GST on hotel rooms in 2026 is no longer decided by star rating or hotel brand - it is decided purely by the price you pay per night, and getting this one detail wrong can mean overpaying tax or losing input tax credit you were entitled to claim. Since the GST 2.0 rate rationalisation kicked in on 22nd September 2025, hoteliers, corporate travellers, and small business owners booking rooms for official trips have all been asking the same question: which slab does my room actually fall into now, and can I still claim ITC on it?

This guide breaks down the current GST structure for hotel rooms, restaurant billing inside hotels, and input tax credit eligibility - verified against the official GST Council recommendations and CBIC clarifications, so you don't have to dig through circulars yourself.

What Is the New GST Rate on Hotel Rooms in 2026?

Following the 56th GST Council meeting, the earlier 12% slab on mid-range hotel accommodation was scrapped entirely. Hotel rooms with a per-unit tariff of ₹7,500 or less per day now attract GST at 5%, but - and this is the part many hoteliers miss - this 5% rate is mandatory and comes with no input tax credit. There is no option to instead charge 18% with ITC on these units, even if the hotel would prefer to.

Rooms priced above ₹7,500 per night continue at 18%, and full ITC remains available on these higher-value bookings.

One important compliance shift: the applicable slab is now based on the actual value charged to the guest (the invoiced amount), not a "declared" or published tariff. So if a room listed at ₹8,000 is sold at ₹7,000 after a genuine discount, the 5% rate applies - because that's the real transaction value. Hotels running frequent seasonal offers need to keep this in mind while configuring billing software and OTA listings, since a mismatch between the PMS and OTA rate can trigger notices later.

GST on Restaurant Services Inside Hotels

This is where most confusion happens, because a hotel's restaurant doesn't automatically follow the room GST rate - it depends on whether the hotel qualifies as a "specified premises."

A property is treated as a specified premises if any unit of accommodation was supplied at more than ₹7,500 per day in the preceding financial year, or if the hotel has voluntarily opted in through the prescribed declaration. Standalone restaurants - even ones physically located inside a hotel building but run as a separate business - cannot declare themselves specified premises under any circumstance.

In simple terms: budget and mid-segment hotels bill food at a flat 5% with no credit benefit, while premium hotels that qualify as specified premises charge 18% but can claim ITC on their restaurant-related purchases.

Input Tax Credit Rules for Business Travellers and Hoteliers

Corporate travel desks and GST-registered businesses frequently ask whether hotel stays booked for employees can be claimed as ITC. The answer depends entirely on the room tariff slab, not on whether the stay was for business purposes.

Rooms taxed at 5% (₹1,001–₹7,500 tariff): No ITC can be claimed by the hotel or the business booking the room, regardless of purpose.

Rooms taxed at 18% (above ₹7,500 tariff): Full ITC is available, provided a valid GST-compliant tax invoice is issued and the business is registered under GST.

Hotels running properties with a mix of budget and premium rooms are required to apportion and reverse ITC on inputs and input services in line with Rule 42 and Rule 43 of the CGST Rules, since the 5% category is treated similarly to an exempt supply for credit purposes. This is one of the more operationally heavy parts of the new structure, and many mid-size hotel chains are still adjusting their accounting workflows around it.

Other Hospitality Services and GST Treatment

Not everything a hotel offers is taxed the same way. Ancillary services generally attract 18% GST with standard ITC eligibility, including:

Spa and wellness treatments

Banquet halls and event spaces

Conference and meeting room bookings

Laundry services billed separately

Where services are bundled together - for instance, a "stay plus breakfast plus spa" package - the applicable GST rate is usually decided by whichever component forms the primary or dominant supply. If accommodation is the main service, the room-tariff slab generally governs the whole package; if catering or event hosting is the dominant element, 18% typically applies to the bundle.

Hostels and paying-guest accommodations continue to enjoy exemption where the value of supply per person per month does not exceed ₹20,000, provided the stay is for a continuous period of 90 days or more. This exemption was untouched by the 2025-26 rate revisions.

Frequently Asked Questions 

Q1. What is the GST rate on hotel rooms below ₹1,000 per night?
Rooms priced at ₹1,000 or less per night remain exempt from GST.

Q2. Is GST on hotel rooms 5% or 18% in 2026?
It depends on the tariff: 5% applies to rooms priced between ₹1,001 and ₹7,500 per night, while 18% applies to rooms above ₹7,500.

Q3. Can hotels choose to charge 18% GST with ITC instead of 5% on budget rooms?
No. The 5% rate on rooms up to ₹7,500 is mandatory, and hotels cannot opt for 18% with ITC on these units.

Q4. Is ITC available on hotel bookings for business travel?
Only if the room tariff exceeds ₹7,500 per night and is taxed at 18%. Rooms taxed at 5% carry no ITC, even for business bookings.

Q5. What GST rate applies to hotel restaurant food?
5% without ITC in most hotels, and 18% with ITC only in hotels classified as "specified premises."

Q6. Can a standalone restaurant inside a hotel charge 18% GST?
No. Standalone restaurants cannot declare themselves as specified premises and must charge 5% without ITC, even if located within a specified-premises hotel.

Q7. When did the new hotel GST rates come into effect?
The revised rates took effect from 22nd September 2025, following the 56th GST Council meeting.

Q8. What is the HSN/SAC code for hotel accommodation services?
Hotel accommodation falls under HSN 9963, with SAC code 996331.

Q9. Does GST apply on the declared tariff or the actual amount paid?
GST is now applied on the actual value charged to the guest (the invoiced transaction value), not a notional or published tariff.

Author Bio

Vishnu Sain is an SEO Executive at LegalDev, specializing in SEO strategy, content optimization, and creating user-focused content around GST, taxation, registration, and business compliance topics. He works on making complex regulatory updates easier to understand through clear, practical, and search-optimized content. His focus is helping businesses and professionals stay updated with changing GST rules and improve their digital visibility through high-quality informational content.