If you run a hotel, guest house, or any accommodation business in India, GST is no longer the complicated four-slab structure it used to be.

The 56th GST Council meeting changed everything effective 22 September 2025. The 12% slab is gone. The structure is now simpler  0%, 5%, or 18%  but the rules around which rate applies when, especially for mixed-tariff hotels and restaurants inside hotels, are more nuanced than ever.

Get it wrong and you're either overcharging guests (and losing bookings) or undercharging the government (and inviting a demand notice with 18% interest).

This guide covers every rate, every rule, every calculation, and every trap  written by Chartered Accountants with examples drawn from real hotel businesses across India.

Verify your GST calculation before billing any guest  free tool:
hisabkitab.co/gst-calculator-online

What Changed After the 56th GST Council Meeting (September 2025)

The most important update every hotelier in India needs to know:

The 12% GST slab for hotel rooms has been abolished.

Effective 22 September 2025, under Notification No. 15/2025-Central Tax (Rate) dated 17 September 2025, the GST rate structure for hotel accommodation was simplified from four slabs to three:

What this means in simple terms:

• If a guest pays ₹6,000 per night, they were earlier paying ₹720 in GST (12%). Now they pay ₹300 (5%). A saving of ₹420 per night  which makes your rooms more competitive.

• If a guest pays ₹10,000 per night, nothing changes. Still 18%.

• If a guest pays ₹800 per night  no GST at all. Still exempt.

Important: The GST rate is determined by the actual transaction value (value of supply)  the amount the guest actually pays, including any discount  not the published rack rate.

GST Rate on Hotel Rooms  Full Breakdown with Examples

Category 1: Exempt rooms (up to ₹1,000 per night)

Budget hotels, dharamshalas, pilgrims' accommodation, and very low-cost lodges that charge ₹1,000 or below per night pay zero GST.

Example: A lodge in Varanasi charges ₹750 per night. No GST. Guest pays ₹750. No GST invoice required (though a regular receipt should be issued).

Important note: If you offer a room at ₹1,200 per night but give a discount to ₹900, the actual transaction value is ₹900  which falls in the exempt slab. But this discount must be genuine, reflected in the invoice, and consistent with your published pricing policy.

Category 2: 5% GST  No ITC (₹1,001 to ₹7,500 per night)

This is the most common category for mid-range hotels, business hotels, and 2-3 star properties across India.

GST rate: 5% (2.5% CGST + 2.5% SGST for intra-state; 5% IGST for inter-state) ITC: Not available  the hotel cannot claim input tax credit on goods and services used to provide this accommodation

Example calculation: A business hotel in Pune charges ₹5,500 per night. One guest stays for 3 nights.

• Room tariff: ₹5,500 × 3 = ₹16,500

• GST at 5%: ₹825

• Total invoice amount: ₹17,325

The hotel collects ₹825 as GST, pays it to the government via GSTR-3B, but cannot claim ITC on the furniture, housekeeping supplies, linen, electricity, or renovation costs used to provide those rooms.

The ITC trap for mid-range hotels: This no-ITC condition significantly affects cost calculations. A hotel spending ₹80 lakh annually on supplies and services (furniture, maintenance, staff, linen, electricity  all with embedded GST) cannot recover any of that GST if all their rooms are in the 5% slab. This makes pricing strategy critical.

Category 3: 18% GST  ITC Available (above ₹7,500 per night)

Premium hotels, 4-5 star properties, luxury resorts, and business hotels charging above ₹7,500 per night.

GST rate: 18% (9% CGST + 9% SGST for intra-state; 18% IGST for inter-state) ITC: Fully available  the hotel can claim input tax credit on all goods and services used to provide these rooms

Example calculation: A 5-star hotel in Mumbai charges ₹12,000 per night. One guest stays for 2 nights.

• Room tariff: ₹12,000 × 2 = ₹24,000

• GST at 18%: ₹4,320

• Total invoice amount: ₹28,320

The hotel collects ₹4,320 as GST, pays it to the government, and can claim ITC on all purchases and services used in running these rooms.

For business travellers: A company can claim ITC on hotel rooms only when the room tariff exceeds ₹7,500 per night and the stay is for official business purposes. If your employee stays in a ₹5,000/night room, the company pays 5% GST but cannot recover it.

The Mixed-Tariff Hotel Problem  When You Have Both Standard Rooms and Suites

This is where most multi-category hotels go wrong.

If your hotel has standard rooms at ₹4,500/night and premium suites at ₹9,500/night, you are running two GST slabs under one roof.

