GST on Hotel Rooms in India Reduced to 5%: What Every Hotelier Needs to Know in 2025

A major update to GST rates that could boost your occupancy and bookings

The GST Council has introduced a significant change that is set to impact the Indian hospitality industry in a big way. Starting September 22, 2025, hotel rooms priced below ₹7500 per night will now attract only 5% GST, down from the previous 12% rate. This new slab applies without input tax credit. The 18% GST slab for rooms priced above ₹7500 remains unchanged.

🎥 Watch the Video Overview

Watch our short explainer video:
👉 https://www.youtube.com/shorts/VfiDIJClRmg

This quick update breaks down the change and what it means for your hotel operations.

Summary of the New GST Slab for Hotel Rooms

• Previous Rate: 12% GST on rooms below ₹7500/night
• New Rate: 5% GST (without input tax credit)
• Effective Date: 22nd September 2025
• No change to the 18% GST for rooms ₹7500 and above

What This Means for Indian Hoteliers

This is more than just a tax adjustment. It presents a strong opportunity for hoteliers to increase occupancy, drive more bookings, and improve revenue performance. Here's how:

1. Increased Affordability for Guests

The reduction in GST translates directly to lower final billing amounts for guests. This added affordability can make mid-range and upper mid-scale properties more attractive to both domestic and international travelers.

2. Higher Occupancy Rates

With the effective room price coming down, hoteliers can expect an increase in demand, especially in competitive markets and during lean seasons. A well-timed rate strategy can help convert this into higher occupancy.

3. Competitive Advantage for Properties Priced Below ₹7500

Hotels that fall just below the ₹7500 threshold will benefit the most. You can now offer premium experiences at better post-tax rates, making your property stand out on OTAs and direct booking channels.

How Stayflexi Helps You Maximize This Opportunity

At Stayflexi, we empower hotels and vacation rentals with tools that enable agile pricing, real-time inventory control, and automated revenue management.

• Our Flexi AI assistant can recommend the right rate adjustments based on market demand and competitor pricing.
• The rate and inventory calendar lets you adjust rates instantly across 100+ connected OTAs.
• With our booking engine and channel manager, you can respond to this GST change in real time and avoid missed opportunities.

If you’re a Stayflexi user, now is the perfect time to run promotions or adjust your rate plans to highlight the lower tax benefit to guests.

Practical Tips for Hoteliers

• Update your pricing strategy: Use dynamic pricing to stay just under the ₹7500 mark while maximizing value.
• Run direct booking campaigns: Emphasize “Lower GST, Better Value” in your marketing.
• Educate your front desk and reservations teams: Ensure they’re ready to explain the new pricing to walk-in and repeat guests.
• Monitor your competition: Use Stayflexi’s market intelligence tools to see how others are adapting their pricing.

Final Thoughts

This GST reduction is a timely boost for India’s hotel industry. It opens up new possibilities for growth, especially for mid-scale and leisure-focused properties. By acting fast and adapting your rate strategy, you can turn this policy shift into measurable results.

‍

‍