GST on Hotel Rooms 2026– Latest Rates, Rules & ITC Guide

The introduction of GST has radically transformed the way hotels approach their tax systems, invoicing and accounting in India. As we know, the GST rates on hotel rooms in India were revised and the new rates came into effect from September 22, 2025. This rationalisation of taxes is expected to benefittravellers as well as the hospitality sector. But hotel operations are becoming increasingly complicated for 2026 as they are driven by dynamic pricing, OTAs, direct and corporate bookings and diversified revenue streams.

Manual computation of GST on all the above platforms often results in invoice errors, return discrepancies, OTA mismatches and compliance issues. It thus becomes vital to understand the Hotel GST Rate in India, GST slab, Input Tax Credit (ITC) and invoicing requirements for all hotels, resorts, homestays and serviced apartments.

Learn about the new GST rates, rules on cancellations and Input Tax Credit (ITC) details for hotels in this article. Also, know about room tariff slabs, GST calculation, invoicing requirements and best practices for maintaining GST-compliant hotel billing.

What is Hotel GST?

Hotel GST is the Goods and Services Tax that applies to services offered by hotels in India. The accommodation service usually comes under SAC Code 9963 whereas services like restaurant service, room service, banquet booking, spa facilities, laundry service, airport transfer and conference halls may come under different GST rates as per the provision of the law.

With an increase in bookings by OTAs, travel agents, corporates and website bookings, accurate GST billing has become one of the key requirements for hotels.

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 5%. 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).

Hotel GST Rate in India (2026)

GST on hotel accommodation primarily depends on the declared room tariff. Hotels are broadly classified into three GST slabs.

Rooms Below ₹1,000

Hotel rooms that have a declared tariff lower than ₹1,000 per day are GST-free. This usually comprises budget hotels, guest houses, lodges, dharamshala, cheap homestays, etc. The hotel does not levy GST on customers but does not have any rights to claim Input Tax Credit for business expenditure related to such rooms.

Tariff Between ₹1,001 and ₹7,500

Room rates that fall within ₹1,001 and ₹7,500 have 5% GST levied on them. It is the most widely used GST structure for hotels, including business hotels, boutique hotels, city hotels, resorts and premium homestays. Even though the low GST rate has brought down accommodation prices for guests, those who charge 5% GST from their clients cannot benefit from ITC.

Rooms costing more than ₹7,500

High-end hotels, upscale resorts, business suites, villa accommodations and five-star hotels with room rates higher than ₹7,500 fall under the 18% GST rate.This GST rate is different from the 5% GST rate as those hotels charging 18% GST can avail themselves of Input Tax Credit.

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, spaor 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 5% GST, the cancellation fee will also be taxed at 5%. 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: 5% or 18%, depending on the applicable room tariff slab
• Food and beverages: 5% or 18%
• Spa services: 18%
• Other amenities: 5%, 12%, 18%, or 28%

GST on Other Hotel Services

GST in hotels is not just restricted to room accommodation. Typically, most hotel businesses earn their income through a range of services, each of which attracts a separate rate of GST according to the GST regulations.

Hotel management should ensure that their billing system is configured such that the right GST is applied according to the kind of services that are being billed. This will reduce manual errors and make invoices accurate.

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.

Input Tax Credit (ITC) is one of the most crucial elements of GST implementation in hotels. It enables hotels to obtain credit against the GST charged on certain business purchases and operations. However, the eligibility for claiming the input tax credit depends upon the GST slab applicable to hotel rooms.

The hotels that levy 18 percent GST for accommodations are allowed to take input tax credit for all their business-related costs incurred for running the hotel operations. The eligible business expenses include furniture and fittings, kitchen equipment, air-conditioning system, cleaning materials, maintenance, security, consultancy services, software, property management system (PMS), office equipment, utilities and annual maintenance contract.

Documentation is very important in taking input tax credits.

Conditions to Claim ITC

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

• GST Registration: First, the hotel must beregistered under GST.
• Valid Tax Invoice: A valid tax invoice should include the invoice number, date, supplier and recipient details, GSTIN, description, tax rate and total tax.
• Business Use: Goods and services must be used for hotel operations.
• Timely Claim: ITC must be claimed within the prescribed time limit under the GST law.
• Invoice Matching: Please note that ITC can be claimed only if the relevant invoice is reflected in the GST records and other prescribed conditions are fulfilled.
• 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.