Here's what the rules say:

• Each room is taxed based on its own tariff

• ₹4,500 rooms: 5% GST, no ITC

• ₹9,500 suites: 18% GST, full ITC

The ITC apportionment challenge: You cannot claim the full ITC on all your purchases. ITC must be apportioned between taxable supplies (18% rooms) and non-ITC supplies (5% rooms) using Rule 42 and Rule 43 of the CGST Rules, 2017.

Practical example:

Grand Palace Hotel in Jaipur has:

• 40 standard rooms at ₹4,500/night (5% GST, no ITC)

• 10 premium suites at ₹10,000/night (18% GST, with ITC)

Monthly room revenue: ₹54,00,000 standard + ₹30,00,000 suites = ₹84,00,000 total

GST paid on hotel purchases (maintenance, linen, supplies): ₹6,00,000

ITC claimable: only the portion attributable to the 18% suite business

Under Rule 42: ITC × (taxable turnover ÷ total turnover) = ₹6,00,000 × (₹30,00,000 ÷ ₹84,00,000) = ₹2,14,286 claimable

The remaining ₹3,85,714 must be reversed  it's a cost to the hotel, not a recoverable credit.

The record-keeping requirement: Hotels with mixed tariff levels must maintain separate ledgers per room category, booking-wise segregation, and monthly ITC apportionment calculations. Failing to do this correctly is one of the top reasons hotels receive GST audit notices.

The "Specified Premises" Rule  The Trap That Catches Hotels Off Guard

This is the single most misunderstood rule in hotel GST compliance. It determines the GST rate on your restaurant  and it can change automatically based on what your rooms are priced at.

What is a "Specified Premises"?

A hotel is classified as a "Specified Premises" if at least one room was sold at above ₹7,500 per night in the preceding financial year.

Under Notification No. 11/2017-Central Tax (Rate) as amended, and operationalised via Notification No. 05/2025-Central Tax (Rate) and the GSTN Advisory dated 04 January 2026, the classification works as follows:

Automatic specified premises status: If any room in your hotel fetched above ₹7,500 in FY 2025-26, your entire property is automatically classified as a specified premises for FY 2026-27.

Voluntary opt-in: A hotel that didn't cross the threshold can voluntarily declare itself a specified premises by filing Annexure VII on the GST portal between 1 January and 31 March of the preceding year.

Voluntary opt-out: A hotel that was a specified premises but no longer meets the threshold can file Annexure VIII to opt out.

Why Does "Specified Premises" Status Matter?

Because it determines the GST rate on your restaurant.

The trap: A hotel that occasionally sells one or two premium suites at ₹9,000 becomes a "specified premises" for the entire following year  even if 95% of its rooms are budget rooms at ₹3,500.

Real example  Grand Palace Hotel, Jaipur:

Grand Palace has 45 standard rooms at ₹4,500/night and 5 suites at ₹9,000/night. They sold at least one suite in FY 2025-26. This makes them a specified premises for FY 2026-27.

Their restaurant must now charge 18% GST with ITC  even though most guests are budget travellers who came for the ₹4,500 rooms. Guests expecting a 5% restaurant bill get an 18% bill instead. The hotel either absorbs the difference in pricing or surprises guests at checkout.

What most hotel owners don't realise: This classification applies to all guests dining in the restaurant  including walk-in guests who are not staying in the hotel. The restaurant rate is determined by the hotel's premises status, not by which type of room the dining guest is staying in.

GST on Other Hotel Services

Banquet Halls and Conference Rooms

Banquet halls, conference facilities, event spaces, and meeting rooms attract 18% GST regardless of the hotel's room tariff category.

SAC code: 996331 (Accommodation services for conferences and meetings)

Bundled packages: If a hotel offers "conference room + lunch + accommodation" as a single package, GST is applied based on the principal supply  typically the accommodation. However, if the conference room and catering are priced separately, each attracts its own rate.

Spa, Gym, Laundry, and Wellness Services

All ancillary services  spa treatments, gym access (if charged separately), laundry, dry cleaning, salon  attract 18% GST with ITC available.

SAC codes:

• Laundry: 997312

• Spa and wellness: 999721

• Gym/fitness: 999721

Room Service and In-Room Dining

• If billed separately on the room invoice: 5% GST (for non-specified premises) or 18% (for specified premises)

• If included as a composite package with the room: follows the room tariff rate

Alcoholic Beverages

Alcohol is outside the GST framework  it is subject to state excise duty, not GST. Do not include alcohol in your GST invoice. It must be billed separately under state excise rules.

This creates a common invoicing mistake: hotels that include alcohol charges in the same invoice as food end up applying GST incorrectly to the full bill.

