Updated GST Rates for Hotel Accommodation and Hospitality Services in India
The 56th GST Council meeting introduced revised tax rates for hotel accommodations in India, effective September 22, 2025. Rooms with tariffs up to ₹7,500 per night now attract a 5% GST without Input Tax Credit (ITC), while those above ₹7,500 continue with an 18% GST with ITC. These changes aim to simplify taxation and boost affordability for mid-range lodgings, though hotels must carefully manage ITC for compliance, especially if operating both specified and non-specified premises.
The hospitality sector, encompassing everything from small hotels to extensive restaurant chains, plays a vital role in India's service economy. Recent adjustments by the 56th GST Council meeting have refined tax rates, aiming to offer relief to both hoteliers and customers, particularly during peak seasons.
Key Updates on Hotel Room GST:
- For hotel rooms costing up to ₹7,500 daily, the Goods and Services Tax (GST) has been lowered from 12% to 5%, effective September 22, 2025.
- Input Tax Credit (ITC) cannot be claimed for this 5% rate. Hotels managing both affordable and premium accommodations need to meticulously handle their tax credits.
- Rooms with tariffs exceeding ₹7,500 will continue to incur an 18% GST, for which full ITC is available.
- Taxation for restaurant and beverage services differs based on whether the establishment qualifies as "specified premises":
- 18% GST with ITC is applicable for specified premises.
- 5% GST without ITC applies to non-specified premises.
- "Specified premises" are defined as hotels where any room's tariff surpassed ₹7,500 per night in the preceding financial year.
Revised GST Rates for Hotel Accommodation in 2025
The GST levied on hotel stays is determined by the declared nightly room tariff.
- Rooms priced at ₹7,500 or less are subject to a 5% GST, with no ITC allowed.
- If the room tariff exceeds ₹7,500, an 18% GST rate applies, and ITC can be claimed.
This revised framework, implemented on September 22, 2025, seeks to simplify taxation and maintain the affordability of mid-range lodging options, appealing to both business and leisure travelers.
Hospitality and Tourism Under the GST Framework
Prior to the Goods and Services Tax (GST) implementation, the tax environment for hotels and restaurants was complex. Hotels faced various taxes such as VAT, service tax, and luxury tax, which varied by state. For instance, a hotel room priced over ₹1,000 typically attracted about 15% service tax, but with a confusing 40% abatement, leading to inconsistencies across different locations.
GST streamlined this by replacing multiple taxes with a uniform structure, primarily at 12% and 18%. The latest revision from the 56th Council meeting further simplifies this: rooms up to ₹7,500 have shifted from a 12% to a 5% rate, while luxury properties continue at 18%.
Current GST Rates on Hotel Services in 2025
| Description of Service | GST Rate | ITC Availability |
|---|---|---|
| Hotel accommodation with tariff |
GST Implications for Hospitality Businesses
This area presents a slight complexity. Hotels cannot claim Input Tax Credit (ITC) on inputs exclusively used for rooms and services taxed at the 5% rate. Therefore, if a hotel offers both room categories (below and above ₹7,500), it is required to reverse ITC on shared inputs proportionally based on turnover, as per Rule 42 of the CGST Rules.
This necessitates robust internal record-keeping, meticulous invoice management, clear segregation of bookings, and precise ITC calculations to ensure compliance. Any errors could lead to credit reversals or discrepancies in tax reporting later on.
Illustrative GST Calculations for Hotel Services
Scenario 1: Room with a tariff of ₹6,000 GST = 5% of ₹6,000 = ₹300 Total amount = ₹6,000 + ₹300 = ₹6,300
Scenario 2: Room with a tariff of ₹8,000 GST = 18% of ₹8,000 = ₹1,440 Total amount = ₹8,000 + ₹1,440 = ₹9,440
Scenario 3: Meal costing ₹1,000 in specified premises GST = 18% of ₹1,000 = ₹180 Total amount = ₹1,000 + ₹180 = ₹1,180