The hotel and hospitality sector is becoming one of India’s largest service industries. It is projected to grow to ₹5,19,200 crore by 2028. GST brought all hospitality services under one unified tax structure, replacing multiple indirect taxes. Understanding Goods and Services Tax (GST) on hotels and hospitality services allows you to maintain regulatory accuracy and optimise pricing strategies.
For customers, knowing the GST rate on hotels can make a big difference when planning trips or comparing hotel prices. In this blog, we will understand everything about GST on hotels and hospitality services.
Whether you are managing a restaurant chain inside a hotel or an event-driven hospitality brand, understanding the correct GST structure helps you to stay compliant and financially efficient. Under the GST framework, hotels and hospitality establishments are taxed based on the declared room tariff per night.
This slab-wise system was designed to ensure that luxury and premium services attract higher rates, while affordable stays remain within reach for budget travellers. The current rates for GST on rooms (as of 2025) applicable to the hotels and hospitality industry are as follows:
| Room Tariff (per night) | Applicable GST Rate | ITC Availability |
| Up to ₹1,000 | 0% (Exempt) | Not Applicable |
| ₹1,001 – ₹7,500 | 5% | Not Allowed |
| Above ₹7,500 | 18% | Allowed |
The GST treatment for restaurants located within the premises of hotels is different, which often creates confusion between both owners and guests. Standalone restaurants have one standard GST rate of 5%. Restaurants inside the hotels have additional conditions that are linked to the hotel’s room tariff and the nature of the restaurant service.
| Restaurant Category | GST Rate |
| Standalone Restaurant Service | 5% without ITC |
| Restaurants within the premises of the hotels (Where the room tariff is below ₹7,500) | 5% without ITC |
| Restaurants within the premises of the hotels (Where the room tariff is above ₹7,500) | 18% with ITC |
Banquet halls are a key essential part of this hotel and hospitality ecosystem. These halls are generally used for events like weddings, conferences, product launches, and parties. These services are not standalone, as they often include multiple services like venue rental, catering, decoration, and entertainment, which makes GST classification slightly complex.
| Service Type | GST Rate | Remarks |
| Banquet hall rental (venue only) | 18% | Applicable if only the venue is rented for events |
| Banquet hall with food & beverage service | 18% | Considered a composite supply; principal supply is service, not goods |
| Catering/event packages | 5% (no ITC) or 18% (with ITC) | Depending on whether the supplier opts for a concessional or standard rate |
Example
Suppose there is a hotel that offers a wedding package including hall, buffet, and decoration for ₹5 lakh. In this case, the entire service will be taxed at 18% GST, and it will be considered a single composite supply where the event service is the main component.
As the travel market is expanding rapidly, hotels are trying to attract customers with bundled hospitality packages that include room stays, meals, spa access, sightseeing, and other services at a single price. While these offers enhance customer experience, they also complicate GST classification and compliance.
Hospitality packages are a form of composite supplies under GST. This means the principal supply (the dominant component in the package) will determine the applicable tax rate. The key examples of it are as follows:
When does it become a Mixed Supply?
A mixed supply generally occurs when two or more services are bundled together. In simple words, there is no natural linkage between services, like in room stay services, the car rental and gym membership voucher are included. In such scenarios, GST is mainly charged at the service that has the highest rate applicable among all items in the package.
The Input Tax Credit (ITC) mechanism under GST is one of the biggest advantages that allows businesses to offset the tax they have paid on inputs/ inward supply (goods and services purchased) against their output tax liability. Under the GST on the hospitality industry, there is a wide range of taxable inputs, such as:
However, there are still some cases when ITC is restricted, such as:
The hotel and hospitality sector in India is operating under a robust GST framework, which varies across room tariffs, restaurant services, event facilities, and bundled packages. While this multi-slab system aims to make taxation fair across income segments, it also demands precise classification, documentation, and invoicing from businesses.
You, however, have to maintain proper GST records, as they help you qualify for a business loan. The GST record serves as an income and helps you get funds for business expansion. Apply for a collateral-free business loan of up to ₹25 lakh for all your business loans.
1. What is the updated GST rate for hotel rooms in 2025?
The GST rate on hotel accommodation is dependent on the declared room tariff per night:
2. How is GST applied to restaurants inside hotels?
If the hotel’s room tariff is below ₹7,500, the restaurant is taxed at 5% (without ITC). If the hotel’s room tariff is ₹7,500 or above, the restaurant attracts 18% GST (with ITC). This rule applies even if guests dine without staying at the hotel.
3. What is the GST rate for banquet halls and event venues?
Banquet halls are typically taxed at 18% GST. If food and decor services are included, it becomes a composite supply, still attracting 18%.
4. Can hotels claim ITC on inputs like food, cleaning supplies, or maintenance?
Yes, if they charge GST at 18% and the inputs are used for taxable business purposes. However, ITC is still not allowed for:
5. How will GST be levied on bundled hospitality packages?
If a package (e.g., “Stay + Meals + Spa”) is a composite supply, GST will be applied according to the principal service. If the package consists of unrelated services (like car rental or vouchers), it may become a mixed supply, which is taxed at the highest rate among all components.
6. Does GST apply to complimentary stays or corporate discounts?
Yes, if there’s a commercial consideration, such as a corporate agreement, GST will still be applied even if the guest is not paying directly. However, purely free stays (with no underlying transaction) are not taxable, though ITC reversal may be required on related expenses.
7. How can I optimise GST compliance for my hospitality business?
You can ensure proper GST compliance by following these tips:
8. How can we stay updated about changes in rates, specifically in the hotels & hospitality sector?
For all types of GST updates, clarifications and notifications, either visit the official portal of the GST department or follow the CBIC guidelines and official circulars.
9. Are banquet halls and event spaces in hotels covered under GST?
Yes. Services like banquet hall booking, conference facilities, and event hosting attract 18% GST, depending on the package type and inclusions (like catering or alcohol).
10. Are food and beverages consumed in hotel rooms taxable under GST?
Yes. Room service or in-room dining attracts 5% GST (without ITC) if billed separately or 18% GST (with ITC) if included as part of a composite package.
