56th GST Council recommends slashing GST on rooms with tariffs less than or equal to Rs 7500 to 5% without ITC

Hotel rooms with tariffs of less than or equal to Rs 7500 per day will be taxed at 5% without input tax credit (ITC) from 12% with inputs tax credit (ITC), as per recommendations made by the 56th GST Council.

The move will benefit budget and mid market travellers, industry insiders said.

"We welcome the GST Council’s decision to rationalise hotel accommodation tax rates for rooms up to Rs 7,500. This will make quality hospitality more affordable for India’s growing middle class and further boost domestic tourism demand," said Nikhil Sharma, MD and COO (South Asia) at Radisson Hotel Group.

Sharma said by easing the upfront tax burden, the government has created a 'supportive' framework for mid-market and budget hotels, which remain the backbone of India’s hospitality growth story. Both Indian and global hospitality chains have been increasingly eyeing the mid market space for expanding further.

"While luxury hotels continue under the higher slab, the move reflects sensitivity to the aspirations of travellers and reinforces confidence in India as an inclusive tourism destination," he added.

In a press statement earlier on Wednesday, the Federation of Hotel & Restaurant Associations of India (FHRAI) had sought a uniform 5% GST across all hospitality and tourism services but had sought recognition of hotel rooms as plant and machinery for input tax credit.

"Hotel rooms are the core revenue-generating assets. Renovations, refurbishments and capital upgrades should qualify for full input tax credit (ITC). FHRAI has requested that hotel rooms be recognised as Plant & Machinery to encourage reinvestment, maintain quality, and boost revenue contributions to the exchequer," the industry body had added.

FHRAI had also sought increasing the current limit for charging 18% GST for room tariffs of Rs 7,500 and above to Rs 15,000.