GST 2.0 and Its Impact on Hotels in India: What Hoteliers Must Know

The Indian hospitality sector is now adapting to the major tax shift brought by GST 2.0, which came into effect on 22nd September 2025.

 For hotels, this update changes how room tariffs are taxed and how operating costs are managed.

If you’re a hotelier, understanding the impact of GST 2.0 on hotels in India is crucial to staying competitive and compliant.

GST 2.0: What Has Changed for Hotels?

• Hotel rooms priced ≤ ₹7,500/night → 5% GST (without Input Tax Credit – ITC)
• Hotel rooms priced > ₹7,500/night → 18% GST (with ITC)

This change simplifies tax slabs but creates new challenges for budget and mid-range hotels.

What is Input Tax Credit (ITC) in hotels?

Input Tax Credit (ITC) allows businesses to claim back the GST paid on goods and services they use.

For hotels, this includes items like:

• Toiletries and cleaning supplies
• Linen, furniture, and maintenance services
• Restaurant raw materials
• Software and technology services

With GST 2.0, hotels charging ≤ ₹7,500 per night cannot claim ITC, which means higher operational costs.

 Impact of GST 2.0 on Budget & Mid-Range Hotels

Hotels with room tariffs in the ₹1,500 – ₹7,500 range are directly affected:

• ✅ Benefit: Guests pay only 5% GST, making stays appear cheaper.
• ❌ Challenge: Hotels lose ITC, leading to higher operating costs.
• 🔄 Result: Many budget hotels may increase base room rates to recover lost margins.

This is where the real impact of GST on hotels is felt most strongly — small and mid-scale hoteliers.

Impact of GST 2.0 on Premium & Luxury Hotels

Hotels with tariffs above ₹7,500 per night remain under the 18% GST slab.

• ✅ Benefit: They can continue to claim full ITC and balance operational expenses.
• ❌ Challenge: Guests face higher GST, which may affect price-sensitive travelers.

Luxury hotels will likely remain more stable in profitability compared to budget hotels.