GST Cuts On Hotels And Flights Set To Boost Domestic Tourism; Experts Call It ‘A Game-Changer’

Heading into the festive season, travellers in India just got some good news. The Goods and Services Tax (GST) Council, chaired by Finance Minister Nirmala Sitharaman, has decided to ease the pinch of travel expenses by cutting tax rates on both hotels and airfares. The decision, taken at the Council’s 56th meeting on September 3 in New Delhi, will take effect from September 22, 2025.

Travel Expenses Get Slimmer With GST Cuts

According to NDTV, the changes are sweeping enough to make a difference to family holidays, wedding guests, and business trips alike, three categories that peak during the final quarter of the year.

For years, hotel rooms up to ₹7,500 a night sat under a 12% GST slab with input tax credit (ITC). That slab has now been pulled down to 5%, though without ITC. In practice, here’s what the new regime looks like:

• Rooms below ₹1,000 per night remain tax-free.
• Rooms between ₹1,000 and ₹7,500 will attract just 5% GST, instead of the earlier 12%.
  Premium rooms above ₹7,500 stay at 18%.
  

The sharpest relief is clearly for mid-market stays. That’s the segment most popular with India’s domestic travellers. “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,” said Rajesh Magow, Co-Founder and Group CEO of MakeMyTrip.

Nikhil Sharma, Managing Director & COO, South Asia at Radisson Hotel Group, pointed out that it isn’t just about cheaper tariffs: “This reform makes quality stays accessible to more travellers and strengthens India’s image as a high-potential tourism hub. For mid-scale and upper mid-scale hotels, this is a game-changer.”

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Flights: Economy At 5% GST

It isn’t just hotels. Air travel is also part of the GST rationalisation. Economy class tickets, previously under the 12% slab, will now be taxed at 5%. Business class, which attracted 18% earlier, drops to 12% now. 

That makes flights more affordable across the board, at a time when demand for both leisure and business travel is surging. “This is a relief to both the travel industry and the consumer,” said Sandeep Arora, Director of Brightsun Travel India. “It will encourage more people to explore destinations without breaking the bank.”

Tourism and hospitality were among the worst-hit sectors during the pandemic. Recovery has been underway, but high costs remain a barrier. “The GST rationalisation represents an uplifting change for any startup or emerging brand in the F&B industry, as it promises an easier working life. Up until now, the multiplicity of tax slabs has posed serious troubles for the young entrepreneurs to construct a transparent price structure, to remain in compliance, and to contend with such buying customers who are cost-conscious,” said Mr Simranjeet Singh, Director at CYK Hospitalities. By cutting GST on travel and other goods, the government hopes to give the sector fresh momentum, whether it’s leisure holidays, weekend getaways, or business mobility. 

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With weddings, festivals, and winter vacations around the corner, both hotels and airlines are bracing for high demand. From September 22 onwards, those bookings are set to get lighter on the wallet, nudging more Indians to travel, celebrate, and spend.

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