GST and Hotel Costs

How GST applies to hotel rooms and restaurants, how the 2025 changes cut rates for cheaper rooms, and how taxes affect competitiveness.

Taxes affect hotel prices and competitiveness.

GST on rooms

GST on hotel rooms depends on the room tariff:

Rooms below 1,000 rupees a night have been exempt.
Under the 2025 GST reform, rooms up to 7,500 rupees a night were taxed at 5 percent without input tax credit, down from 12 percent.
Rooms above 7,500 rupees attract 18 percent.

Restaurants

Stand-alone restaurants generally pay 5 percent GST without input tax credit.
Restaurants in hotels with high room tariffs pay 18 percent with input tax credit.

Competitiveness

Industry groups argue high taxes make India less competitive than destinations like Thailand or Dubai for tourists.

Other costs

Property taxes.
Liquor licence fees, which can be very high.
Electricity at commercial rates.

Policy debates

Lower taxes could boost tourism and jobs.
Governments need revenue.

The rate threshold

A hotel prices a room at 7,499 rupees rather than 7,600, so guests pay 5 percent GST instead of 18 percent, a common pricing response to slab thresholds.

Thinking all hotel rooms are taxed equally

GST varies with room tariff.

Key takeaways

GST on rooms depends on the tariff.
The 2025 reform cut GST to 5 percent for rooms up to 7,500 rupees.
Higher-priced rooms pay 18 percent.
Taxes and licence fees affect competitiveness.