New GST Rates on Hotel Rooms 2026: From 12% to 5%

GST on hotel rooms (from 22 September 2025): Nil below ₹1,000, 5% without ITC for ₹1,000-₹7,500, and 18% with ITC above ₹7,500. Learn the mandatory 5% rule, ITC for businesses, the specified-premises rule for in-hotel restaurants, cancellations, and a worked calculation.
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June 15, 2026

The GST applicable to a hotel room in India depends on the actual room tariff charged per night. Following the GST 2.0 rationalisation implemented from 22 September 2025, hotel accommodation is broadly taxed at three rates—Nil, 5% and 18%. However, the availability of Input Tax Credit (ITC) varies across these categories, and there are separate provisions relating to restaurants operating within hotels and bundled accommodation packages that both hoteliers and business travellers should be aware of.

This guide explains the current GST rates applicable to hotel rooms, how the relevant tax slab is determined based on the actual room rate charged rather than the earlier declared tariff system, the applicable ITC provisions and the mandatory nature of the 5% rate, the rules governing restaurant services in specified hotel premises, the GST treatment of cancellations and package bookings, and a practical example illustrating the GST calculation process.


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

The GST rate applicable to a hotel room is determined by the value of supply, which means the actual room tariff charged per room per night.

Room tariff (per night)GST rateInput Tax Credit (ITC)Change from previous structure
Up to Rs. 1,000Nil (Exempt)Not applicableNo change; budget accommodation remains exempt from GST
Rs. 1,001 to Rs. 7,5005%Not availableReduced from 12% with ITC to 5% without ITC
Above Rs. 7,50018%Full ITC availableNo change

Important: The 5% GST rate is mandatory and does not permit ITC

For hotel rooms with a tariff of up to Rs. 7,500 per night, GST is levied at a mandatory rate of 5% without the benefit of Input Tax Credit. Hotels cannot choose to charge GST at 18% in order to claim ITC on such rooms.

This represents the most significant change from the earlier GST framework, under which hotel rooms priced up to Rs. 7,500 per night were generally taxed at 12% with the benefit of Input Tax Credit. Under the revised structure, the lower GST rate is compulsory, but the corresponding ITC benefit is no longer available.

How the threshold is determined: actual price, not ‘declared tariff’

Under the earlier GST framework, hotels often determined the applicable GST rate based on the declared tariff or published room rate. This approach has now been discontinued. The GST rate is currently determined on the basis of the value of supply, meaning the actual amount charged to the guest for the room per night. As a result, the applicable GST slab is linked to the invoiced room tariff rather than a published or notional rate.

Consequently, if a discount reduces the actual room tariff below a GST threshold, the lower GST rate will apply. For example, if a hotel room has a published tariff of Rs. 8,000 per night but is offered to a guest at Rs. 7,000 per night after discounts, GST will be charged at 5% because the actual amount charged is below Rs. 7,500 per night. This change has simplified GST compliance and eliminated many of the disputes that previously arose regarding the use of declared tariffs versus discounted room rates.

Hotel GST rate for cancellations

GST also applies to cancellation charges for hotel bookings. The rate charged on the cancellation fee corresponds to the GST rate applicable to the original room booking. For example, if a room priced at Rs. 5,000 is cancelled, the cancellation fee will attract GST at 5%, matching the rate for that booking.

Input tax credit on GST in hotel room

For hotels

The availability of Input Tax Credit (ITC) depends on the GST rate applicable to the room. For hotel rooms taxed at 18% (where the room tariff exceeds Rs. 7,500 per night), hotels are entitled to claim full ITC on eligible goods and services used in providing the accommodation.

However, for rooms taxed at 5% (with tariffs between Rs. 1,001 and Rs. 7,500 per night), ITC is not available. Hotels must therefore reverse the ITC attributable to such supplies, as these are treated similarly to exempt supplies for ITC purposes. Hotels offering rooms across both GST slabs are required to allocate and apportion ITC appropriately in accordance with Section 17 of the CGST Act and Rules 42 and 43 of the CGST Rules.

For businesses booking hotel accommodation

A GST-registered business may claim ITC on hotel accommodation expenses only when the room is subject to GST at 18%, which generally applies to rooms priced above Rs. 7,500 per night.

Where accommodation is taxed at the concessional 5% rate, ITC cannot be claimed by the recipient, regardless of whether the booking is made for official business travel or in the name of the company. Businesses that regularly recover GST on travel-related expenses should take these rules into account when planning travel budgets and selecting accommodation providers.

