India’s 2025 GST Shake-Up: What Hotels and Diners Need to Know

Big changes are here for India’s hospitality sector. As of April 1, 2025, the Goods and Services Tax (GST) rules for hotels and restaurants have been revamped-and if you run a hotel or love dining out, these updates directly affect you. Here’s a deep dive into what’s new, why it matters, and how it will shape your next stay or meal.

No More “Declared Tariff”: GST Gets Real

For years, hotels calculated GST based on the “Declared Tariff”-a published rate that often had little to do with what guests actually paid. That’s history now. From April 2025, GST is charged on the actual transaction value-the real price paid by the customer, discounts and all

Why this matters:

No more confusion or disputes over published vs. actual rates.

Taxes are now fairer and more transparent, reflecting what guests truly pay.

The ₹7,500 Rule: Who Pays What?

The government has introduced a clear threshold:

If any room in your hotel was sold for more than ₹7,500 per night in the previous financial year, your premises are now “specified premises.”

All restaurant services in these hotels must charge 18% GST (with Input Tax Credit, or ITC).

If your hotel never charged above ₹7,500 per night, you’re not a “specified premises.”

Restaurant services here stay at 5% GST (but without ITC).

What’s Input Tax Credit (ITC)?

It lets businesses offset the GST they pay on purchases against their GST liability-helping high-end hotels manage their tax burden.

Declaration Drama: Opting In or Out

If you want your restaurant to charge 18% GST with ITC (even if your room rates are below ₹7,500), you can voluntarily opt in by filing a declaration before the financial year starts.

Once you opt in, you’re in for the whole year-no switching back and forth.

For Diners: Will Your Meal Cost More?

Dining at luxury hotels (room rates above ₹7,500): Expect your food bill to carry 18% GST, up from 5% before. Yes, it’s a noticeable jump.

Dining at budget hotels (room rates below ₹7,500): The 5% GST rate continues, but hotels can’t claim ITC.

For Hoteliers: What’s Changing Behind the Scenes?

Simplified Compliance: No more juggling “Declared Tariff” paperwork-just report what you actually charged.

More Operational Clarity: You know your GST rate for the year upfront, making pricing and planning easier.

ITC Advantage: Premium hotels can now claim full ITC, improving cash flows and potentially offsetting the higher GST rate.

Strategic Pricing: Hotels now have an incentive to manage room rates and discounts carefully to stay below or above the threshold, depending on their business model.

What About Food Delivery Apps?

For restaurants inside “specified premises,” the restaurant-not Zomato or Swiggy-must pay the 18% GST on food orders.

For other restaurants, the earlier system (5% GST collected by the platform) continues.

Compliance Checklist for Hotels

File Declarations: If you’re opting for 18% GST with ITC, submit your declaration by March 31 for the next financial year.

Update Billing Systems: Ensure your invoices reflect the new GST rates and ITC eligibility.

Train Your Staff: Everyone from the front desk to the finance team needs to understand the new rules.

Coordinate with Delivery Platforms: Clarify who’s responsible for GST on every order.

The Big Picture: What Does This Mean for India’s Hospitality Sector?

Greater Transparency: Guests pay GST on the real price, not inflated published rates.

Operational Flexibility: Hotels can choose the GST regime that fits their business, but must stick with it for the year.

Potential Price Adjustments: Expect some luxury hotel dining bills to rise, but hotels can now claim more tax credits, which may offset costs in the long run.

Streamlined Compliance: Less paperwork and fewer disputes with tax authorities.

Conclusion

India’s 2025 GST reforms are a game-changer for hospitality. They bring clarity, fairness, and flexibility-but also demand careful compliance and smart pricing strategies. Whether you’re a hotelier or a guest, understanding these changes will help you make informed choices in the new era of Indian hospitality.

Sources

Treelife: GST Amendments Effective from 1st April 2025

TaxGuru: GST Rate Changes for Hotels and Restaurant Services wef 01.04.2025

ClearTax: GST on Hotel Rooms and Hospitality Industry in India

TaxGuru: Latest Amendments in GST related to Hotels & Restaurants

Economic Times: Restaurant services in hotels with tariff over Rs 7,500 per day to attract 18% GST from April

RNM: Indirect Tax Updates March 2025 – Key GST Changes & New