In September 2025, India's GST Council changed how hotel rooms are taxed. If you run an independent hotel, guest house or small resort, the short version is good news: most properties now sit in a simpler, lower slab than before. The details still matter for how you configure billing, though — and a few edge cases are worth understanding before you assume you know your rate.
The current room-tariff slabs
Since the change took effect on 22 September 2025 (part of the wider "GST 2.0" rate rationalisation), hotel accommodation is taxed by declared room tariff as follows:
- Up to ₹1,000 per room per night — exempt (0% GST).
- ₹1,001 to ₹7,500 per room per night — 5% GST, with no input tax credit (ITC) available on this revenue.
- Above ₹7,500 per room per night — 18% GST, with full ITC available.
Before this change, the mid-range band was taxed at 12% with ITC available. The new 5% rate is mandatory for that band — a hotel cannot choose to stay on the 18%-with-ITC structure just to keep claiming credits.
Why "no ITC" is the part worth planning around
For most independent hotels — the 10–100 room, ₹1,000–₹7,500 tariff range this article is written for — the 5% slab is simpler and usually cheaper for the guest than the old 12% rate. But losing input tax credit is a genuine cost shift, not just a compliance footnote. GST already paid on renovation work, furniture, linens, software subscriptions and similar inputs becomes a straight cost rather than a recoverable credit. It's worth discussing with your accountant whether this changes how you time larger purchases or structure any mixed-use revenue (for example, a banquet hall or event space, which is generally still taxed at 18%).
Restaurant and food service inside the hotel
Food and beverage service at a hotel is assessed separately from the room, and it depends on a specific classification:
- "Specified premises" — broadly, a hotel where any unit had a room tariff above ₹7,500 at any point in the preceding financial year — restaurant and room-service income is taxed at 18%, with ITC available.
- Non-specified premises — every room stayed at or below ₹7,500 through the preceding year — restaurant and room-service income is taxed at 5%, with no ITC.
The practical trap here is that the "specified premises" status is typically assessed annually, based on the previous year's declared tariffs. A property that occasionally lets a suite or a peak-season upgrade go above ₹7,500 could find its entire restaurant operation reclassified into the higher band for the following year. If your hotel has any rooms that sometimes cross the ₹7,500 line — even occasionally — flag this specifically with your accountant when the financial year closes.
What the rate is actually based on
The GST rate is determined by the room's tariff — broadly, the rate at which the room is being charged for that stay — not by the hotel's star rating, category, or a fixed "rack rate" that never changes. Reporting on this point isn't perfectly consistent on one specific edge case: what happens when a room's published or declared tariff is above ₹7,500 but is actually sold, after a discount, for less. Some guidance treats the pre-discount declared tariff as controlling; other explanations describe the actual transaction value as controlling. Because this can change which slab applies — and can even affect your "specified premises" status for restaurant GST — this is exactly the kind of question to put directly to your GST practitioner rather than assume either way.
A short, practical checklist
- Confirm your property's applicable room slab (0% / 5% / 18%) with your accountant, based on your actual declared tariffs — don't assume from a competitor's or a generic online example.
- Check your restaurant/food-service classification separately — it does not automatically match your room rate.
- Review "specified premises" status at each year-end if any room ever crosses ₹7,500, even occasionally.
- Configure your billing software's tax rate to match what your accountant confirms — and re-confirm it if you change your pricing structure.
- Keep a record of the declared tariff for each booking, not just the amount actually collected, since both numbers can matter.
Frequently asked questions
Do all hotel rooms in India now pay the same GST rate?
No. The rate depends on the room tariff: tariffs up to ₹1,000 are exempt, ₹1,001–₹7,500 attract 5% GST with no input tax credit, and tariffs above ₹7,500 attract 18% GST with input tax credit available. Most independent hotels, guest houses and budget properties fall in the 5% band.
My declared tariff is above ₹7,500 but I discount the room below that. Which rate applies?
Guidance on this point is not perfectly uniform across sources, and it can also affect whether your property counts as a "specified premises" for restaurant GST. Confirm the treatment with your GST practitioner or CA before setting your billing configuration, rather than assuming either interpretation.
Does this affect how AtithiOps generates my GST invoices?
AtithiOps lets you configure the tax rate and treatment your accountant confirms for your property, and applies it consistently on every invoice. It does not decide your applicable slab for you — that determination should always come from a qualified tax professional.