GST calculation on hotel room charges with example

Here’s an example: Riya books a hotel room originally priced at Rs. 8,000 per night, but after a discount, she pays Rs. 7,000 per night. She also uses additional services during her stay.

ComponentCost (Rs.)GST Rate (%)GST Amount (Rs.)
Room Tariff (2 nights)Rs. 14,0005%Rs. 700
Meals (Food & Beverages)Rs. 3,00012%Rs. 360
Spa ServiceRs. 2,00018%Rs. 360
  • Total Package Price: Rs. 19,000
  • Total GST: Rs. 1,420
  • Final Amount Payable: Rs. 20,420

So, the total amount Riya pays for her stay, including GST, is Rs. 20,420.

You can also use a GST calculator to determine the exact tax amount.


Add the GST amount to the room tariff to get the total payable.


Ensure that the correct rate is applied according to GST council guidelines.


Conclusion

The introduction of GST has streamlined the tax structure for hotel rooms, ensuring uniformity across the country. It simplifies compliance, offers the benefit of input tax credit, and reduces the overall tax burden. For hotel businesses seeking financial support to manage operations and growth, considering a business loan can be a strategic move. While exploring loan options, it is important to be aware of the applicable costs, and reviewing the current business loan interest rate can help in planning finances more effectively.

Here are some of the key advantages of our business loan that make it an ideal choice for your business expenses:

  • Rapid disbursement: Funds can be received in as little as 48 hours of approval, allowing businesses to respond promptly to opportunities and needs.
  • Simplified application process: Online applications streamline the process, reducing paperwork and saving time.
  • High loan amount: Businesses can borrow funds up to Rs. 80 lakh, depending on their needs and qualification.
  • No collateral required: You do not have to pledge any collateral to get our business loan, which is beneficial for small businesses without substantial assets.

These features and benefits of business loans make them a highly accessible and practical financial tool for businesses. To further plan your repayment journey, you can conveniently estimate monthly instalments using a business loan emi calculator based on your loan amount and tenure preferences.

Helpful resources and tips for business loan borrowers

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Frequently asked questions

What is the GST rate for hotel room rent?

The GST rate for hotel room rent is now based on the invoiced amount, not the declared tariff. The current structure is:

  • 0% GST for rooms priced below Rs. 1,000 per night.
  • 5% GST for rooms with an invoiced amount up to Rs. 7,500 per night. (Note: This rate is without Input Tax Credit)
  • 18% GST for rooms with an invoiced amount above Rs. 7,500 per night. (Eligible for Input Tax Credit)
Can we claim GST for a hotel stay?

Yes, businesses can claim Input Tax Credit (ITC) on hotel stays—but only for rooms taxed at 18%, i.e., rooms with an invoiced amount above Rs. 7,500 per night.

Rooms taxed at the reduced 5% GST rate (invoiced at Rs. 7,500 or less) are not eligible for ITC, as this concessional rate is provided without ITC benefit.

How much GST is on a 5-star hotel room?

The GST rate on a 5-star hotel room depends on the invoiced amount, not the hotel's star rating:

  • If the room rate is Rs. 7,500 or less, 5% GST applies (without ITC).
  • If the room rate is above Rs. 7,500, 18% GST applies (with ITC eligibility).

So, even in a 5-star hotel, if the invoiced room rate is within Rs. 7,500, the lower 5% GST rate is applicable.

How to calculate GST on hotel bills?

To calculate GST on your hotel bill:

  1. Identify the invoiced room rate (after any discounts).
  2. Apply the applicable GST rate:
    • 5% if the rate is up to Rs. 7,500
    • 18% if the rate is above Rs. 7,500

Example:
If your final invoiced room rate is Rs. 6,000,

  • GST = 5% of 6,000 = Rs. 300
  • Total Bill = Rs. 6,000 + Rs. 300 = Rs. 6,300
Is there GST on banquet halls in hotels?

Yes, banquet halls and related services in hotels attract 18% GST, regardless of the room tariff. This includes charges for:

  • Banquet hall rental
  • Catering services
  • Event packages

For standalone catering services (not bundled with accommodation), the GST rate is typically 5%, without ITC.

Is GST charged on declared tariff or discounted hotel price?

Under the current GST rules in India, GST is generally charged on the actual amount paid by the guest, including any discounted room rate, rather than the declared tariff. The applicable GST rate depends on the accommodation charges and the hotel's GST classification under the prevailing regulations.

What does specified premises mean under new hotel GST rules?

A "specified premises" refers to a hotel or accommodation establishment where the value of supply of accommodation exceeds the threshold notified under GST regulations. This classification affects the GST rate applicable to restaurant services provided within the premises and determines the availability of input tax credit in certain cases.

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