Finance Ministry Clarifies: Hotels up to Rs 7500 Tariff to Pay 5% GST Without ITC

Last updated: 18 September 2025

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The Finance Ministry has clarified that hotels with room tariffs up to Rs 7,500 per night must charge a mandatory 5% Goods and Services Tax (GST) without the option to claim Input Tax Credit (ITC). This ruling applies to all such accommodations, regardless of whether the hotel might prefer to opt for the 18% GST slab with ITC. The hospitality industry has expressed concerns that this change, particularly the removal of ITC, could increase operational costs and deter investment in the mid-scale and budget hotel segments.

The Ministry of Finance has reiterated through a fresh set of FAQs that hotels charging up to Rs 7,500 per room per day will be taxed at a mandatory 5% GST rate without ITC. The clarification settles industry queries on whether hotels could voluntarily opt for the 18% GST slab with ITC for such units. Ministry's Stand According to the Finance Ministry, "Suppliers of hotel accommodation service where the value of a unit of accommodation is less than or equal to Rs 7,500 per unit per day shall h

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FAQ :

Hotels charging up to Rs 7,500 per room per day must charge a mandatory 5% GST.

No, the Finance Ministry has clarified that hotels charging up to Rs 7,500 per room per day cannot opt for the 18% GST slab with ITC; they must charge 5% GST without ITC.

'Without ITC' means hotels cannot claim credit for the GST paid on their business expenses, which increases their overall operational costs.

The hospitality sector, especially mid-scale and budget hotels, is concerned that the removal of ITC will increase operating costs, reduce profit margins, and discourage new investments.

Industry associations like the Hotel Association of India (HAI) and FAITH have raised concerns and are seeking discussions with the government to allow ITC on the 5% slab for tariffs up to Rs 7,500.

The government maintains that the simplified 5% GST slab for rooms up to Rs 7,500 is intended to promote greater uniformity and affordability for consumers.

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CCI News Desk

Finance news reporter covering taxation, GST, income tax, business compliance, and economy updates. I simplify complex financial topics into easy-to-understand articles for professionals, taxpayers, and business owners on leading finance and tax platforms.

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