Impact of GST on Tourism and Hospitality Industry in 2025 | GST 2.0 Updates
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- by MI September 18, 2025
The tourism and hospitality industry is one of the largest revenue generators in India. With the introduction of GST 2.0 in 2025, significant changes have been made to tax rates, compliance requirements, and pricing structures for hotels, restaurants, and travel services. This article explores how GST 2.0 impacts businesses and customers in this vital sector.
GST 2.0 Rates for Tourism and Hospitality
- Hotel Accommodation: Hotels with tariffs below ₹1,000 are exempt, while tariffs between ₹1,000–₹7,500 attract 12% GST. Luxury hotels above ₹7,500 are taxed at 18% GST.
- Restaurants: Non-AC restaurants attract 5% GST without ITC, while premium dining and AC restaurants attract 18% GST with ITC availability.
- Tour Operators: Services offered by travel agencies and tour operators attract 5% GST without ITC, and 18% GST with ITC on input services.
- Transportation: Air travel and cab aggregators fall under the 5%–12% GST bracket depending on the class and type of service.
How GST 2.0 Impacts the Tourism Industry
The new system aims to simplify compliance and increase transparency. However, it also impacts the overall pricing for customers and margins for service providers.
Positive Impacts
- Uniform tax structure across states simplifies travel package pricing.
- Boost for digital compliance with e-invoicing in hospitality businesses.
- Reduced cascading effect of multiple taxes from the pre-GST era.
Challenges for Businesses
- High GST rates on luxury hotels and restaurants may reduce premium segment demand.
- Small hotels and restaurants face difficulties in meeting e-invoicing compliance.
- Tour operators need to restructure pricing to remain competitive globally.
GST 2.0 Compliance Tips for Hospitality Businesses
- Adopt GST-ready billing and e-invoicing software to avoid penalties.
- Maintain clear records of input tax credits for services like catering, travel, and event management.
- Regularly reconcile GSTR-1 and GSTR-3B to ensure accurate reporting.
- Seek professional advice for international packages involving foreign services.
Conclusion
GST 2.0 in 2025 has brought both opportunities and challenges for India’s tourism and hospitality industry. While compliance has become more technology-driven, businesses must adapt quickly to remain competitive. Customers may face slightly higher prices, especially in the luxury segment, but the streamlined tax system improves transparency and consistency across the sector.
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