Understanding GST on hotel rooms is crucial for travellers and hoteliers alike. This article explores the applicable rates pre and post GST, and compliance requirements needed to be followed.
Pre-GST rate on hotel room
Before the implementation of GST hotel rooms were subject to a complex mix of taxes, such as Value Added Tax (VAT), service tax, luxury tax, and in some cases, entry tax. These taxes varied by state, creating inconsistencies and complications for both hotels and travellers. The introduction of GST in 2017 simplified this by consolidating multiple taxes into a single, uniform rate.
For example, let's look at a hotel room with a tariff of Rs. 10,000 per night in Bengaluru, Karnataka:
Category |
Pre-GST |
Post-GST |
Room Tariff |
Rs. 10,000 |
Rs. 10,000 |
Service Tax (10%) |
Rs. 1,000 |
N/A |
Luxury Tax (15%) |
Rs. 1,500 |
N/A |
GST (18%) |
N/A |
Rs. 1,800 |
Total Tax |
Rs. 2,500 |
Rs. 1,800 |
Total Payable Amount |
Rs. 12,500 |
Rs. 11,800 |
As seen in this example, the total tax burden decreases under the GST regime, leading to a lower total payable amount for the same room tariff.
Post-GST rate on hotel room
| Tariff range | GST rate |
| Below Rs. 1,000 | 0% |
| Rs. 1,000 to Rs. 2,499 | 12% |
| Rs. 2,500 to Rs. 7,499 | 18% |
| Rs. 7,500 and above | 28% |
GST for hotel rooms
| Tariff category | GST council rate |
| Economy (Below Rs. 1,000) | 0% |
| Budget (Rs. 1,000 - Rs. 2,499) | 12% |
| Mid-range (Rs. 2,500 - Rs. 7,499) | 18% |
| Luxury (Above Rs. 7,500) | 28% |
New GST Rates on Hotel Rooms
The GST rate on hotel rooms is set at 12% for room tariffs up to Rs. 7,500 per night, and 18% for room tariffs exceeding Rs. 7,500 per night.
Here’s a breakdown of the new GST rates based on hotel room tariffs:
Hotel Room Tariff per Night |
GST Rate |
Below Rs. 1,000 |
12% |
Rs. 1,000 to Rs. 7,500 |
12% |
Rs. 7,501 and Above |
18% |
Declared tariff or invoice cost for hotel room GST rate
The GST rate is determined based on the declared tariff or the actual invoice cost.
Declared tariff refers to the published room rate without discounts.
Discounts offered do not affect the GST rate if the declared tariff falls into a higher category.
The GST rate is applied based on the room’s declared tariff at the time of booking.
Additional services like food and beverages in rooms may attract separate GST rates.
Hotel GST rate for cancellations
GST is applicable on cancellation charges for hotel bookings.
The rate of GST on cancellation charges is the same as that on the booking.
For example, if the booking attracts 18% GST, the same rate applies to the cancellation fee.
GST must be paid by the hotel even if the booking is cancelled.
This ensures compliance and consistent revenue for the government.
Input tax credit on GST in hotel room
Hotels can claim an input tax credit (ITC) on GST paid for inputs used in providing services.
ITC is available for GST paid on goods and services used for business purposes.
This helps reduce the overall tax liability for hotel businesses.
Proper documentation and compliance are necessary to claim ITC.
Utilising ITC effectively can improve the financial health of hotel operations.
GST calculation on hotel room charges with example
Riya booked a room for Rs. 10,000 per night in Bengaluru and also availed of additional meal and spa services. Here's a detailed breakdown of the costs and GST calculations:
Component |
Cost (INR) |
GST Rate (%) |
GST Amount (INR) |
Room Tariff (2 nights) |
Rs. 20,000 |
18% |
Rs. 3,600 |
Meals (Food & Beverages) |
Rs. 3,000 |
12% |
Rs. 360 |
Spa Service |
Rs. 2,000 |
18% |
Rs. 360 |
- Total Package Price: Rs. 25,000
- Total GST: Rs. 4,320
- Final Amount Payable: Rs. 29,320 (Rs. 25,000 + Rs. 4,320)
Thus, the total amount payable for Riya’s stay, including GST, is Rs. 29,320.
You can also use a GST calculator to determine the exact tax amount.
Add the GST amount to the room tariff to get the total payable.
Ensure that the correct rate is applied according to GST council guidelines.
Conclusion
The introduction of GST has streamlined the tax structure for hotel rooms, ensuring uniformity across the country. It simplifies compliance, offers the benefit of input tax credit, and reduces the overall tax burden. For hotel businesses seeking financial support to manage operations and growth, considering a business loan can be a strategic move.
Here are some of the key advantages of our business loan that make it an ideal choice for your business expenses:
Rapid disbursement: Funds can be received in as little as 48 hours of approval, allowing businesses to respond promptly to opportunities and needs.
Simplified application process: Online applications streamline the process, reducing paperwork and saving time.
High loan amount: Businesses can borrow funds up to Rs. 80 lakh, depending on their needs and qualification.
No collateral required: You do not have to pledge any collateral to get our business loan, which is beneficial for small businesses without substantial assets.
These features and benefits of business loans make them a highly accessible and practical financial tool for businesses.
