- The Finance Ministry will not review the five percent GST rate on hotel rooms under seventy-five hundred rupees.
- There is no pending proposal to restore the Input Tax Credit for smaller hotel operators as of July 2026.
- The government has not conducted any assessment on how the rate cut impacted occupancy or regional tourism growth.
The Finance Ministry told the Lok Sabha on 20 July 2026 that it has not reviewed the impact of the 5% GST rate on qualifying hotel stays and has no proposal before the GST Council to change it.
The written reply covered rooms priced at ₹7,500 or less per day. It also confirmed that the government has not completed a post-implementation review or a data-based assessment of the measure.
The unanswered questions include occupancy rates, tourist footfall, affordability, revenue trends and tourism growth in Tier-II and Tier-III cities. No assessment has been completed.
Free toolSubstantial Presence Test Calculator"The Government has not undertaken any post-implementation review or data-based assessment of its impact on occupancy rates, tourist footfall, affordability, revenue trends, or tourism growth in Tier-II and Tier-III cities."
The response came from Shri Pankaj Chaudhary, Minister of State in the Ministry of Finance, in reply to Lok Sabha Unstarred Question No. 108, titled "Post-GST Rationalisation Trends in Tourism and Hospitality Sector." Shri Dushyant Singh asked the question.
The ministry also said no proposal to reconsider the reduced rate or restore Input Tax Credit, known as ITC, is pending.
The lower rate began after the council’s September 2025 decision
The 56th GST Council meeting approved the change on 3 September 2025. The government implemented it on 22 September 2025, replacing a 12% rate with ITC for qualifying stays priced at ₹7,500 or less per day.
The revised rate became 5% without ITC. Operators therefore pay a lower rate but cannot claim credit for taxes paid on eligible business inputs.
"At present, no proposal to review the 5 per cent GST rate without ITC is pending before the GST Council."
The present categories are:
| Transaction value per day | Current GST rate | Input Tax Credit |
|---|---|---|
| ₹7,500 or less | 5% | Not available |
| Above ₹7,500 | 18% | Available |
Rooms above the threshold continue to attract 18% GST with ITC. The lower category moved from 12% with ITC to 5% without ITC.
The government linked the cut to lower costs and simpler compliance
The government said the reform was designed to lower costs, improve affordability and stimulate consumption. It also cited enhanced competitiveness, a reduced compliance burden and lower transaction costs.
The change affects smaller operators in two ways. They face a simpler tax structure, but they lose the ability to offset taxes paid on inputs such as laundry, supplies and maintenance.
Travelers in the qualifying category received a direct tax reduction of 7%. The ministry’s reply also said discussions were held to ensure that the benefit reached consumers directly.
"Discussions were held with stakeholders to emphasise that the benefit of the reduced tax rate should be passed on directly to consumers."
That instruction addresses how properties apply the reduced rate in customer bills. The government has not paired it with a post-implementation assessment of the results.
The reply leaves the rate structure without a performance review
The absence of a review means the government’s stated objectives remain untested in the written response. It has not presented figures linking the change to room occupancy, visitor numbers, affordability or hotel revenue.
The policy still applies by transaction value. A stay at or below ₹7,500 per day falls into the 5% category without ITC, while a higher-priced room remains subject to 18% with ITC.
The ministry’s response therefore preserves both parts of the reform: the lower charge for the qualifying category and the removal of input credit. Neither part is currently before the council for reconsideration.
The September 2025 decision remains the operative framework. The government’s latest position does not announce a new rate, a new threshold or a timetable for a review.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA about your specific situation.
