GST rate on Hospitality Industry/ Hotel Rooms in India

GST rate on Hospitality Industry/ Hotel Rooms in India

The hospitality & tourism industry in India is expected to rise from INR 15.24 lakh crore (US$ 234.03 billion) in 2017 to INR 32.05 lakh crore (US$ 492.21 billion) by 2028. Implementation of GST has helped the sector by reducing costs for customers, harmonising taxes, and lowering transaction costs for businesses however it also presents compliance challenges.

Hospitality industry still faces challenges with compliance technology, parity with global tourism hubs, and adapting to frequent rate revisions. However, in the long run, GST is expected to enhance India’s hospitality competitiveness by offering customers a more transparent and efficient tax structure.

GST has streamlined the taxation system for the hospitality sector, reduced cascading taxes, and improved ITC availability.

56th GST Council Meeting (Sept 2025) announced that GST on hotel accommodation services up to INR 7,500 per unit per day will be reduced from 12% to 5%, effective 22nd September 2025. While budget and mid-segment hotels gain under the revised 5% GST slab (effective 22nd Sept 2025), luxury accommodations continue with 18%. i.e tariffs above INR 7,500/night remains at 18%. Notification from CBIC is awaited before PMS/OTA updates are fully implemented.

Hospitality & Tourism Under Pre-GST

Before GST, hotels and restaurants were subject to multiple taxes — VAT, Luxury Tax, and Service Tax.

Hotels with tariffs above INR 1,000/night attracted Service Tax @15% (effective 9% after 40% abatement). VAT ranged 12–14.5%, with luxury tax on top. Restaurants enjoyed 60% abatement, making effective service tax ~6% on F&B, in addition to VAT. Bundled services (seminars, marriages, events) had 30% abatement.

GST simplified the structure by Applying standardised rates based on room tariff. Allowing Input Tax Credit (ITC) across goods & services. Taxing bundled services (e.g., complimentary breakfast) under a single rate.

Current GST Slabs (till 21st Sept 2025)

Room Tariff (per night)	GST Rate
Less than INR 1,000	Nil
INR 1,000 – INR 7,500	12%
INR 7,501 and above	18%

Hotels with tariff above INR 7,500/day are “Specified Premises”. Restaurant services in such hotels attract 18% GST with ITC.

Historical GST Rates (till Sept 2019)

Tariff per Night	GST Rate
< INR 1,000 (religious/charitable premises)	Nil
INR 1,000 – INR 2,499.99	12%
INR 2,500 – INR 7,499.99	18%
≥ INR 7,500	28%

Pre-GST bills had multiple taxes (Service Tax, VAT, Luxury Tax). GST unified them. Drawback is Cascading taxes increased end costs, and input tax credit was unavailable across state vs. central levies.

GST Rate Revision on Hotel Room Tariffs Effective 22nd Sept 2025

GST on Hotel Rooms 2026: New Rates & Impact on Hospitality Industry: 

This article reviews the impact of GST on the hospitality industry, including the latest updates from the 56th GST Council meeting. As per the recent announcement by the GST Council, effective 22nd September 2025, GST rates applicable on hotel room tariffs will change. These revisions will impact bookings created in Orgination / company GST tax Software / accounting Software tax  reservations, and other booking sources. New GST rates on hotel rooms effective 22nd September 2025 along with examples. It reinforces the same point as the GST Council press release you mentioned earlier:

From boutique hotels to large hospitality chains, the Indian hotel industry plays a major role in the service economy. The 56th GST Council Meeting introduced important changes to GST on hotel accommodation, effective 22nd September 2025, impacting pricing, ITC eligibility, and restaurant taxation within hotels. Let’s break it down clearly. Key Takeaways of 56th GST Council Meeting

GST reduced from 12% to 5% for room tariffs up to ₹7,500 per day, No ITC allowed at 5% rate, Rooms above ₹7,500 continue at 18% with ITC, Restaurant services taxed differently based on “specified premises” classification, ITC reversal required for mixed-category hotels under Rule 42 of CGST Rules

Revised GST Slabs for Room Tariffs- New Rule (effective 22nd Sept 2025) :

Please review the details carefully to ensure compliance and avoid billing discrepancies.

• Room tariff up to INR 7,500/night : GST reduced from 12% to 5%
• Room tariff Above INR 7,500/night : GST remains unchanged at 18%

Applicability of GST Based on Booking Dates

Booking Creation Date	Check-in Date	Room Tariff	GST Rate Applicable
Before 22nd Sept 2025 (or before final notice)	Any date	Up to INR 7,500/night	12%
Before 22nd Sept 2025 (or before final notice)	Any date	Above INR 7,500/night	18%
On/after 22nd Sept 2025	On/after 22nd Sept 2025	Up to INR 7,500/night	5%
On/after 22nd Sept 2025	On/after 22nd Sept 2025	Above INR 7,500/night	18%

Any modification or re-saving of an existing booking (created before 22nd September) with check-in after 22nd September will trigger recalculation as per the new GST slabs.  Example: If occupancy or tariff is updated, GST will be re-applied at 5% or 18% as per the revised rules.

