Archive · 30 Sep 2025
Hotel GST Cut Doesn't Lower Bills Due to ITC Changes
The government lowered the tax (GST) on hotel rooms, hoping to make them cheaper.
However, your hotel bill probably didn't go down.
This is because hotels can't get back the tax they paid on things like rent and services (ITC).
This extra cost means they can't lower their prices.
Online travel agencies also face increased costs, and the benefits they offered are removed.
Experts say this hurts mid-market hotels.
Domestic tourism is growing, but this change might slow down investment and expansion.
Hotel groups want the government to change the rules to help hotels lower prices and boost tourism.
The GST rate on hotel rooms under ₹7,500 was reduced from 18% to 5%.
Consumers have not seen reduced hotel bills despite the GST cut.
Online Travel Agencies (OTAs) can no longer claim Input Tax Credit (ITC) and are passing on the increased costs.
Hotels cannot claim back GST paid on key inputs, making it a non-creditable cost.
The change threatens investment and expansion in mid-market and budget hotels.
- Who
- Hotels, Online Travel Agencies (OTAs), and Consumers
- What
- The GST rate reduction on hotel rooms has not resulted in lower bills due to the denial of Input Tax Credit (ITC).
- When
- The new GST rates came into effect on September 22.
- Where
- India
- Why
- The denial of ITC for hotels prevents them from passing on the savings from the GST rate reduction to consumers.
Hotels, OTAs and Consumers
Government
ITC on GST
Hotels, OTAs and Consumers
Restore ITC benefits to reduce cascading tax effects and enable price reductions.
Government
Maintain the current GST structure.
Impact on Tourism
Hotels, OTAs and Consumers
The current structure will negatively affect the rebound of domestic tourism, especially in the budget and mid-market hotel segments.
Government
It is assumed to maintain the current benefits of the tax reduction.
- GST Rate Reduction
- 18% to 5% for rooms under ₹7,500
- Effective Date
- September 22
- Affected Parties
- Hotels, Online Travel Agencies (OTAs), Consumers
- Issue
- Denial of Input Tax Credit (ITC)
- Impact
- Higher costs for hotels, no price reduction for consumers
- Tourism Spending (2024 Projection)
- ₹16 trillion