Nearly a month after the Goods and Services Tax (GST) on hotel rooms priced at ₹7,500 or less was slashed from 12% to 5%, the majority of consumers are yet to fully benefit from the rate cut, a LocalCircles survey reveals.
Effective September 22, 2025, the GST reduction was intended to lower room charges in mid-scale and budget hotels, with rules prohibiting any increase in base tariffs to offset the tax cut. However, hotels in this segment remain ineligible for input tax credit (ITC) on utilities such as power and water, prompting industry calls for special exemptions.
The LocalCircles survey, which received 17,235 responses from 288 districts, found that only 16% of consumers reported receiving the full benefit of the GST reduction. Another 56% said they received partial benefit, while 28% reported no reduction at all.
“These numbers point to a significant gap between policy intent and consumer experience,” said a LocalCircles spokesperson. “Hotels are passing on only part of the benefit or adjusting discounts, limiting observable savings for travelers.”
Survey demographics showed 64% of respondents were men and 36% women, with 43% from tier-1 cities, 29% from tier-2, and 28% from tier-3, tier-4, tier-5, and rural districts. Many consumers noted that while the 5% GST was applied in bills, hotels often raised base room rates or reduced promotional discounts, resulting in marginal or negligible savings.
The issue gained further attention after a September ruling by the GST Appellate Tribunal (GSTAT), which found a hotel guilty of profiteering for increasing its base tariff post-GST reduction. The hotel was ordered to deposit the profiteered amount, with interest, into the Consumer Welfare Fund.
With the festive season approaching, when mid-scale and budget hotel bookings typically surge, consumer advocates warn that hotels may continue to limit the benefits of GST cuts. Industry insiders say that mid-scale hotels are pushing for ITC eligibility on the 5% slab to ease cost pressures, a move likely to be debated in policy circles in the coming weeks.
Survey snapshot
- Total respondents: 17,235 across 288 districts
- Gender: 64% men, 36% women
- City tier: 43% tier-1, 29% tier-2, 28% tier-3/4/5 & rural
- GST benefit received: Full benefit – 16%, Partial benefit – 56%, No benefit – 28%
The survey underscores the need for stronger enforcement to ensure GST cuts translate into tangible savings for consumers, especially during peak travel periods.
Source from: https://www.cnbctv18.com/economy/gst-rate-cut-on-mid-scale-hotels-only-16-of-consumers-see-full-benefit-19718732.htm
