Hotel rooms sit in two GST slabs, not three. Charge ₹7,500 a night or less and the rate is 5% with no input tax credit. Charge above that and it is 18% with credit.
That has been the position since 22 September 2025, when the 12% slab was removed. Anything you read about a 12% band, or about rooms under ₹1,000 being exempt, is describing a structure that no longer exists.
In the properties we work with, the rate itself is rarely the problem. Getting the tariff test right is, because it does not work the way most owners assume.
Key Takeaways
- Two slabs only: 5% at ₹7,500 a night or less, 18% above it
- The 5% rate comes without input tax credit
- The exemption for rooms under ₹1,000 ended on 18 July 2022
- The rate follows what you actually charge, not your printed tariff
- Your room rate also decides what your in-house restaurant charges
The Hotel Room GST Slabs, and What Changed
Two rows, and the whole structure fits in them.
| Room Value Per Unit Per Day | GST Rate | Input Tax Credit |
|---|---|---|
| ₹7,500 or less | 5% | Not available |
| Above ₹7,500 | 18% | Available |
The change came through Notification No. 15/2025-Central Tax (Rate), issued on 17 September 2025 and effective from 22 September 2025, following the 56th GST Council meeting. The Council’s own press release sets out the two-rate structure it moved to.
One caution. Published summaries word the threshold inconsistently, a few putting a room priced at exactly ₹7,500 in the higher slab. If your rate lands precisely on the line, confirm that one booking with your accountant rather than assuming.
What Changed in September 2025
Before that date there were three bands, and the middle one carried credit.
| Period | ₹7,500 or Less | Above ₹7,500 |
|---|---|---|
| Until 21 September 2025 | 12% with ITC | 18% with ITC |
| From 22 September 2025 | 5% without ITC | 18% with ITC |
So a mid-market property did not simply get cheaper. It moved from 12% with credit to 5% without it. The headline rate fell by seven points, and the GST paid on linen, electricity, commissions and refurbishment stopped being recoverable on the same day.
Whether that is a gain depends on how input-heavy the property is. A lean guesthouse gains. A property mid-refurbishment, carrying large input tax on the fit-out, may not.
The premium end was left alone. Rooms above ₹7,500 stayed at 18% with credit through the whole rationalisation, so a five-star property saw no change to its room tax at all. The rate movement in 2025 was entirely below the line, which is why the change landed hardest on the mid-market where most Indian rooms sit.
Why the ₹1,000 Exemption No Longer Exists
This is the most persistent bad information on the topic, and it is four years out of date.
Accommodation with a declared tariff below ₹1,000 a day used to be exempt under Entry 14 of Notification 12/2017. Notification No. 04/2022 omitted that entry with effect from 18 July 2022, following the 47th GST Council meeting, which listed the change under its withdrawal of exemptions.
From that date every room became taxable regardless of price. A ₹600 room in a small lodge carried 12% then, and carries 5% now. There is no floor below which GST stops applying.
If a guide, a consultant or a booking platform’s help page still shows a nil band under ₹1,000, it has not been updated since 2022.
Whether a very small property has to register at all is a separate question, decided by turnover rather than room rate. Our guide to GST registration covers those thresholds.
The Rate Follows What You Charge, Not Your Printed Tariff
Here is the test owners get wrong most often.
The slab is decided by the value of supply for each unit of accommodation per day, meaning the amount actually charged on that booking. It is not the declared or rack tariff on the board behind reception.
That shifted on 1 October 2019 through Notification No. 20/2019-Central Tax (Rate). The 37th GST Council meeting that recommended it set the rates against “transaction value per unit per day”. Before that, the printed tariff governed. Now the billed amount does.
The practical effect is that one room can fall in different slabs on different nights. As an example, a Udaipur property listing a suite at ₹9,000 sells it at ₹6,800 in a soft August week. That booking is a 5% booking. The same suite at ₹8,200 in December is an 18% booking. Same room, same tariff card, two slabs.
The Pricing Cliff at ₹7,500
Because the two slabs are thirteen points apart, the threshold is not a gentle slope. It is a step.
| Room Rate | Slab | GST | Guest Pays |
|---|---|---|---|
| ₹6,800 | 5% | ₹340 | ₹7,140 |
| ₹7,400 | 5% | ₹370 | ₹7,770 |
| ₹7,600 | 18% | ₹1,368 | ₹8,968 |
| ₹8,200 | 18% | ₹1,476 | ₹9,676 |
Look at the middle two rows. Raising a room from ₹7,400 to ₹7,600 puts ₹200 more in your pocket and ₹1,198 more on the guest’s bill. The tax does the rest of the work.
