New GST Rates on Hotel Rooms 2025: From 12% to 5%

The GST on hotel rooms has been reformed effective Sept 22, 2025. Learn about the new rates, tax changes on tariffs, cancellations, and ITC rules for hotels. Find out how this GST cut benefits travellers and the hospitality sector.
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3 min
05 September 2025

The GST has greatly simplified India’s tax system for the hospitality industry by replacing a complicated array of taxes with a single, unified levy. The latest GST reforms, which came into effect on September 22, 2025, have further streamlined the structure, providing significant benefits to both travelers and the hotel sector.

Pre-GST rate on hotel room

Prior to the implementation of GST, hotel room tariffs were burdened with a complicated mix of taxes—such as Service Tax, Value Added Tax (VAT), and Luxury Tax—which differed across states. GST unified these into a single tax, introducing greater simplicity and transparency.

Category

Pre-GST

Post-GST

Room Tariff

Rs. 10,000

Rs. 10,000

Service Tax (10%)

Rs. 1,000

N/A

Luxury Tax (15%)

Rs. 1,500

N/A

GST (18%)

N/A

Rs. 1,800

Total Tax

Rs. 2,500

Rs. 1,800

Total Payable Amount

Rs. 12,500

Rs. 11,800


As seen in this example, the total tax burden decreases under the GST regime, leading to a lower total payable amount for the same room tariff.

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

Tariff Range (Rs.)

Old GST Rate

New GST Rate

Key Change

Below Rs. 1,000

0%

0%

Tax exemption for budget stays remains unchanged.

Rs. 1,000 to Rs. 7,500

12%

5%

Substantial reduction from 12% to 5%, enhancing affordability for a large segment of travelers. (Note: 5% rate applies without Input Tax Credit)

Above Rs. 7,500

18%

18%

No change in rate for luxury and premium accommodations.
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Declared tariff or invoice cost for hotel room GST rate

The applicable GST rate is based on the final invoiced amount rather than the declared room tariff. If a discount reduces the room price, it may fall into a lower GST slab, resulting in savings for the customer. For instance, if a room originally priced at Rs. 8,000 is discounted to Rs. 7,000, it will be taxed at the reduced 5% rate instead of the higher 18%.

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

Under the revised rules, hotels can continue to claim Input Tax Credit (ITC) on most goods and services used in their operations, including expenses related to room maintenance and laundry. However, for rooms taxed under the new 5% GST slab, ITC on inputs is not permitted. This is an important change that hotel businesses need to be aware of.

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.

Component

Cost (Rs.)

GST Rate (%)

GST Amount (Rs.)

Room Tariff (2 nights)

Rs. 14,000

5%

Rs. 700

Meals (Food & Beverages)

Rs. 3,000

12%

Rs. 360

Spa Service

Rs. 2,000

18%

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.

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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.

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