GST on Hotel Rooms 2025 – Latest Rates, Rules & ITC Guide

The GST on hotel rooms in India has been revised and the new rates would be effective from September 22, 2025. This rationalisation of taxes is expected to benefit travellers as well as the hospitality sector. Learn about the new GST rates, rules on cancellations and Input Tax Credit (ITC) details for hotels in this article.

New GST Rate on Hotel Rooms (Effective September 22, 2025)

The GST applicable on hotel rooms depends upon the room tariff. For rooms costing up to ₹7,500 per night, the GST is 12%. And for rooms that are priced above ₹7,500 per night, it is 18%.

Comparison of Old vs. New GST Rates on Hotel Room Tariffs

Example:

• Room priced at ₹6,000/night: GST drops from 12% (₹720) to 5% (₹300).
• Room priced at ₹10,000/night: GST remains 18% (₹1,800).

How GST on Hotel Rooms is Calculated? Declared Tariff vs. Invoice Amount

The GST amount which a guest pays for a hotel room is generally based on the room rate that is declared by the hotel. Basically, it is the standard listed price before any discounts.

So, even if the guest gets a promotional discount or special deal, the GST may still be charged on the original tariff (particularly if it falls into a higher tax slab).

Also, extra services like meals, spa or beverages are taxed separately. This method promotes transparency and ensures that there is uniform compliance across hotels.

GST on Hotel Cancellations

When a guest cancels a hotel booking, the GST that is applicable on the cancellation charges is the same rate that was applied for that room tariff.

For instance, if the room attracts 12% GST, the cancellation fee will also be taxed at 12% only. This ensures that there is compliance and it helps in maintaining a steady revenue flow for the government from the tourism sector.

GST on Bundled Packages

Hotel packages often include room stay, meals, spa treatments and other amenities. However, it’s important to note that each component is taxed at its own GST rate:

• Room tariffs: 12%–18% depending on the price
• Food and beverages: 5% or 18%
• Spa services: 18%
• Other amenities: 5%, 12%, 18%, or 28%

Input Tax Credit (ITC) for hotels

Hotels can claim ITC on GST paid for goods and services that are used in their operations. This includes taxes paid on:

• Construction materials for building or renovation.
• Furnishings and equipment.
• Food and beverages served to guests.
• Utilities such as electricity, water and gas.
• Salaries of employees involved in hotel operations.

Conditions to Claim ITC

In order to claim Input Tax Credit, hotels must ensure that the following conditions are met:

• GST Registration:First, the hotel must be registered under GST.
• Valid Tax Invoice:And invoice should include elements like includes number, date, supplier and recipient details, GSTIN, description, tax rate and total tax.
• Business Use: It applies for Goods/services that are used for hotel operations.
• Timely Claim: ITC must be claimed from the end of hotel within the prescribed period.
• Invoice Matching: Please note that ITC can be claimed only if output tax liability is declared.
• No Ineligibility:Hotels cannot claim ITC on exempt or ineligible items.
• Reverse Charge:ITC is allowed if GST is paid under reverse charge.
• Composite Supply:ITC is claimable on taxable portions of bundled supplies.
• Exemptions & Restrictions: Note that some goods/services may have specific restrictions.

Benefits of New GST Rates: For Hoteliers, Travellers and Economy

The latest GST rates on hotel rooms will benefit hoteliers by simplifying taxation, improving cash flows and boosting occupancy. Guests will be greatly benefited as well.

Boost to Domestic Tourism

• Lower GST on rooms up to ₹7,500 (from 12% to 5%) makes stays way more affordable.
• It encourages domestic travel, weekend getaways and festive bookings.
• Further, it stimulates leisure trips and business mobility across cities.

Support for Budget and Mid-Scale Hotels

• GST cuts will reduce operational tax burden for mid-market and budget hotels.
• It increases occupancy and revenue in Tier 2 and Tier 3 cities.
• And it strengthens sustainability and competitiveness of smaller hotels.

Consumer Benefits

• When room rates are lower it increases disposable income for travellers.
• Lowers GST rates also enable longer stays, repeat visits and improved travel experience.
• It makes quality hospitality more accessible to a wider audience.

Industry Growth and Investment

• GST cuts boost investor confidence in mid-scale hotels and homestays.
• It encourages operational efficiency, pricing rationalisation and service improvements.
• Further, it stimulates innovation and expansion in hotel and homestay offerings.

Simplification and Clarity

• Rationalised GST slabs reduce tax complexity as well as disputes.
• It improves compliance and transparency for startups and F&B businesses.
• It also simplifies accounting and operational processes across the hospitality sector.

Long-Term Strategic Benefits

• The revised rates align hotel taxation with broader economic goals and Vision 2047.
• It creates multiplier effects across housing, real estate and tourism ecosystems.
• It promotes inclusive development and sustainable growth in hospitality and allied sectors.

So, the latest decisions taken by the 56th GST Council will help hoteliers as well as travellers by reducing costs and attract more bookings, ensuring a long-term positive impact on the hospitality and tourism sector.