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