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GST Reforms 2025: How Will It Impact Your Travel Cost?

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Ever since COVID-19 hit the world, travelling has become more of a luxury for the common man. Earlier as well, many Indians didn’t travel much, but the increased cost of hotels, flights, trains, and cabs made it even more difficult. To say that hospitality has been struggling since the pandemic ended would be an understatement.

The hospitality industry needed a boost, and the new GST rates, announced by Finance Minister Nirmala Sitharaman, following the recommendations of the 56th GST Council meeting, have provided that. Revised tax percentages are applicable from September 22, 2025.

So, let us get to the details:

How much will accommodation cost after September 22?

With the wedding and festive season coming, people will be spending on hotels. Notably, the hotels have seen one of the most significant reductions in GST.

Tax percentage for rooms costing up to Rs 7,500 per night was charged 12% GST, including Input Tax Credit (ITC). Now, with revised rates, the hotel rooms of up to Rs 7,500 would be charged 5% GST without ITC.

The points sum up what changes and what does not:

• Rooms with a tariff of Rs 1,000 or under per night will remain GST-free.

• Rooms above Rs 1,001 and below Rs 7,500 per night will be taxed at a 5% GST rate, down from 12%.

• The tax on luxury hotels with room charges of more than Rs 7,500 will remain the same, that is, 18%.

This move is expected to let the common man to go for more vacations, staycations, or workcations, since staying at mid-level properties is not cheaper.

For instance, if a hotel room worth Rs. 6,000 per night with 12% GST was for Rs. 6,720 before, now with 5% tax, it would only be Rs. 6,300.

Rajesh Magow, co-founder and group CEO of MMT, was elated by the move. “The rationalisation of GST slabs is a welcome move that will act as a stimulus to the Indian economy by boosting discretionary income and fueling consumption across sectors. For travel and tourism, the cut in GST on hotel rooms priced below Rs 7,500 will make stays more affordable for a large share of Indian travellers, reinforcing demand in the domestic market,” he said.

Has the cost of flying across India gone down, too?

While hotel stays have seen a relief from before, that is not quite the case with flying. The GST rate on economy flight tickets remains unchanged. It was earlier set at 5% and is the same.

On the contrary, the business class ticket will now cost more. Earlier, the taxation was set at 12%, but as per the reform, the new rate is 18%.

For instance, if the base price of your economy ticket from Delhi to Bangalore was Rs 5,000. With GST, it came to Rs 5,250. This cost will remain the same. And, if your business class ticket from Delhi to Bangalore was Rs. 11,200 (Rs. 10,000 + Rs. 1,200), it would now cost Rs. 11,800. The GST just went up from Rs 1,200 to Rs 1,800.

What is the main goal of these GST reforms?

Actually, the primary goal of these revised GST rates is simple. The government wants to make travel more accessible within India.

Indians are mostly budget-conscious people, and with travel becoming cheaper, it will encourage more people to go on vacations. This directly aligns with the Government of India’s goal to boost travel in different Indian states.

Lately, the Government of India has been promoting travelling to various destinations like Rajasthan, Gujarat, Bihar, Uttarakhand, Himachal Pradesh, Tamil Nadu, Kerala, and others. Overwhelming prices of hotels could have been one of the biggest factors holding people back from going out with their friends and families. With this resolved now, to an extent, the government hopes to see an uptick in the tour and travel industry.

Be it a journey to witness migratory birds, experience India’s vast culture, or bask in the history of our beautiful nation, all can be done well within budget now.

Conclusion

The revised GST rates are indeed a positive shift for India’s hospitality sector. It has made hotel stays more affordable for the common traveller. While airfares, especially in business class, have become more costly, the reduction in the cost of hotels is expected to boost domestic tourism. By lowering costs for mid-range accommodations, the government aims to encourage more vacations, ultimately giving a push to the travel and tourism industry. This would not only benefit travellers but also strengthen India’s long-term vision of broader economic growth.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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