How GST affects luxury hotels and resorts in India

India’s hospitality industry attracts domestic and foreign tourists every year. But high Goods and Services Tax (GST) rates often increase the final bill for guests booking luxury hotels and resorts. Industry experts say understanding how GST applies can help travellers and operators plan better.

Hotels and resorts in India charge GST based on the room tariff per night. If a room costs up to ₹7,500 per night, it attracts 12% GST. If the room tariff is above ₹7,500, GST goes up to 18%.

Earlier, premium hotel stays could attract 28% GST.

This was lowered to 18% to make luxury travel more attractive.

However, the total value used to calculate GST may include more than just the room. For example, if extra beds, meals, or room service are bundled with the room, these may get taxed at the higher slab too.

Many hotels register as ‘specified premises’. In such cases, restaurants or outdoor catering inside the hotel also attract 18% GST with input tax credit.

What experts say about the structure

According to CA Mandar Telang, Secretary of the Bombay Chartered Accountants' Society (BCAS), the rules around what counts in the taxable value can create confusion. Guests often face higher bills when bundled services push the rate into the 18% slab.

Prabhat Ranjan, Senior Director at Nexdigm, explains that earlier, seasonal price changes forced hotels to switch GST slabs during peak and off-peak months. A new system now allows hotels to declare themselves as ‘specified premises’ at the start of the year, offering more stability. But the 28% GST slab still applies to very high-end tariffs, which some experts feel should be reviewed to support luxury tourism growth.

High tax rates mean hotels have to carefully plan packages and prices. Alam Khan, Vice President Sales at The Clarks Hotels & Resorts, says taxes make it harder to offer attractive all-inclusive deals. Some guests choose international destinations with lower tax rates for similar luxury stays.

To tackle this, resorts offer bundled services — like rooms with meals or spa services — and flexible pricing for longer stays. Many properties also invest in technology to cut costs and stay profitable while keeping quality high.

Tarun Gulati, Director at Ganga Kinare Resorts & Hotels, says India’s 18% slab makes luxury hotels less competitive than destinations like Sri Lanka, Vietnam, or Indonesia. “High slabs make hotels expensive. Rising costs and inflation add up, and the government takes away a significant share of gross revenue,” Gulati says. He adds that high taxes limit hotels’ ability to reinvest, expand services, or increase staff salaries, which can affect quality over time.

Calls for clearer rules

Brijesh Gandhi, Partner at NPV & Associates LLP, says Input Tax Credit helps hotels recover part of the tax they pay on goods and services used to run the property.

This supports investment in premium hospitality. But the link between room tariffs and restaurant taxes still needs clarity.

Many hotel owners want a simpler structure. Some suggest separate tax treatment for in-house dining and uniform rates to remove confusion.