The Goods and Services Tax (GST) on hotel rooms has been revised with effect from September 22, 2025. This update is designed to make mid-range hotels more affordable, simplify compliance for hoteliers, and bring more transparency for travelers. In this article, we’ll break down the latest GST slabs for hotel tariffs, rules for cancellations, input tax credit (ITC) benefits, and a real-life calculation example.
Why the New GST Reform Matters
Before GST came into play, hotel stays were taxed under different heads such as Service Tax, VAT, and Luxury Tax. These varied from state to state, creating confusion and uneven pricing. With GST, all these taxes were merged into a single system. The new reforms announced in September 2025 go a step further by reducing rates for certain hotel categories, especially budget-friendly and mid-range rooms.
Updated GST Rates for Hotels (2025)
Here’s a quick look at the revised GST rates:
| Room Tariff (₹) | Previous GST | New GST (2025) | Key Impact |
|---|---|---|---|
| Below ₹1,000 | 0% | 0% | Budget stays remain tax-free |
| ₹1,000 – ₹7,500 | 12% | 5% | Reduced significantly; more affordable |
| Above ₹7,500 | 18% | 18% | No change for premium stays |
➤ The biggest change is the reduction from 12% to 5% for rooms priced between ₹1,000 and ₹7,500. This makes mid-range hotels more pocket-friendly for travelers, though hotels charging 5% GST cannot claim ITC on inputs.
GST Based on Invoice Amount, Not Declared Tariff
The GST rate is always calculated on the final billed amount and not on the advertised room tariff.
For example:
- If a room originally priced at ₹8,000 is discounted to ₹7,000, it will fall under the 5% GST slab, not 18%.
This ensures customers benefit directly from discounts.
GST on Hotel Cancellations
If a booking is cancelled, the cancellation charges are still subject to GST. The rate is the same as the GST rate applicable to the original booking.
Example:
- A room priced at ₹5,000 that falls under the 5% slab will attract 5% GST on the cancellation fee.
Input Tax Credit (ITC) Rules for Hotels
Hotels can continue to claim ITC on various expenses such as cleaning, maintenance, or supplies. However:
- For rooms under the 5% GST slab, ITC is not allowed.
- For luxury rooms taxed at 18%, ITC can still be claimed.
This is an important detail for hotel owners when planning pricing and operations.
GST Calculation Example
Let’s take a real scenario:
- Room Tariff (2 nights @ ₹7,000) = ₹14,000 → 5% GST = ₹700
- Meals (Food & Beverages) = ₹3,000 → 12% GST = ₹360
- Spa Services = ₹2,000 → 18% GST = ₹360
➤ Total GST = ₹1,420
➤ Final Payable Amount = ₹20,420
Useful Tools for Travelers & Businesses
- GST Calculator – Instantly calculate GST on hotel bookings, dining, or travel bills.
These tools help both travelers and hotels save time and avoid errors in tax calculations.
Frequently Asked Questions (FAQs)
Does GST apply to banquet halls in hotels?
Yes, GST is charged on banquet halls in hotels. The standard rate is 18%, which covers hall rentals as well as related services like catering and decorations if they are part of the package.
What is the GST rate on hotel room rent?
The GST rate depends on the price of the room:
Rooms priced below ₹1,000 → No GST
Rooms priced ₹1,000 to ₹7,500 → 5% GST (without ITC)
Rooms priced above ₹7,500 → 18% GST
Can a traveler claim GST on a hotel stay?
Yes, GST paid on hotel stays can be claimed as Input Tax Credit (ITC), but only if the booking is for business purposes. Please note that ITC is not allowed on rooms charged at 5% GST. It is available only for rooms that fall under the 18% GST bracket.
How much GST is charged on a 5-star hotel stay?
For luxury and 5-star hotels where the room tariff is above ₹7,500 per night, the GST rate is 18%. This applies to premium and high-end accommodations across India.
How can I calculate GST on a hotel bill?
GST is added to the final invoice amount, which includes the room tariff and any additional services like meals, spa, or other amenities. Different services may attract different GST rates (5%, 12%, or 18%).
Final Thoughts
The new GST rates on hotel rooms (2025) simplify the tax structure while offering relief to travelers booking mid-range accommodations. Hotels priced between ₹1,000 and ₹7,500 now enjoy a much lower 5% GST, making travel more affordable across India.