In a landmark decision, the GST Council on September 3, 2025, approved sweeping tax reforms that significantly lower the Goods and Services Tax (GST) for hotel stays and restaurant services, effective September 22, just in time for Navratri and the upcoming festive season.
Taxes on hotel rooms priced at ₹7,500 or less per night have been slashed to 5% (without input tax credit, or ITC), down from the previous 12% with ITC. This change is expected to make mid-range and budget accommodations notably more affordable.
Industry stakeholders have welcomed the move. Nikhil Sharma, MD and COO (South Asia) at Radisson Hotel Group, remarked that the GST cut “makes quality hospitality more affordable for India’s growing middle class” and will likely “boost domestic tourism demand.” Similarly, K Syama Raju, president of FHRAI (Federation of Hotel & Restaurant Associations of India), highlighted that the change makes Indian hotels more attractive to both domestic and international travellers.
On the restaurant front, the Council has standardized the GST rate to a flat 5%, winnowing the previous variable slabs of 12% to 18%. This simplification is poised to make dining out, including casual outings, family dinners, and festive gatherings, lighter on consumers and potentially reinvigorate demand.
Supporting the broader reform push, Finance Minister Nirmala Sitharaman confirmed that the GST system has now been rationalized to only two main slabs—5% and 18%—alongside a limited 40% slab for select luxury or “sin” goods. This aligns with a broader effort to simplify taxation for consumers and businesses alike.
For B2B players in hospitality, the reduced GST on restaurants and sub-₹7,500 hotel stays represents a rare opportunity to refresh demand dynamics during a peak period. Operators should proactively adjust pricing, update internal billing protocols, and communicate clear value to customers. Savvy chains will also analyze how this relief can translate into volume gains and margin recovery in the coming quarters.
