Good news! Hotel rooms in India costing less than ₹7,500 will now have a GST rate of only 5%. This should make travel more affordable for everyone!

New Delhi, September 4, 2025 – In a move set to make travel more affordable for millions, the 56th GST Council has announced a significant reduction in the Goods and Services Tax (GST) on hotel rooms with tariffs up to ₹7,500 per day. Effective from September 22, 2025, the new GST rate of 5% without Input Tax Credit (ITC) replaces the previous 12% rate with ITC, promising relief for budget and mid-market travelers across India.

This decision, hailed as a “Diwali gift” by Finance Minister Nirmala Sitharaman, aims to bolster domestic tourism and make quality hospitality accessible to India’s growing middle class. Industry leaders, including Mr.Shyam Sahu , MD at Konark Hotels , have welcomed the move, stating, “This rationalization of tax rates will enhance affordability, driving demand for budget and mid-segment hotels, which form the backbone of India’s hospitality growth.”

The revised tax structure is expected to lower accommodation costs at popular destinations like Goa, Indore,Jaipur, and Ujjain, especially ahead of the festive season. K Syama Raju, President of the Federation of Hotel & Restaurant Associations of India (FHRAI), noted, “This reform will not only boost occupancy but also encourage spending across the hospitality value chain, benefiting local economies.”

However, the absence of ITC under the new 5% slab may pose challenges for hoteliers, as they can no longer offset taxes paid on inputs. Despite this, the industry remains optimistic, with experts predicting a surge in bookings for leisure and pilgrimage travel. The tax cut aligns with India’s broader goal of becoming a global tourism hotspot, with the hospitality sector projected to reach a market size of USD 475.37 billion by 2029.

Travelers are advised to book early to secure GST-compliant invoices and take advantage of the reduced rates. For more details on the new GST structure, visit the official GST Council website or consult with registered hospitality providers.