GST Calculations  Step by Step with Examples

Example 1: Budget hotel, single-tariff, no restaurant

Hotel: 20 rooms at ₹2,000/night Guest: 2 nights Calculation:

• Room tariff: ₹2,000 × 2 = ₹4,000

• GST at 5%: ₹200 (₹100 CGST + ₹100 SGST)

• Invoice total: ₹4,200

• ITC for hotel: Not available

Use hisabkitab's GST Calculator to verify: hisabkitab.co/gst-calculator-online

Example 2: Premium hotel, with restaurant (specified premises)

Hotel: 30 rooms at ₹9,000/night  specified premises Guest stay: 1 night Restaurant bill: ₹2,500

Room invoice:

• Room: ₹9,000

• GST at 18%: ₹1,620 (₹810 CGST + ₹810 SGST)

• Room total: ₹10,620

Restaurant invoice:

• Food: ₹2,500

• GST at 18% (specified premises): ₹450 (₹225 CGST + ₹225 SGST)

• Restaurant total: ₹2,950

Total guest bill: ₹13,570 ITC available for hotel: Yes  on both room and restaurant

Example 3: Mixed-tariff hotel (the most complex case)

Hotel: 30 standard rooms at ₹5,000/night + 5 suites at ₹11,000/night

Standard room invoice (guest staying 2 nights):

• Room: ₹5,000 × 2 = ₹10,000

• GST at 5%: ₹500

• Total: ₹10,500

• ITC: Not available to hotel

Suite invoice (guest staying 2 nights):

• Room: ₹11,000 × 2 = ₹22,000

• GST at 18%: ₹3,960

• Total: ₹25,960

• ITC: Available to hotel

Restaurant invoice (same hotel, now specified premises due to suite pricing):

• Food bill: ₹3,000

• GST at 18%: ₹540

• Total: ₹3,540

GST Compliance Calendar for Hotels  Monthly Tasks

6 GST Mistakes Hotels Make Most Often

Mistake 1: Still using the 12% slab after September 2025 Many hotels  especially those using older billing software  are still charging 12% on rooms between ₹1,001 and ₹7,500. This means overcharging guests. Refunds or credit notes must be issued for the excess collected.

Mistake 2: Not checking specified premises status at the start of each financial year If any room crossed ₹7,500 in the previous year, you automatically become a specified premises on 1 April. Many hotels don't check and continue charging 5% on restaurant bills  creating a tax shortfall that compounds over the year.

Mistake 3: Claiming full ITC on mixed-tariff properties without apportionment Hotels with both 5% and 18% rooms cannot claim 100% ITC on their purchases. Failing to do Rule 42 apportionment means excess ITC claimed  which attracts reversal with 18% interest when caught.

Mistake 4: Applying GST on the rack rate instead of the actual transaction value If a guest books at ₹6,000 but you give a loyalty discount to ₹4,800, the GST must be on ₹4,800  not ₹6,000. Using rack rate instead of actual transaction value overcharges the guest.

Mistake 5: Including alcohol in the GST invoice Alcohol is outside GST. Including it in the food invoice and applying 18% GST to the full bill (including alcohol) is incorrect. Alcohol must be billed separately under state excise.

Mistake 6: Missing the separate ledger requirement Hotels providing services across multiple GST slabs must maintain separate ledgers per service type  accommodation (by tariff category), restaurant, banquet, spa, etc. A single combined ledger without service-wise break-up is a compliance failure.

How hisabkitab Handles Hotel GST Automatically

hisabkitab is built by Chartered Accountants who understand the exact complexity of hotel GST  and has built that compliance logic into the billing software.

Auto-applies the correct GST slab per room: When you create a room booking invoice in hisabkitab, the software reads the tariff amount and automatically applies 0%, 5%, or 18%  based on the September 2025 updated slabs. No manual rate selection.

Specified premises detection: hisabkitab tracks your room tariff history and alerts you at the start of each financial year if your property qualifies as a specified premises  so your restaurant rate updates automatically on 1 April.

Separate ledgers per service type: hisabkitab automatically separates room revenue, restaurant revenue, banquet revenue, and ancillary services into separate ledgers  satisfying the compliance requirement and making GSTR-1 preparation accurate.

ITC apportionment for mixed-tariff hotels: For hotels with both 5% and 18% rooms, hisabkitab calculates Rule 42 ITC apportionment automatically  showing you exactly how much ITC you can claim and how much must be reversed before GSTR-3B.

Alcohol billing separated: hisabkitab's billing interface keeps alcoholic beverages in a separate section  not subject to GST  with state excise billing handled separately from the GST invoice.

WhatsApp payment reminders: Outstanding hotel bills  especially for corporate accounts and travel agencies  are followed up automatically via WhatsApp with the invoice PDF and UPI payment link attached.

