GST on Hotel Rooms 2025: New Rates and Impact on Hospitality Industry

From boutique hotels to bustling restaurant chains, the hospitality industry keeps India’s service economy running around the clock. The 56th GST Council meeting brought another set of changes, streamlining rate slabs and aiming to give both hoteliers and guests some much‑needed breathing space during the hectic wedding and festive season rush.

Key Takeaways

• GST on hotel rooms is reduced from 12% to 5% for tariffs up to ₹7,500 per day, effective 22nd September 2025.
• No ITC is allowed at 5%, so hotels with both budget and premium rooms must carefully manage their tax credits.
• Rooms priced above Rs.7,500 will continue to attract 18% GST, and ITC is fully available here.
• Restaurant and beverage services are taxed differently depending on whether the property is a “specified premises” or not:
  • 18% with ITC for specified premises
  • 5% without ITC for non-specified ones.

• “specified premises” are hotels where any room crossed Rs.7,500 per night in the previous financial year.

New GST Rates on Hotel Rooms in 2025

Simply put, GST on hotel stays depends on the declared room tariff per night. 

• If your room costs Rs.7,500 or less, you pay 5% GST. No ITC. 
• If it’s more than Rs.7,500, the GST rate jumps to 18%, and ITC can be claimed.

This updated structure, effective from 22nd September 2025, aims to make taxation a little more straightforward and keep mid-range accommodation options affordable, something that’s likely to appeal to both leisure and business travelers.

Hospitality and Tourism under the GST Regime

Before GST, the tax landscape for hotels and restaurants was messy. Hotels had to deal with VAT, service tax, and luxury tax, all of which differed from state to state. To put it simply, a hotel room above Rs.1,000 used to attract around 15% service tax, but that came with a 40% abatement; confusing and uneven across locations.

GST changed that, replacing the patchwork of taxes with a unified structure — mainly at 12% and 18%. The new revision from the 56th Council meeting now simplifies it further: rooms priced up to Rs.7,500 have moved from 12% to 5%, while premium properties remain taxed at 18%.

New GST Rates on Hotel Rooms in 2025

• “Specified premises” are hotels or accommodation properties where at least one room exceeded the Rs.7,500 tariff threshold in the last financial year. 
• Even if the hotel doesn’t meet that automatically, it can voluntarily declare itself “specified” through a formal filing process.

GST on Different Types of Accommodation

• Specified Premises: Hotels where at least one room exceeded Rs.7,500. Rooms priced up to Rs.7,500 are taxed at 5%, while those above Rs.7,500 attract 18%. All dining and food services here are taxed at 18% with ITC benefits.
• Non-Specified Premises: Hotels with room tariffs below the threshold. Both stays and food here are taxed at 5% without ITC.
• Residential Use: Renting for personal use stays GST-exempt unless the property is leased to a registered business.
• Religious and Charitable Use: Renting is exempt from GST unless it exceeds ₹1,000 per night for rooms, ₹10,000 per day for venues, or ₹10,000 per month for shops.

GST on Food and Additional Services

For food, banquets, and catering, GST depends on whether the services are provided at specified premises (where any room has a tariff above ₹7,500) or not. 

• At specified premises, these services are taxed at 18% with ITC. 
• At non-specified premises, the rate is 5% without ITC. 

Hotels need to track this carefully, especially if they operate both types of premises.

Impact of GST on Hotel Rooms and the Hospitality Industry

This GST rate cut may not sound dramatic at first, but shaving the rate down to 5% on mid-range rooms can make a visible difference. A stay capped at Rs.7,500 costs about Rs.525 less per night than before, roughly a 7% drop in total cost. It’s a welcome change for domestic travelers and corporate clients who often book in that price segment.

For hotels, this change may help increase bookings in Tier-2 and Tier-3 cities, where guests are more price‑conscious. Industry experts believe it sends a positive signal from the government, which could boost confidence among hotel owners to invest in upgrades, expand services, and maintain steadier pricing over the long term.

GST Implications for the Hospitality Industry

Here’s where it gets slightly tricky. Hotels can’t claim ITC on inputs used exclusively for rooms and services under the 5% category. So, if a hotel operates both types of rooms (below and above Rs.7,500), it must reverse ITC on common inputs proportionally based on turnover as per Rule 42 of the CGST Rules.

That means maintaining strong internal records, invoices, booking segregation, and ITC computations to stay compliant. Any slip-up could lead to credit reversal or tax mismatches later.

GST Calculation on Hotel Rooms with Example

Room with a tariff of Rs.6,000:

GST = 5% of Rs.6,000 = Rs.300

Total amount after GST = Rs.6,000 + Rs.300 = Rs.6,300

Room with a tariff of Rs.8,000:

GST = 18% of Rs.8,000 = Rs.1,440

Total amount after GST = Rs.8,000 + Rs.1,440 = Rs.9,440

Meal costing Rs.1,000 in specified premises:

GST = 18% of Rs.1,000 = Rs.180

Total amount after GST = Rs.1,000 + Rs.180 = Rs.1,180