GST on Hotel Room Tariff in 2026: 5% or 18%, Food, OTAs and ITC

What is the GST on hotel rooms after 22 September 2025?

From 22 September 2025, a hotel room with a value of supply up to seven thousand five hundred rupees per unit per day attracts 5% GST without input tax credit (ITC). A room above that value attracts 18% with ITC. The earlier 12% slab is gone.

The PIB press release on the 56th GST Council meeting, dated 3 September 2025, lists “hotel accommodation” up to that value moving from “12% with ITC” to “5% without ITC” from 22 September 2025. Notification 15/2025-Central Tax (Rate) of 17 September 2025 set central tax at 2.5%, with a no-credit condition, in serial 7, item (i) of the services rate notification, 11/2017-Central Tax (Rate). Costlier rooms fall in item (vi), at 9% central tax. Hotel rooms take SAC 996311 under heading 9963.

Within a state the tax splits equally into CGST and SGST, so 5% shows as 2.5% plus 2.5% and 18% as 9% plus 9%. Notification 06/2026-Central Tax (Rate), in force from 1 November 2026, keeps these rates but lets a 5% hotel claim limited credit, capped at 2.5% central tax, on rooms it buys from another hotel.

How is the seven thousand five hundred rupee limit worked out?

The test is the value of supply of one unit of accommodation per day, that is, what is actually charged for that room, not the rate card. A room at exactly seven thousand five hundred rupees is still in the 5% slab, because the entry reads “less than or equal to”.

Since 1 October 2019, Notification 20/2019-Central Tax (Rate) has tested rooms on the “value of supply of a unit of accommodation”. “Declared tariff”, the published charge without any discount, survived only in the specified premises definition until Notification 05/2025-Central Tax (Rate) omitted it from 1 April 2025.

• Per unit: each room, suite or cottage is tested on its own value.
• Discounts: the test follows the value charged; ask your CA about discounts given after the stay.
• Packages: where meals or extra beds are bundled, get your CA’s view on what counts as room value.

The worked example, in plain units: on a room bill of 100 in the 5% slab, GST is 5, shown as 2.5 CGST and 2.5 SGST. On a room bill of 100 in the 18% slab, GST is 18.

Is there still a GST exemption on hotel rooms below one thousand rupees?

No. The exemption for rooms with a declared tariff below one thousand rupees a day was removed from 18 July 2022. Such rooms were taxed at 12% until 21 September 2025 and at 5% without ITC from 22 September 2025.

Serial 14 of the services exemption notification, 12/2017-Central Tax (Rate), exempted a hotel, inn, guest house, club or campsite with a declared tariff below one thousand rupees per day. Notification 04/2022-Central Tax (Rate) omitted serial 14, and Notification 03/2022-Central Tax (Rate) deleted the words “above one thousand rupees but” from the room rate entry, both from 18 July 2022.

An unregistered guest house below the Section 22 threshold, twenty lakh rupees of aggregate turnover in most states and ten lakh rupees in special category states, does not charge GST.

What is the GST on hotel food and room service?

Restaurant service in a hotel is taxed at 5% without ITC unless the hotel is a “specified premises”, where it is 18% with ITC. A hotel becomes a specified premises if it supplied any room above seven thousand five hundred rupees per unit per day in the previous financial year, or if it opts in.

Notification 05/2025-Central Tax (Rate) rewrote the definition from 1 April 2025. A premises is specified for a year if it supplied a room above that value in the preceding year, or if the hotel opted in by filing Annexure VII between 1 January and 31 March (Annexure VIII for a new applicant, within fifteen days of the registration acknowledgement). Annexure IX opts out in the same window.

The CBIC explanatory notes to the services classification place hotel food services, “including room services, takeaway services and door delivery of food”, under code 996332. Opting in can suit a food business with heavy GST-paid costs; ask your CA to compare. Standalone restaurants are covered in our guide to GST on restaurant food bills.

What is the GST on a hotel banquet hall or conference room?

A banquet package that combines catering with the hall is taxed as a composite outdoor catering supply: 5% without ITC when the hotel is not a specified premises, and 18% with ITC when it is. A hall or meeting room rented alone, with no food, is a rental of non-residential property.

Serial 7, item (v) of Notification 11/2017-Central Tax (Rate) covers the “composite supply of outdoor catering together with renting of premises” at 2.5% central tax without credit. Explanation (e) under item (vi) moves the same package to 9% central tax for hotels at specified premises.

• Hall or conference room only: the explanatory notes put rental of non-residential property, including convention centres, under code 997212 in heading 9972, which the rate notification taxes at 18% in all. Confirm the current entry with your CA.
• Room blocks for guests: room nights billed as hotel accommodation are tested against the seven thousand five hundred rupee limit like any other room.

Who pays GST on hotel booking by agent, and on cancellation charges?

When a room is booked through an e-commerce platform, the platform pays GST on the room under Section 9(5), unless the hotel is itself liable to register under Section 22(1). Cancellation charges and no-show forfeits take the same rate as the room.

Clause (ii) of Notification 17/2017-Central Tax (Rate) covers accommodation in “hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes”, except where the hotel is liable to register under Section 22(1). So an unregistered guest house below the threshold can sell online while the platform pays, and a larger hotel pays its own GST. The platform’s commission is a separate supply; ask your CA about it.

On cancellations, Circular 178/10/2022-GST of 3 August 2022 names hotel accommodation in paragraph 11. It says allowing cancellation against a fee, or retaining or forfeiting the consideration or deposit, should be assessed as the principal supply.

For more direct bookings, see our guide to building a hotel booking website.

Can guests claim ITC on hotel stays, and can a hotel use the composition scheme?

A registered business guest can usually claim GST on a room booked for business, subject to Section 16 of the CGST Act; the no-credit condition in the 5% slab binds the hotel, not the guest. Food on the bill is generally blocked. A hotel earning mainly from rooms cannot use the restaurant composition scheme.

• Guest’s credit: needs a tax invoice with the company’s GSTIN and the Section 16 conditions met. Section 17(5)(b) blocks credit on food and beverages and outdoor catering, except when used for an outward supply of the same category.
• Hotel at 5%: no credit on its own inputs such as linen, furniture or renovation; from 1 November 2026, limited credit only on rooms bought from another hotel.
• Hotel at 18%: full credit under the usual rules.

Section 10(1) composition suits traders, manufacturers and restaurants, with a limit of one crore fifty lakh rupees in most states under Notification 14/2019-Central Tax; other services are capped at ten per cent of turnover or five lakh rupees, whichever is higher, which rules out a hotel earning mainly from rooms. Section 10(2A) lets service providers with turnover up to fifty lakh rupees pay 6% in all under Notification 2/2019-Central Tax (Rate), but not if they make inter-state supplies or sell through a platform that collects tax at source. Neither scheme allows collecting tax or claiming credit, and 6% is above the 5% room slab.

The same credit logic applies to a hotel’s other business bills, such as GST on Google Ads invoices.

How DVM Techno Can Help

DVM Techno is a web and software company in Sector 84, Gurgaon, with a local office in Kasni, Jhajjar. Our hotel and resort website design gives each room type its own page with real photos, occupancy and a cancellation policy in plain words, connects the booking engine you choose, and sends banquet and group enquiries to WhatsApp and email. A corporate stays page can collect the company name and GSTIN to help with invoices. Your GST treatment stays with your CA.

Frequently Asked Questions