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. |