol-related harm or negative impacts on the community.
In the committee's ruling notes, commissioner Jane Terpstra said they declined the application because they believed the object of the new law would be breached and the area would be negatively affected by the opening of the store.
She said there was no reason to doubt the suitability of Mr Sandhu but they were concerned he did not show any awareness of the wider effects of a new store in a community with an already high density of liquor outlets.
"He also did not show any insight into the direct or indirect harm caused by excessive consumption of alcohol in this community."
At a hearing in May, Mr Sandhu said he wanted to open the store in Masterton because it was a growing and prosperous farming centre.
He has been involved in the alcohol industry for three years, has a current manager's certificate and holds a Hospitality and Management Diploma.
Dr Palmer said Masterton was already "saturated" with one licence per 709 people, above the national average.
He was also concerned the store was in the most socially deprived area of Masterton and people there were at a much higher risk of alcohol related harm.
Police Sergeant Kevin Basher said many alcohol-related calls to police came from this area.
He said preloading was a problem and people were more likely to drink in Rogers Lane because it is not part of the liquor ban area.
Surrounding businesses objected because of security fears.
Council licensing inspector Kaine Jaquiery recommended the licence be denied because if granted, it was highly likely to cause further alcohol-related harm.
He noted there were already 29 places with off-licences and 18 of them were within the urban area - six bottle stores, four supermarkets, three taverns, two grocery stores, two clubs and one hotel.
