The GST Council, led by Finance Minister Nirmala Sitharaman, cut the GST on hotel rooms priced below ₹7,500 to 5 per cent without input tax credit (ITC). Earlier, the rate was 12 per cent with ITC.
The revised rates will take effect on 22 September 2025. This decision will make stays cheaper and push tourism and discretionary spending.
Hotel rooms under ₹1,000 per night will stay exempt. However, premium rooms above ₹7,500 will continue to attract 18 per cent GST.
As a result, a wide range of travellers will see reduced costs, and hotels are likely to gain higher occupancy.
Industry leaders welcomed the GST rate cuts.
Rajesh Magow, Co-Founder and Group CEO of MakeMyTrip, said the decision will make stays more affordable and reinforce demand for domestic travel.
Likewise, Rikant Pittie, CEO and Co-Founder of EaseMyTrip, called the reforms transformative. He said the shift to two slabs of 5 per cent and 18 per cent will make travel more affordable and boost demand in the budget and mid-scale hotel segments.
Meanwhile, the GST Council also moved to define ‘specified premises’. Under this rule, stand-alone restaurants cannot declare themselves as such to avail the option of paying 18 per cent GST with ITC. This change will stop the misuse of tax benefits.
Air travel will also see relief. Economy class tickets will now carry 5 per cent GST, down from 12 per cent. Business class fares will attract 12 per cent, reduced from 18 per cent. Therefore, passengers will enjoy cheaper tickets, and airlines may see stronger demand.
Overall, the rationalisation of GST slabs to just 5 per cent and 18 per cent will act as a stimulus. It will raise discretionary income, fuel consumption, and support growth in India’s travel and tourism sector.
Also Read: GST Rate Cuts Can Ease Inflation, Pave Way For RBI Repo Rate Cut: HSBC Report
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