Luxury Hotels to Get Costlier: The cost of staying and dining in luxury hotels is set to rise as the government introduces a new GST rule. Hotels charging over ₹7,500 per night will now be classified as “designated premises,” and services within them, including restaurants, will attract an 18% GST with input tax credit benefits. This new system, effective from April 1, 2025, replaces the previous declared tariff-based taxation.
New GST Rule for Luxury Hotels
The Central Board of Indirect Taxes and Customs (CBIC) has announced that any hotel charging more than ₹7,500 per night at any point in a financial year will be considered a “designated premise” for the next financial year. As a result, all restaurant services within such hotels will be taxed at 18% GST. The taxation will be based on the transaction value rather than the previously followed “declared tariff” method.
Impact on Hotel and Restaurant Services
With this new tax structure, hotels that exceed the ₹7,500 room rate threshold will see higher tax implications. Restaurants operating within these hotels will no longer follow the old system, and their taxability will be determined by the actual transaction value. This could lead to increased prices for dining and staying in premium hotels.
Industry Expectations and Reactions
The hospitality industry is evaluating how this change will affect hotel bookings and dining expenses. While luxury hotels might adjust their pricing to accommodate the higher GST, customers will have to bear increased costs. Experts suggest that the shift from “declared tariff” to “transaction value” taxation could lead to greater transparency but might also impact the affordability of high-end hospitality services.
Potential Impact on Tourism
The increase in hotel and restaurant prices due to higher GST could affect the tourism industry. Business travelers and tourists who frequently stay in luxury hotels may face higher expenses, possibly influencing their accommodation choices. This move might benefit mid-range hotels that fall below the ₹7,500 per night threshold, as travelers look for more cost-effective options.