GST cut makes festive travel lighter on the pocket
The changes arrive at the start of India’s most travel-intensive months, spanning the Durga Puja, Diwali, and the long wedding season across the country
Just ahead of the festive and wedding season, the Goods and Services Tax (GST) Council has rolled out a reform that promises to make hotel stays and air travel lighter on the pocket for Indian travellers.
In its 56th meeting, chaired by Finance Minister Nirmala Sitharaman, the council announced reductions in GST rates on hotels and airline tickets, changes that will come into effect on September 22, 2025.
For travellers, it means that holidays will now be a little easier on the wallet. Hotel rooms priced at or below ₹7,500 per night will now attract only 5% GST, down from the earlier 12%, though without the benefit of input tax credits. Rooms priced below ₹1,000 will remain exempt, while luxury stays above ₹7,500 continue to be taxed at 18%.
For flights, economy class air tickets will now attract a GST of just 5%, compared to the earlier 12%, while business class fares will be taxed at 18% as opposed to 12%.
What this means for travellers
The changes arrive at the start of India’s most travel-intensive months , spanning the Durga Puja festivities in the east, Diwali in the west and north, and the long wedding season across the country. Domestic tourism, already on the rise post-pandemic, is set to receive a fresh boost as bite-sized leisure and short getaways become more affordable.
Hari Ganapathy, Co-founder, Pickyourtrail believes that when these savings flow through to travellers, the impact is immediate. He says, “A family may choose to stay an extra night, a business traveller might upgrade for comfort, and groups could explore new destinations without stretching budgets.”
“This reform is transformative for India’s travel and tourism sector,” says Rikant Pittie, CEO and Co-Founder of EaseMyTrip. “The simplified tax regime will make travel more affordable and boost overall demand. Reducing GST on hotel rooms will help hoteliers increase occupancy across budget and midscale segments.”
Karan Agarwal, Director at Cox & Kings, sees the move as socially significant: “Domestic travel will feel more inclusive, drawing families and younger travellers. While some premium fliers may shift to economy, this will also nudge operators to innovate new value-driven offerings.”
Enthusiasm with a note of caution
Not everyone is celebrating unconditionally. Tejas Parulekar, founder of luxury homestay chain SaffronStays, welcomes the rationalisation while pointing to areas that need further clarity:
“Tourism revenues are invisible exports, generating employment across sectors. But the absence of input credits may drive up costs for operators. Also, a clearer definition of what a ‘unit’ means—whether strictly a room—would help prevent ambiguity between hotels and homestays.”
Meanwhile, for the top-tier traveller, the change may feel like a mixed blessing. Manjari Singhal, Chief Growth and Business Officer at Cleartrip, explains: “A business class ticket that currently costs ₹50,000 will go up by roughly ₹3,000 with the new GST rate. Premium travellers tend to value experiences, so demand will hold steady, but it’s still a recalibration.”
StayVista’s Co-Founder, Amit Damani, frames the decision as “an early Diwali gift” to consumers. However, he admits some complexity remains: “It’s unclear how accounting and ITC restrictions will play out for companies.”
