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

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.

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.

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.

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.

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.