GST on hotel rooms under ₹7,500 cut to 5%, Indian travellers to benefit

The GST Council has slashed tax from 12% to 5% on hotel rooms priced below ₹7,500 per night, offering relief to travellers and giving a push to domestic tourism

Love to travel but think it’s too costly with hotel tariffs and airfares rising every year? You may find your next trip a bit lighter on the wallet. The GST Council on Wednesday announced a cut in goods and services tax (GST) rates across key travel categories.

 

Economy flight tickets will now attract 5 per cent GST, down from 12 per cent. Business class tickets will be taxed at 18 per cent, up from 12 per cent. Hotel stays priced under ₹7,500 per night will now be taxed at 5 per cent, also down from 12 per cent.

 

“This move is expected to make both domestic and international travel significantly more affordable, right ahead of the festive and wedding season,” said Mohak, founder of Atlys.

 

 

The lower hotel tax will apply without input tax credit and is expected to boost the mid-range hospitality sector, especially for Indian travellers planning local getaways or short work trips.

 

No credit, but wider affordability

 

Currently, rooms with tariffs up to ₹7,500 attract 12 per cent GST with the benefit of ITC. Under the revised structure, this category will face a lower 5 per cent tax rate, but hotels will not be able to claim credit for taxes paid on their inputs.

 

Industry players believe the shift will still bring net benefits.

 

“This is a move that will act as a stimulus to the Indian economy by boosting discretionary income and fuelling consumption across sectors,” said Rajesh Magow, co-founder and group CEO, MakeMyTrip. “For travel and tourism, the cut in GST on hotel rooms priced below ₹7,500 will make stays more affordable for a large share of Indian travellers, reinforcing demand in the domestic market.”

 

Hotel chains welcome the move

 

Hotel operators expect the decision to increase bookings, especially from Indian travellers planning leisure getaways and business trips.

 

“It’s a timely and welcome reform that will make quality stays more accessible to a wider base of Indian travellers and strengthen the country’s positioning as a high-potential tourism hub,” said Nikhil Sharma, managing director and COO, South Asia, Radisson Hotel Group.

 

He added, “By reducing the tax burden on mid-scale and upper mid-scale hotels, the government has unlocked new opportunities for stronger domestic travel, weekend leisure breaks, and business mobility — factors that are critical to the hospitality sector's growth.”

 

Boost to tourism and employment

 

The Federation of Hotels and Restaurants Association of India (FHRAI) also said the tax cut would support India’s tourism goals and improve global competitiveness.

 

“This reform will directly boost tourism demand, increase occupancy and encourage more spending across the hospitality value chain,” said K Syama Raju, president of FHRAI, in a statement to PTI. “As a sector that already contributes over 5 per cent to India’s GDP and is among the largest job creators, this step will further strengthen our role in driving economic growth, generate employment for youth and women, and enhance India’s global competitiveness.”

 

Domestic travel demand already on the rise

 

The tax relief comes at a time when Indians are travelling in greater numbers across the country. India’s domestic aviation sector has seen steady growth over the past year, reflecting rising demand for travel.

 

According to a report by ratings agency ICRA:

 

< Domestic air traffic in April 2025 was estimated at 14.55 million passengers

< This marks a 10.2% increase over April 2024, when the figure stood at 13.2 million

 

While March and April figures show a flattening of monthly growth, the broader trend suggests a strong recovery and growing appetite for domestic travel.

 

The reduced tax on hotels is expected to give further momentum to this trend, especially for travellers looking to plan affordable holidays or weekend breaks within India.