GST on Hotel Rooms: Current Rates and ITC Rules#
GST on hotel accommodation was restructured under the GST 2.0 rate rationalisation, effective 22 September 2025. The earlier four-slab structure (which included a 12% rate) has been simplified into three tiers, and — this is the detail businesses most often get wrong — the applicable rate is based on the actual amount charged per room per night, not the hotel's published rack rate or the maximum tariff shown on its rate card or booking platform.
Current GST Rate Slabs on Hotel Rooms#
| Room Tariff (per unit, per day) | GST Rate | ITC Available? |
|---|---|---|
| Up to ₹1,000 | Nil (0%) | Not applicable |
| ₹1,001 to ₹7,500 | 5% | No |
| Above ₹7,500 | 18% | Yes |
Why "Actual Transaction Value" Matters#
The rate slab is determined by the actual value charged for that specific room on that specific day — after any discounts applied at the time of booking — not:
- The rack rate or maximum published tariff displayed at the hotel
- The rate listed on an online travel aggregator before discount
- An average or seasonal rate
A room with a ₹9,000 rack rate that's actually sold for ₹6,800 after a discount falls in the 5% (no-ITC) bracket for that transaction, not the 18% bracket — because GST applies to what was actually charged, not the listed price.
No Input Tax Credit at the 5% Slab#
This is the most consequential detail for hotel operators: rooms taxed at 5% are not eligible for ITC on the goods and services used to provide that accommodation (housekeeping supplies, laundry, maintenance, F&B inputs allocated to the room, and similar). This means GST paid on those inputs becomes a real cost for the hotel rather than a recoverable credit — a trade-off for the lower headline rate.
Rooms taxed at 18% (tariff above ₹7,500) do get full ITC on eligible inputs and services used in providing that accommodation, which is the standard trade-off between the two paid slabs: lower rate with no credit, or higher rate with full credit.
What This Means for Different Businesses#
- Budget and mid-range hotels (most rooms priced at or below ₹7,500) will typically operate under the 5%, no-ITC regime — input costs on housekeeping, amenities, and maintenance are not recoverable, so pricing should account for this as a real cost rather than a pass-through credit.
- Premium and luxury properties (tariffs regularly above ₹7,500) fall into the 18% bracket but can claim ITC, which partially offsets the higher headline rate depending on the hotel's actual input cost structure.
- Properties with a mix of room categories may have different rooms falling into different slabs on the same night, depending on which specific room (and its actual sold price) is being invoiced — GST treatment is per-transaction, not per-property.
Booking Through an OTA or Travel Agent#
If a hotel room is booked through an online travel agent or aggregator, the GST treatment on the room itself still follows the tariff-based slabs above, based on what the guest is actually charged for the room. The travel agent or aggregator's own commission or service fee is a separate supply, generally taxed at the standard rate applicable to their intermediary service — see our guide on GST for travel agents and tour operators for how that side of the transaction is treated.
Common Mistakes#
- Charging GST based on the rack rate instead of the actual amount billed — this overcharges the customer and misstates output tax liability.
- Claiming ITC on inputs for a room taxed at 5% — this is specifically disallowed and will be flagged as an incorrect claim if caught during scrutiny.
- Applying a flat rate across an entire property without checking each room's actual transaction value for that stay — different rooms, or the same room on different dates/rates, can fall into different slabs.
- Forgetting that discounts before booking reduce the taxable value and can move a room from the 18% to the 5% slab (or from 5% to nil) for that specific transaction.
Frequently Asked Questions#
Does the GST rate depend on the star category of the hotel? No — the pre-GST-2.0 structure sometimes correlated with star category in practice, but the current rate slabs are purely a function of the actual room tariff charged, regardless of star category or hotel classification.
What if a customer stays for multiple nights at different rates each night? Each night's charge is generally assessed against the slab independently based on the value for that specific night, rather than an average across the full stay — confirm the exact invoicing treatment for multi-night, mixed-rate bookings with your GST practitioner for your specific billing system.
Are banquet halls and event spaces taxed the same way as room accommodation? Banquet hall and event-space GST treatment is governed separately from room-tariff-based accommodation rates — don't assume the same slabs apply without checking the specific rate applicable to that supply.
Key Takeaways#
- Three slabs post-GST 2.0: Nil below ₹1,000, 5% (no ITC) from ₹1,001–₹7,500, 18% (with ITC) above ₹7,500.
- The rate is based on the actual amount charged per room per night, not the rack rate or listed price.
- No ITC at the 5% slab means input GST becomes a real cost for hotels pricing most rooms in that bracket.
- Each room/night is assessed on its own actual transaction value — a property can have different rooms in different slabs simultaneously.