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Planning a memorable vacation is itself a matter of joy and excitement, but the fear of burning a hole in the pocket during the festive season is a concern among travelers. The increasing airfares and hotel rates during the festivals challenge travelers while planning a trip. To address this issue,
the government has taken some initiatives to provide concessions in travel and accommodation in the upcoming months to ensure stress-free and enjoyable tours.
As Durga Puja, Diwali, and the wedding season across the country are ahead, the Goods and Services Tax Council announced the changes in the accommodation and air travel effective from September 22, 2025, in the 56th meeting chaired by Finance Minister Nirmala Sitharaman. Hotel rooms costing Rs 7500 or below per night will charge only 5% GST, down from 12% but without input tax credits. Rooms costing Rs 1000 or below will be exempted from paying GST, and luxury properties above Rs 7500 will charge 18% GST. Moreover, economy class flight tickets will charge a GST of only 5% and business class tickets will be taxed at 18%.
Benefits of the GST Cut for Travelers
After the COVID-19 pandemic, the nation has witnessed a surge in domestic tourism, and the forthcoming festivals will boost the tourism industry by making travel journeys affordable for travelers. The Co-founder of Pickyourtrail, Hari Ganapathy, believed in ample savings during the trip, leading to changes in the travel decisions of travelers. He added that a family may spend an extra night, a corporate traveler may upgrade their stay, and backpackers may choose to explore new destinations without any hesitation.
Rikant Pittie, the CEO and Co-founder of EaseMyTrip, stated the change as transformative for India's tourism industry, and allowing hoteliers to increase hotel room occupancy for the budget segment. Moreover, Karan Agarwal, the Director of Cox & Kings, also marked the change as significant for inclusive tourism, and he further added that the operators need to come up with new offerings for business class fliers as they might shift to economy class due to the cost reduction.
Precautionary Actions to Take If Needed
Tejas Parulekar, founder of SaffronStays, appreciates the change, but he identified a few gaps that need to be addressed. As tourism creates employment opportunities and generates revenues as covert exports, the lack of input credits will increase operational costs. There should be a clear definition of what is considered a 'unit' to avoid confusion between hotels and homestays.
For travelers choosing luxury, they will experience mixed emotions. The Chief Growth and Business Officer at Cleartrip, Manjari Singhal, stated that a business class ticket costing Rs 50000 will increase by Rs 300 with the new GST rate. Even though premium travelers prefer experiences over costs and the demand will be stable, but the market will see a shift.
Amit Damani, the co-founder of StayVista is considering it as an early Diwali gift for travelers despite the required clarification on how accounting and restrictions on input tax credits will affect companies.
