By Debanjali Rakshit
In the sweltering heat of early September, as families across India dream of monsoon-faded hill escapes or festive Diwali getaways, a quiet revolution is brewing in the hospitality world. The GST Council, in its 56th meeting, has delivered a potent boost: slashing the goods and services tax on hotel rooms priced up to Rs7,500 per night from 12percent, with input tax credit, to a straightforward 5percent, sans credit. Effective September 22, 2025, this change targets the heart of India’s booming mid-market segment, where most everyday travelers pitch their tents.
The tourist sector in India jumped 20percent beyond pre-2019 levels in 2024, injecting roughly Rs21 trillion into the GDP as it eagerly recovered from pandemic lows Nevertheless, the rapidly rising costs shut off many would-be explorers. This tax cut is a catalyst for inclusive travel, supporting over 40 million jobs, many of which empower women and youth, and contributing over 6percent to the GDP. Imagine saving hundreds of rupees for a weekend on the sun-kissed beaches of Goa or a cultural dip in Jaipur. This would free up rupees for local artisans, street food sellers, and rickshaw rides.
A cascade of advantages is anticipated by experts, with mid-tier hotel revenues rising 7–10percent, occupancy rates rising 5-7percent in recreation hotspots like hill stations and coastal retreats, and 3-5percent in urban centers.
Experts predict a cascade of benefits: occupancy rates climbing 5-7percent in leisure havens like hill stations and coastal retreats, 3-5percent in urban hubs, and mid-tier hotel revenues jumping 7-10percent. “The GST Council’s decision is a progressive step that will positively impact India’s hospitality industry. By easing the tax obligations on guests with room rates below Rs7,500, the government has created a more supportive environment for the industry to grow and further boost tourism demand,” declares Sudeep Jain, Managing Director for South West Asia at IHG Hotels & Resorts.
However, the removal of input tax credits may pinch hotel profit margins, potentially slowing expansion plans in a sector aiming for 10% annual growth through 2030. Still, optimism reigns. “The cut in GST on hotel rooms priced below Rs7,500 will make stays more affordable for a large share of Indian travellers, reinforcing demand in the domestic market,” affirms Rajesh Magow, Co-Founder and Group CEO of MakeMyTrip.
With festive bookings surging, this policy ushers in a new era of accessible travel, more middle-class adventures, booming jobs, and a nation rediscovering its vibrant tapestry.