New GST Rates on Hotel Rooms (Effective 22 Sept 2025)

Description	GST Rate	ITC Availability
Room tariff ≤ INR 7,500 per day	5%	Not allowed
Room tariff > INR 7,500 per day	18%	Allowed
Restaurant services – Non-specified premises	5%	Not allowed
Restaurant services – Specified premises	18%	Allowed

“Specified Premises” means A hotel is considered a specified premises if At least one room exceeded INR 7,500 per night in the previous financial year, OR The hotel voluntarily opts for specified status via declaration. Because restaurant and catering GST rates depend on this classification.

GST on Different Types of Accommodation

Specified Premises

• Rooms ≤ INR 7,500 → 5% (No ITC)
• Rooms > INR 7,500 → 18% (With ITC)
• Food & beverage services → 18% (With ITC)

Non-Specified Premises

• Rooms → 5% (No ITC)
• Restaurant services → 5% (No ITC)

Residential Use

• Renting for personal use → Generally GST exempt
• Renting to registered business → GST applicable

Religious & Charitable Use : Exempt unless exceeding:

• INR 1,000 per night (rooms)
• INR 10,000 per day (venue)
• INR 10,000 per month (shops)

GST on Food, Banquets & Additional Services, GST depends on whether services are provided in specified premises:

Type	GST	ITC
Food at specified premises	18%	Allowed
Food at non-specified premises	5%	Not allowed

Hotels operating mixed models must maintain careful segregation of accounts.

Impact on Revision on Hotel Room Tariffs Effective 22nd Sept 2025

• Company shall continue to display their own configured tax rates until they receive and implement the official government notification. GST rate after 22nd September, the new GST slabs will apply automatically. GST impact will follow the same date-based logic. Any change after 22nd September for check-ins post 22nd September will trigger recalculation of GST.
• Final GST Dept change will be immediately come after the government notification. Taxpayers must review all upcoming reservations, understand the new GST applicability, and verify GST tax Software / accounting Software tax configurations to ensure a smooth transition.

Impact Examples – Pre vs Post GST

Particulars	Before GST	After GST
Room tariff INR 2,700 + taxes	INR 3,213	INR 3,024
Room + Breakfast (INR 2,200 + INR 500)	INR 3,191	INR 3,024
Room INR 8,000 + Breakfast INR 2,500	INR 12,383	INR 12,390

Mid-range hotels benefited & Luxury hotels saw negligible change.

Lower tariffs (budget/mid-segment hotels) benefit significantly. Luxury accommodations (above INR 7,500/night) see no change. Discounts bringing tariffs below INR 7,500/night will qualify for the reduced 5% GST. Complimentary services bundled with rooms (like breakfast, Wi-Fi, etc.) are included in tariff for GST computation.

Pros of GST for Hospitality – Impact on Hospitality Industry

Benefit for Travelers : A INR 7,500 room earlier at 12% GST cost INR 8,400. Now at 5%, it costs INR 7,875. Savings = INR 525 per night. This is a noticeable price drop for Domestic tourists, Corporate bookings, Tier-2 & Tier-3 city hotels. Impact on Hotels : While lower GST improves demand, the lack of ITC at 5% means Higher input cost burden, Need for ITC reversal under Rule 42, More accounting complexity. Hotels with both 5% and 18% categories must proportionately reverse ITC on common inputs.  GST Calculation Examples

Room Tariff ₹6,000

• GST @5% = INR 300
  Total = INR 6,300

Room Tariff ₹8,000

• GST @18% = INR 1,440
  Total = INR 9,440

Meal ₹1,000 (Specified Premises)

• GST @18% = INR 180
  Total = INR 1,180

GST Compliance Challenges for Hotels due to ITC reversal under Rule 42, Segregation of turnover, Proper classification of premises, Taxpayer has to maintaining audit-ready documentation and Accurate invoicing (room vs bundled package). Hotels offering combo packages (Room + Meal) must determine whether it qualifies as a composite supply or separate supply.

• Administrative Ease: Multiple taxes abolished → simpler compliance.
• Clarity for Consumers: One unified tax → transparent billing.
• Faster Check-outs: Reduced billing complexity.
• Full Input Tax Credit: Easier claim of ITC on raw materials, supplies, and services.

Cons of GST for Hospitality

• Increased Technological Burden: Businesses need digital systems for compliance and reconciliations.
• Higher Costs in Some States: Minimal benefit where pre-GST taxes were already close to 18–19%.
• Global Competitiveness: India’s GST rates (18%) remain higher than Asian peers like Singapore (7%) or Japan (8%), impacting backpacker/tourist inflow.

Action Required from Hotels, restaurant, spa, banquet or these Services prover Organization

• All the Hotel, restaurant, spa, banquet or these Services prover Organization must verify and update GST configurations manually. Organization invoices may not immediately reflect revised GST rates. Company account dept must edits to bookings after 22nd September will trigger revised GST rates. Update your Accounts/Finance team about transitional billing provisions.
• We needed Cross-check communication for reconciliations whether origination systems adopt new GST Rate slabs.

Conclusion – In Summary

GST on hotel rooms is charged at 5% for tariffs up to INR 7,500 per night (without ITC) and 18% for rooms above INR 7,500, where ITC is allowed. The rate for rooms up to INR 7,500 was reduced from 12% to 5% effective 22 September 2025. Hotel packages (room + meals) are taxed based on their structure, and if properly bundled, composite supply rules apply. GST on restaurant services within hotels is 5% without ITC in non-specified premises and 18% with ITC in specified premises. Business travelers can claim ITC only when GST is charged at 18% and subject to fulfillment of conditions under Section 16 of the CGST Act.