GST 2.0 (56th Meeting): GST Reform for Hoteliers & Travel Agents in India

The 56th GST Council Meeting, held on September 3, 2025, in New Delhi, introduced significant reforms under the "Next-Generation GST" framework, aiming to simplify tax rates, ease compliance, and boost sectors like hospitality and tourism. Effective from September 22, 2025, these changes impact hoteliers and travel agents in India, offering opportunities to drive demand while presenting challenges in cost management and pricing. Below, we explore the key updates, their implications, and actionable strategies for businesses, based on official outcomes from the Ministry of Finance, Press Information Bureau (PIB), and CBIC notifications.

GST 2.0: For Hotelier & Travel Agents

GST Changes for Hoteliers (GST reform for Hotelier & Travel Agents)

Key Updates

• Hotel Rooms (up to Rs. 7,500 per night): GST reduced from 12% to 5% (without Input Tax Credit) for accommodation services with a value of supply ≤ Rs. 7,500 per unit per day.

• Standalone Restaurants: Remain at 5% GST without ITC, unchanged from existing rules.

Impact on Hotels & Resorts

As GST reform for hotelier and travel agents has taken please, we have to look its all perspective:

• Positive: The 5% rate makes budget and mid-range hotels more affordable, boosting demand from domestic and international travelers in destinations like Udaipur, Jaipur, Jodhpur, Ranakpur, Kumbhalgarh, and Mount Abu.

• Negative: Loss of ITC increases operational costs for inputs like food and beverage, maintenance, and utilities (taxed at 18%). Hotels may face inverted duty structures, though automated refund processes offer relief.

Suggested Hotel Strategies

• Adjust Pricing Smartly: Balance affordability with profitability to attract price-sensitive guests.

• Offer Bundled Packages: Combine rooms with meals, spa treatments, or local activities to enhance value.

• Strengthen Agent Partnerships: Collaborate with travel agents to promote mid-segment occupancy.

• Focus on Efficiency: Optimize vendor contracts and supply chains to offset ITC loss.

GST Changes for Travel Agents

Key Updates

• Air Tickets (Non-Economy Class): GST increased from 12% to 18% (with ITC). Economy class remains at 5%.

• Car & Bus Passenger Transport: Revised to 5% (without ITC) or 18% (with ITC), with service providers choosing the applicable slab.

• Goods Transport (GTA, Rail Containers): Shifted to 5% (without ITC) or 18% (with ITC), depending on the provider’s option.

• Export of Services: Clarified to align with the recipient’s location, making services like bookings for foreign clients zero-rated with eligibility for GST refunds.

Impact on Travel Agencies

• Challenge: Higher GST on non-economy flights and premium transport increases package costs, potentially deterring price-sensitive customers.

• Opportunity: Zero-rated export status for international bookings (e.g., for NRI or overseas clients) unlocks GST refund benefits, enhancing competitiveness in global markets.

Suggested Travel Agent Strategies

• Educate Customers: Clearly communicate that package cost increases are due to GST hikes, not agency mark-ups.

• Promote Domestic Tourism: Highlight hotels with 5% GST room rates to offset transport cost increases.

• Expand Globally: Market services to international clients to leverage zero-rated export refunds.

• Bundle Experiences: Include cultural tours, wildlife safaris, or wellness retreats to enhance value perception.

• Negotiate with Hotels: Partner with hotels in Rajasthan and Gujarat to create attractive, all-inclusive packages.

• Seek Higher TAC or Reduced Rates: Request higher Travel Agent Commissions (TAC) or negotiate lower rates from hotels to offset increased costs.

Conclusion

The 56th GST Council Meeting offers a mixed bag for India’s hospitality and tourism sectors. Hoteliers can capitalize on the 5% GST rate for rooms to drive demand but must optimize costs to manage ITC loss. Travel agents face higher transport taxes but gain from export refund opportunities, particularly for international markets. Collaboration between hotels and agents is key—innovative, value-driven packages and clear communication can help both sectors adapt and thrive under the new GST framework.

For compliance, businesses should review updated CBIC notifications (e.g., amendments to Notification No. 11/2017-Central Tax (Rate)) and leverage automated refund systems for inverted duties or exports. The reforms, effective September 22, 2025, aim to boost tourism while maintaining revenue neutrality.

This is based on a press release which only contains the recommendations and the final effect will be through the relevant circulars, notifications and law amendments which alone will have the force of law.