Start your 7-day free trial  no credit card required: hisabkitab.co Built by CAs. Trusted by 10,000+ Indian businesses.

GST on Hotel Rooms  Quick Reference Checklist

Before billing any guest, run through this:

• What is the actual transaction value (not rack rate) for this booking?

• Does the tariff fall below ₹1,000 (exempt), ₹1,001–₹7,500 (5%), or above ₹7,500 (18%)?

• Is this hotel a specified premises for the current financial year?

• If restaurant bill  apply 5% (non-specified) or 18% (specified premises)?

• Are banquet or conference services billed separately at 18%?

• Is alcohol excluded from the GST invoice and billed under state excise?

• If mixed-tariff hotel  has Rule 42 ITC apportionment been done this month?

• Are all service types in separate ledgers?
  
  

  Has the 12% GST slab for hotels been removed?

  Yes. Effective 22 September 2025, under Notification No. 15/2025-Central Tax (Rate) dated 17 September 2025, the 12% slab was abolished. Rooms between ₹1,001 and ₹7,500 per night now attract 5% GST without ITC. Rooms above ₹7,500 remain at 18% with ITC.

  What is the GST rate on hotel rooms in 2026?

  Three slabs apply: 0% for rooms up to ₹1,000/night, 5% (no ITC) for rooms ₹1,001–₹7,500/night, and 18% (with ITC) for rooms above ₹7,500/night.

  Can a business claim ITC on hotel accommodation expenses?

  Only if the room tariff exceeds ₹7,500 per night and the stay is for official business purposes. Rooms taxed at 5% do not carry ITC for the recipient the GST paid on a ₹5,000/night room cannot be recovered by the company booking it.

  What is a "specified premises" and why does it matter?

  A specified premises is a hotel where at least one room was sold above ₹7,500 per night in the preceding financial year, or where the hotel has voluntarily opted in via Annexure VII. The classification determines the GST rate on the hotel's restaurant 18% with ITC for specified premises, 5% without ITC for others.

  What happens to bookings made before 22 September 2025 but with check-in after?

  Any booking modification or re-saving after 22 September 2025 triggers recalculation at the new GST slabs. Pre-September bookings with check-in after the effective date should be verified and, if modified, recalculated at the new rates.

  What GST rate applies to banquet halls in hotels?

  18% GST with ITC, regardless of the hotel's room tariff category or specified premises status.

  Has the 12% GST slab for hotels been removed?

  Yes. Effective 22 September 2025, under Notification No. 15/2025-Central Tax (Rate) dated 17 September 2025, the 12% slab was abolished. Rooms between ₹1,001 and ₹7,500 per night now attract 5% GST without ITC. Rooms above ₹7,500 remain at 18% with ITC.

  What is the GST rate on hotel rooms in 2026?

  Three slabs apply: 0% for rooms up to ₹1,000/night, 5% (no ITC) for rooms ₹1,001–₹7,500/night, and 18% (with ITC) for rooms above ₹7,500/night.

  Can a business claim ITC on hotel accommodation expenses?

  Only if the room tariff exceeds ₹7,500 per night and the stay is for official business purposes. Rooms taxed at 5% do not carry ITC for the recipient the GST paid on a ₹5,000/night room cannot be recovered by the company booking it.

  What is a "specified premises" and why does it matter?

  A specified premises is a hotel where at least one room was sold above ₹7,500 per night in the preceding financial year, or where the hotel has voluntarily opted in via Annexure VII. The classification determines the GST rate on the hotel's restaurant 18% with ITC for specified premises, 5% without ITC for others.

  What happens to bookings made before 22 September 2025 but with check-in after?

  Any booking modification or re-saving after 22 September 2025 triggers recalculation at the new GST slabs. Pre-September bookings with check-in after the effective date should be verified and, if modified, recalculated at the new rates.

  What GST rate applies to banquet halls in hotels?

  18% GST with ITC, regardless of the hotel's room tariff category or specified premises status.

  
  The Bottom Line

  Hotel GST in India in 2026 is simpler than it was  just three slabs instead of four. But the rules around specified premises, ITC apportionment for mixed-tariff properties, and restaurant rate determination are more nuanced than most billing systems handle.

  The businesses that stay out of trouble are the ones that:

  1. Updated their billing software after September 22, 2025  still using 12% means overcharging guests

  2. Check specified premises status every 1 April before the new financial year

  3. Run monthly Rule 42 ITC apportionment if they have rooms across both slabs

  4. Keep separate ledgers for every service type  accommodation, restaurant, banquet, spa
     
     

  Calculate your exact GST on any hotel service right now free: hisabkitab.co/gst-calculator-online