New GST rates take off: What it means for your next flight and hotel bookings

Starting September 22, India’s revised Goods and Services Tax (GST) rates will come into effect, as announced by Finance Minister Nirmala Sitharaman. This government’s latest rationalisation of GST is also set to reshape the landscape for travel and tourism. Following the recommendations of the 56th GST Council meeting, new rates will come into effect soon, which intends to simplify slabs while directly influencing hotels and air travel, the two primary components of most journeys. For more details, check this press release.

Hotels: Cheaper stays for budget travellers

One of the key announcements is the reduction of GST on hotel room tariffs priced up to INR 7,500 per night. Instead of the earlier 12% with input tax credit (ITC), these rooms will now attract only 5% GST without ITC. The move is expected to make accommodation more affordable, benefiting millions of domestic travellers who prefer mid-range and budget hotels.

Industry experts see this as a much-needed boost to India’s hospitality sector, which has been recovering from pandemic disruptions. Cheaper tariffs could encourage weekend getaways, business travel, and longer leisure stays. For inbound tourists, the change also enhances India’s competitiveness compared with destinations in Southeast Asia where room taxes are often lower.

Air travel

The GST Council maintained 5% GST on economy-class air tickets, a relief for budget flyers who make up the majority of domestic passengers. Low-cost carriers, already popular in India’s aviation market, are expected to benefit as travel demand remains price-sensitive. Rest of the categories will attract 18% GST.

Travel industry outlook

With GST rates streamlined to just two slabs, 5% and 18%, the Council’s goal is to simplify compliance and reduce ambiguities. For the travel sector, this means greater clarity for operators and travel agents when applying taxes on bookings.

Budget-conscious travellers and domestic tourists are the clear winners, with both hotels and economy flights becoming more affordable. Overall, the GST reforms tilt in favour of boosting mass tourism while aligning with the government’s long-term vision of making travel within India more accessible.

Industry reaction:

Welcoming the move, Rajesh Magow, Co-Founder and Group CEO of MakeMyTrip, said, “The rationalisation of GST slabs is a welcome move that will act as a stimulus to the Indian economy by boosting discretionary income and fuelling consumption across sectors. For travel and tourism, the cut in GST on hotel rooms priced below ₹7,500 will make stays more affordable for a large share of Indian travellers, reinforcing demand in the domestic market.”

Mr Aviral Gupta CEO at Zostel and Zo World said, "As a prominent player in India’s dynamic hospitality and travel sector, we at Zostel recognize the far-reaching impact of the recent GST reforms. The reduction of the GST rate on hospitality services to 5% is a pivotal step toward fostering a more transparent and predictable tax structure. This reform not only makes travel and accommodation more affordable for guests but also offers businesses a clearer path to growth and sustainability. We are confident that these changes will stimulate long-term growth in the hospitality sector, benefiting both the industry and the larger economy, while enhancing the overall guest experience."

"The GST revisions are timely and will influence travel behaviour in interesting ways. The reduction to 5% on hotel tariffs makes domestic travel more inclusive, encouraging more families and young travellers to explore India. On the other hand, the higher GST on premium airfares may shift some demand towards economy cabins, but it also opens room for operators to rethink value-driven premium offerings. For the industry, this is not just about price correction it’s about recalibrating experiences, reimagining itineraries, and ensuring that travel remains aspirational yet accessible. At Cox & Kings, we see these changes as an opportunity to innovate and guide travellers towards smarter, more fulfilling journeys,” said Karan Agarwal, Director, Cox & Kings.