In the GST Council meeting chaired by Finance Minister Nirmala Sitharaman, the GST rate on hotel rooms priced below Rs 7,500 has been reduced to 5%, which was earlier 12% (with ITC). The new rates will be applicable from 22 September 2025.
This change will directly benefit travelers, as now such hotel rooms will become cheaper than before. Due to this, domestic tourism is likely to get a boost and discretionary spending will increase.
News 18 quoted, MakeMyTrip co-founder and group CEO Rajesh Mago welcomed the decision and saying, “For travel and tourism, the cut in GST on hotel rooms priced below Rs 7,500 will make stays more affordable for a large share of Indian travelers, reinforcing demand in the domestic market.”
Rikant Pitti, CEO and co-founder of EaseMyTrip, called it a major change for India’s travel and tourism sector. He said, “The simplified tax regime, which has reduced the earlier four GST slabs to just two – 5% and 18%, will make travel more affordable for people and boost overall demand. The reduction to 5% GST on hotel rooms up to Rs 7,500 will not only encourage tourism but also help hoteliers increase occupancy across budget and mid-scale segments.”
Additionally, hotel rooms with a rate of less than Rs 1,000 per night will continue to attract no GST as before, while premium rooms above Rs 7,500 will continue to attract 18% GST.
Relief has also been announced for air travellers. Economy class tickets will now attract 5% GST, from 12% earlier, and business class tickets will attract 12% GST, from 18% earlier. The move is expected to reduce passenger expenses and boost demand for air travel.
From September 22, the GST structure will see a major change, with now only two major slabs, 5% and 18%. 12% and 28% rates have been abolished. Also, a 40% slab has been specifically set for luxury and ‘sin goods’.
The government has also clarified that no standalone restaurant will now be able to declare itself as a ‘Specified Premises’, thereby not being able to opt for 18% GST (with ITC).
The government has described these sweeping changes as a “historic Diwali gift” aimed at reducing the cost of living, increasing consumption, and boosting economic activity.
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