Business EconomyPosted at: Sep 6 2025 12:23AM


GST Reform to drive growth in India’s hospitality sector

Mumbai, Sep 5 (UNI) The Goods and Services Tax (GST) Council has approved a reduction in tax rates for hotel rooms priced up to Rs 7,500 per night.
The new rate of five percent without input tax credit is expected to benefit budget and mid-market travellers, making domestic travel more accessible and affordable.
Reacting to this, Dr Shefali Joshi, Dean of the School of Hospitality Management at NMIMS University, highlighted the significance of this move for the hospitality sector.
“The recent reform in the Goods and Services Tax (GST) brings a significant opportunity for India’s hospitality sector. As someone closely involved in hospitality education and industry trends, I see this change as a positive step that will benefit both businesses and travellers. The reduction of GST to
five percent for hotels with room rates below Rs 7,500 per night is especially important for the mid-segment and budget travel markets. This makes travel more affordable and encourages more people to explore domestic destinations,” she said.
She explained that the benefits extend beyond reduced costs for travellers.
“Lower taxes on accommodation do more than reduce costs for travellers. They create a ripple effect across the economy. Higher affordability drives increased hotel occupancy, which in turn boosts demand for restaurants, local transport and leisure services. This multiplier effect strengthens not only the hospitality sector but also the local businesses and communities that rely on tourism.”
Domestic tourism is expected to see a notable boost. Dr. Joshi noted, “India’s rich cultural heritage and diverse landscapes offer countless opportunities for travel. By making stays more accessible, this GST change encourages families, young professionals and millennial travellers to plan more trips. It also supports regional economies and local attractions. Hotels are also encouraged to invest in better facilities, services, and staff, raising overall standards within the sector.”
Echoing this optimism, Mr. Akhil Arora, CEO & MD of Espire Hospitality Limited, said, “In my view, the reduction of GST on hotel rooms is a brilliant step and is a signal to focus on increasing the domestic tourism. This change will encourage people to take short but frequent holidays. What excites us most is the boost it will give to Tier-II and Tier-III cities. When travel becomes more affordable, people look beyond the obvious destinations and start exploring hidden gems. This spreads economic benefits to smaller destinations and gives local communities a real stake in tourism growth.”
Mr. Arora added that Espire Hospitality’s expansion plans align with this reform: “We have recently signed seven new ‘Country Inn Hotels & Resorts’ that falls under this price bracket, in Rishikesh, Goa, Udaipur and Ludhiana and are planning to expand in cities like Lucknow, Gwalior, Guwahati, besides Bengaluru, Chennai and Ahmedabad. We see more guests choosing to discover new places, and more hotels stepping up to create experiential stays in untapped markets.”
He emphasized the broader impact of the reform: “Lower GST is not merely about better margins - it is an opportunity to make travel more democratic, to inspire people to see more of India, and to ensure that every guest, whether on business or leisure, walks away with a story worth remembering. For us, the true impact lies not just in higher occupancy or more attractive pricing, but in the shift it creates in mindsets. Travellers who earlier hesitated to choose quality mid-segment stays will now see greater value in upgrading their travel experiences. This encourages a culture of aspiration, where Indian guests experience premium hospitality more often, and not only for rare occasions. That cultural change is far more powerful than the immediate numbers.”
The GST adjustment is being seen as a strong signal of government support for affordable domestic travel, with the potential to fuel sustained growth across the hospitality sector and regional tourism economies.
Khalid Hakim who owns famous Noor Mohamedi hotel in Mumbai and also a residential hotel in Mumbai, said that GST Council’s decision is a progressive step that will positively impact India’s hospitality industry and this rationalisation will make quality hospitality more accessible to domestic travellers, further boosting demand for tourism.
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