In the Lok Sabha, the Minister of State in the Ministry of Finance, Shri Pankaj Chaudhary, on 20 July 2026, informed that the GST rate on hotel accommodation services with a transaction value of ₹7,500 or less per unit per day has been reduced from 12 per cent with Input Tax Credit to 5 per cent without Input Tax Credit.
The information was provided in a written reply to Lok Sabha Unstarred Question No. 108, titled “Post-GST Rationalisation Trends in Tourism and Hospitality Sector.”
The rate reduction was implemented on the recommendation of the GST Council at its 56th meeting held on 3 September 2025. The measure is expected to reduce the tax burden on the tourism and hospitality sector, lower the cost of hotel accommodation, improve affordability and stimulate consumer demand.
The Minister stated that the lower GST rate is also expected to improve trade competitiveness and support the hospitality industry by reducing compliance burdens and transaction costs.
The Government, however, has not yet undertaken any post-implementation review or data-based assessment of the measure’s impact on hotel occupancy, tourist footfall, affordability or revenue trends. No separate sector-wise analysis has been conducted on its impact on tourism growth, investment and employment generation in Tier-II and Tier-III cities.
Shri Pankaj Chaudhary further informed the Lok Sabha that GST rates and exemptions are prescribed on the recommendations of the GST Council, which comprises representatives of the Union Government and State and Union Territory Governments. At present, no proposal to review the 5 per cent GST rate without ITC is pending before the GST Council.
To ensure that the benefit of the reduced tax rate reaches consumers, the Government held discussions with industry stakeholders and emphasised that the tax reduction should be passed on directly to customers. The Government stated that the 5 per cent rate without ITC is intended to reduce the overall cost of services and make hotel accommodation more affordable for the common citizen.
The Unstarred Question can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/07/LS-Post-GST-Rationalisation-Trends-in-Tourism-and-Hospitality-Sector-20.07.2026.pdf
