New Delhi: The new GST rates are set to come into effect from Monday, September 22. The tax simplification move is aimed at making several essential goods and services cheaper for the Indian households. Of all the beneficiaries, the hospitality sector is also one among them. The revised GST slabs are set to make mid-range hotel stays cheaper for customers.
New GST rates on hotel bookings
| Rent | Old GST Rate | New GST Rate | Key Changes |
| Less than Rs 1,000 | 0% | 0% | No changes |
| ₹1,000 to Rs 7,500 | 12% | 5% | Reduced from 12% to 5% (Note: 5% rate applies without ITC) |
| More than Rs 7,500 | 18% | 18% | No change in rates for luxury and premium accommodation |
Presently, hotel rooms priced under Rs 1000 are exempted from GST charges, a provision that will remain unchanged. However, the segment that is set to receive lower GST lies in the bookings of midrange rooms between Rs 1000 and Rs 7500. At present, booking a room ranging from Rs 5,000 attracts 12 percent GST, amounting to Rs 600, which makes the total bill Rs 5,600. Under the new rules, the GST rate will fall to 5 percent, meaning only Rs 250 in tax. Consequently, the same room will cost Rs 5,250, giving customers a direct saving of Rs 350 per night.
No ITC claim for hoteliers
Although, there exists a catch. Under the revised system hoteliers will not be allowed to claim input tax credit (ITC). This may lead some hotels to increase their base tariff rate to offset the loss of credit. However, the overall impact on consumers will still be less, with midrange hotel bookings becoming cheaper. For premium travelers, the scenario remains unchanged. Rooms priced above Rs 7500 will continue to attract 18 percent GST.
An important clarification relating to cancellations. GST is applicable on cancellation fees at the same rate as the original booking rate. This means that if an Rs 5,000 room booking is cancelled, the cancellation fee will also be taxed at 5 percent instead of the earlier 12 percent.
Overall, the GST cut is expected to boost occupancy in budget and mid-range hotels, encouraging more domestic travel during the festive season.
