GST on Tourism and Hospitality in India (2026)
India’s tourism and hospitality sector is one of the largest contributors to employment and foreign exchange, and it operates under a layered Goods and Services Tax (GST) framework. Following the rate rationalisation that took effect in late 2025, hotels, restaurants and tour operators now work with revised slabs, tighter input tax credit (ITC) conditions and clearer place-of-supply rules. This guide explains how GST applies across the hospitality value chain in 2026, so that businesses can price correctly, invoice accurately and stay compliant.
GST on Hotel and Accommodation Services
For hotels, guest houses, resorts and similar accommodation, GST is determined by the value of supply (the actual amount charged per unit of accommodation per day), not merely the published tariff. The threshold that decides the rate is Rs 7,500 per unit per day.
- Room value up to Rs 7,500 per day: GST is charged at 5% without ITC.
- Room value above Rs 7,500 per day: GST is charged at 18% with full ITC.
Because the 5% slab comes without ITC, budget and mid-segment hotels cannot offset the tax paid on their inputs such as rent, furnishings and maintenance. Premium hotels charging above Rs 7,500 pay 18% but can claim ITC on eligible business inputs, which often makes the effective cost neutral for them.
GST on Restaurant Services
Restaurant GST depends on whether the outlet is standalone or located inside a hotel, and on the room tariff of that hotel.
Standalone Restaurants
Independent restaurants, cafes, cloud kitchens and eateries not attached to a premium hotel charge GST at 5% without ITC. This applies whether the service is dine-in, takeaway or delivery through the restaurant’s own channel.
Restaurants Inside Hotels
A hotel is treated as a “specified premises” if any unit of accommodation was supplied at a value above Rs 7,500 per day in the preceding financial year, or if the supplier voluntarily opts in through a declaration. Restaurant services in such specified premises attract 18% GST with ITC. Restaurants in hotels that are not specified premises continue at 5% without ITC. This declaration-based approach, effective from April 2025, replaced the earlier transaction-by-transaction linkage and gives hoteliers more certainty at the start of each year.
GST Rate Table for Tourism and Hospitality (2026)
| Service | Condition | GST Rate | ITC |
|---|---|---|---|
| Hotel accommodation | Value up to Rs 7,500 per day | 5% | Not available |
| Hotel accommodation | Value above Rs 7,500 per day | 18% | Available |
| Standalone restaurant | Dine-in, takeaway or delivery | 5% | Not available |
| Restaurant in hotel | Non-specified premises | 5% | Not available |
| Restaurant in hotel | Specified premises (tariff above Rs 7,500) | 18% | Available |
| Outdoor catering | In specified premises | 18% | Available |
| Tour operator package | Gross tour cost basis | 5% | Not available (limited) |
| Air travel agent | Commission or basic fare basis | 18% | Available |
GST on Tour Operators and Travel Agents
A tour operator selling an inclusive package (accommodation, transport, sightseeing and guide services bundled together) generally charges 5% GST on the gross tour value, without the benefit of full ITC. This concessional rate keeps packages affordable but blocks credit on inputs. Operators who prefer to claim ITC can structure their supplies at 18% where applicable.
Travel agents are taxed differently from operators. An agent earning commission for booking hotels, flights or rail tickets charges 18% GST on the commission or service fee. Air travel agents may compute GST on a deemed value of the basic fare, typically 5% of the basic fare for domestic bookings and 10% for international bookings, or on actual commission. Foreign exchange and visa facilitation services carry their own valuation rules.
Input Tax Credit Rules
ITC is the single most important commercial factor in hospitality GST. The pattern is consistent: concessional 5% rates come without ITC, while the standard 18% rate carries full ITC on eligible inputs. Hotels in the 18% bracket can claim credit on capital goods, professional services and consumables, subject to the usual blocked-credit restrictions under Section 17(5), such as credit on food and beverages used for personal consumption. Businesses supplying both taxable and exempt or concessional services must maintain proportionate credit records and reverse ineligible portions.
Place of Supply
Accommodation and restaurant services are tied to the location of the immovable property or the place where the service is performed. This means GST on a hotel stay or a meal is almost always charged as CGST plus SGST of the state where the hotel or restaurant is situated, regardless of where the guest is registered. For tour operator and travel agent services, the place of supply generally follows the location of the recipient where that recipient is a registered person, and the location where services are performed for unregistered customers. Getting the place of supply right determines whether CGST plus SGST or IGST applies, which is critical for correct invoicing and return filing.
Composition Scheme
Restaurants with an aggregate turnover up to Rs 1.5 crore can opt for the composition scheme and pay GST at a flat 5% (2.5% CGST plus 2.5% SGST) on turnover, without charging GST separately to customers and without claiming ITC. Composition dealers cannot issue tax invoices, must issue a bill of supply and cannot make inter-state outward supplies. Pure accommodation providers are not eligible for the restaurant composition rate but may consider the general composition option for service providers, capped at a turnover of Rs 50 lakh at 6%. The scheme suits small operators who value simplicity over credit.
Invoicing and Compliance
Registered hospitality businesses must issue GST-compliant tax invoices showing the GSTIN, HSN or SAC code, taxable value, applicable rate and tax split. Accommodation services fall under SAC 9963 and food and beverage services under the same chapter. Those with turnover crossing the prescribed limit must generate e-invoices, and monthly or quarterly returns in GSTR-1 and GSTR-3B are mandatory. Accurate, timely filing protects ITC claims and avoids interest and penalties; professional support such as TAXAJ’s GST filing service can help hotels and restaurants keep returns error-free through the year.
Frequently Asked Questions
Is GST charged on hotel rooms below Rs 1,000?
The earlier exemption for rooms up to Rs 1,000 has been withdrawn. Such rooms now fall in the up-to-Rs-7,500 slab and are taxed at 5% without ITC.
Does the 5% restaurant rate allow ITC?
No. The 5% rate for standalone restaurants and non-specified-premises hotel restaurants comes without ITC. Only restaurants in specified premises at 18% can claim credit.
How is a tour package taxed?
An inclusive package is usually taxed at 5% on the gross value without full ITC, while agent commissions are taxed at 18%.
Which GST applies to a hotel stay for an out-of-state guest?
CGST plus SGST of the state where the hotel is located, because accommodation is linked to the property’s location.
Conclusion
GST on tourism and hospitality in 2026 rewards clarity: know your room value, know whether your premises are specified, and match your rate to the correct ITC position. Standalone restaurants and budget hotels stay simple at 5% without credit, while premium properties operate at 18% with full ITC. Tour operators and agents follow their own concessional and commission-based rules. With correct classification, disciplined invoicing and timely returns, hospitality businesses can price competitively while remaining fully compliant.