GST Components in Hotel Bills: CGST, SGST & IGST

Each GST compliant hotel bill includes one or more components of GST depending on where the supply happens.

In case of accommodation within the same state, GST is usually split into CGST (central GST) and SGST (state GST). In case of inter-state supplies, IGST (integrated GST) becomes applicable.

The latest hotel billing system automatically determines the GST component structure based on GST setup and place of supply.

GST Invoice Format for Hotels

GST invoice plays an important role in ensuring precise accounting, filing of GST returns and reconciling them. It is important to ensure that every hotel invoice contains all the information necessary in accordance with GST laws.

The standard GST invoice of hotels must contain:

• Name of Hotel and GSTIN
• Invoice Number & Date
• Name of Guest & GSTIN (if any)
• Room Number
• Check In and Check Out Date
• SAC Code
• Room Tariff
• Taxable Value
• GST Rate
• Breakup of CGST/SGST/IGST
• Place of Supply
• Value of Invoice
• Digitally or Authenticated Signature

Hotels using automated Property Management Systems (PMS) can generate GST-compliant invoices instantly. It reduces manual intervention while improving billing accuracy and audit readiness.

GST Billing Errors Hotels Must Avoid

The manual process of billing and inconsistent pricing practices can often be a source of GST mistakes and reconciliation problems. These are some of the most common GST billing errors that hotels must avoid:

• Incorrect Classification of Room Tariffs: Incorrect classification of room tariffs can cause wrong application of the GST slab, leading to wrong taxation.
• Incorrect GST Rate: Billing with 18% instead of 5% (or vice versa) will be an error and cause wrong invoices.
• No GST Information on Invoices: Invoices not having the GSTIN, invoice number, SAC code, or tax breakup might be an error.
• Mismatches in OTA Pricing: Different room tariffs for different OTAs and channels of direct booking can cause GST errors.
• Errors Due to Manual Billing: Manual calculations increase the risk of incorrect GST amounts, duplicate invoices and billing inaccuracies, especially during peak occupancy.
• No Proper Supplier Invoices : Proper documentation of the supplier invoices is required to avoid mistakes in claiming ITC in GST audits.Use of automated hotel billing software is the solution to all these billing mistakes.

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

The latest GST rates on hotel roomswill benefit hoteliers by simplifying taxation, improving cash flows and boosting occupancy.Guests will also benefit from the revised GST rates.

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 Councilwill 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.

How Booking Master Simplifies Hotel GST Compliance

GST management in hotels becomes complicated when the hotel receives reservations through online travel agencies (OTAs), direct website, travel agencies, corporates and walk-ins. Booking Master makes GST management easy through the integration of reservation, billing, accounting and distribution modules in one cloud solution.

• Automatic Calculation of GST and Billing:Booking Master automatically calculates GST as per the applicable tariff and generates the GST-compliant invoice with correct tax break-ups.
• Property Management System (PMS):The integrated Property Management System (PMS) links reservations, front office, housekeeping, billing and accounting processes to each other. Every reservation is managed in all these modules and hence GST calculation and billing are done automatically
• Commission Free Booking Engine with GST Invoice Generation :The built-in Booking Engine facilitates the generation of commission-free booking without any problem, along with the creation of GST-compliant invoices.
• Revenue Management without Any GST Mistakes :With the help of the Revenue Management module, hotels can implement dynamic pricing without making any mistakes related to the classification of room tariffs as per GST norms.
• Accounting Automation and GST Reconciliation :Booking Master ensures that all invoices, payments, refunds, tax information and statements for reconciliation are sorted out on a timely basis. It helps hotels file GST, track ITCs and conduct audits.
• Live Dashboard for GST and Revenue Performance:There is an interactive dashboard available to get insights related to room revenue, GST collection, liabilities, occupancy performance and billing performance.

Conclusion

The revised GST rates for hotel rooms are going to make stays more affordable, simplify taxation for hotels and ensure transparent billing. These changes would boost domestic tourism, support the hospitality sector and strengthen India’s position as a competitive and traveller-friendly destination.

With Booking Master, the entire process becomes easier through automated GST calculation, automated generation of invoices as per GST rules, integration of OTA bookings and proper tax compliance. With an integrated property management system, billing, account management, channel management and revenue management, hotels become GST compliant.