That is why properties pricing near the line tend to sit deliberately below it. To land the same ₹7,770 total on the 18% slab, the room would have to drop to about ₹6,585, which is less than the ₹7,400 you were charging before. Crossing the threshold only pays once you are clearly past it.
Worth modelling with a GST calculator before a festive or wedding-season price rise, rather than after.
What Losing Input Tax Credit Means at 5%
The rate cut and the credit loss arrived together, so read them together.
On 5% you cannot set off the GST charged to you on inputs. Housekeeping supplies, laundry contracts, OTA commission, air conditioning servicing and furniture all carry GST that now stays with you as a cost.
Commission is the line that stings most. An online travel agent’s fee carries GST of its own, and on the 5% slab none of it comes back, so the real cost of a channel booking is higher than the percentage in your contract suggests.
At 18% that credit is available, subject to the usual blocked-credit and reversal rules, which is why a premium property’s economics look different from a mid-market one’s on the same street. The CBIC GST portal carries the Act, the rules and the rate notifications in full if you want the underlying text.
Price with that in mind. A property moving from 12% to 5% has a lower headline rate and a higher input cost, and only its own numbers show which way that lands.
How Your Room Rate Decides Your Restaurant’s Rate
This is the part hoteliers miss, and it costs more than the room rate question.
A restaurant inside a hotel charges 18% with credit only if the premises is “specified”, and the main test looks at the rooms rather than the food. Where accommodation was supplied above ₹7,500 per unit per day in the preceding financial year, the premises is specified for the following year, and the in-house restaurant follows at 18%.
Below that, the restaurant sits at 5% without credit like any standalone outlet. Our guide to restaurant GST billing sets out both sides, including why a standalone restaurant cannot opt into 18%.
So one December booking at ₹8,200 can change what your coffee shop charges for the whole of next year. That is worth knowing before you price a festive package.
Getting the Right Slab Onto Every Invoice
Two slabs sounds simple until a property runs both in the same week.
A tax invoice has to carry your GSTIN, the invoice number and date, and the tax split into CGST and SGST for a stay inside your own state, which covers most bookings. Our GST invoice template shows the full field list.
The risk is a fixed rate sitting in your billing setup. If the system is set to 5% and a suite goes out at ₹8,900, the invoice is wrong and the shortfall is yours to make good.
As a second example, a Coorg resort selling eleven rooms below the line and two above it on the same night needs both slabs on one night’s billing run, not a single default. A restaurant and hotel POS that reads the slab from the billed value handles that without anyone remembering to switch it.
Conclusion
Two slabs, one threshold, one test. At ₹7,500 a night or less it is 5% with no input tax credit, above it is 18% with credit, and the figure that decides it is the amount you actually charge.
Two pieces of stale information cause most of the trouble: the 12% band, which went on 22 September 2025, and the exemption under ₹1,000, which went on 18 July 2022. Neither exists now.
Check what your billing system does when a room crosses the line mid-season. If your hotel POS reads the slab from the billed amount, that question answers itself. Rates change, so confirm your own position with your CA.
Frequently Asked Questions
Yes. The exemption for rooms below ₹1,000 was withdrawn on 18 July 2022, so every room is taxable regardless of price. A room at ₹600 a night carries 5% today. Any source still showing a nil band predates that change.
Per unit of accommodation per day, so per room per night. A guest taking two rooms at ₹5,000 each is at 5% on both, not 18% on a ₹10,000 total. The test never aggregates rooms.
No. The 5% slab comes without input tax credit, so GST on linen, commissions, utilities and refurbishment is a cost rather than a set-off. Credit is available only at 18%, and even then the usual blocked-credit and reversal rules apply.
Yes. Where accommodation was supplied above ₹7,500 per unit per day in the preceding financial year, the premises becomes “specified” and the in-house restaurant charges 18% with credit instead of 5%. Our post on GST rates for restaurants covers the categories in full.
The rate follows the value actually charged, so a discounted booking below ₹7,500 takes 5% even where the rack rate is higher. That has been the position since 1 October 2019, when the test moved from declared tariff to transaction value.
