Lok Sabha Question No. 3781 (UNSTARRED), answered on 2026-03-16
Subject: Impact of GST Rationalisation for Hospitality Industry
Ministry: FINANCE
Asked by: Shri Dushyant Singh

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE LOK SABHA UNSTARRED QUESTION NO. 3781

## TO BE ANSWERED ON MONDAY, MARCH 16, 2026/ PHALGUNA 25, 1947 (SAKA)

Impact of GST Rationalisation for Hospitality Industry

3781. SHRI DUSHYANT SINGH :

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government has undertaken any assessment to evaluate the  impact  of  the  Goods  and  Services  Tax  (GST)  rationalisation  for hospitality industry, particularly the reduction of GST to 5 per cent without Input Tax Credit for room tariffs up to Rs. 7,500, in terms of occupancy, revenue patterns and affordability, if so, the details thereof;
- (b)  whether  any  representations  have  been  received  from  stakeholders regarding  challenges  in  availing  Input  Tax  Credit,  especially  for  hotels operating in budget and premium categories and undertaking proportionate Input Tax Credit (ITC) reversal under Rule 42 of the CGST Rules, if so, the details thereof;
- (c) whether the Government proposes to further streamline the Input Tax Credit framework applicable to the hospitality sector to enhance ease of compliance while ensuring revenue neutrality and supporting growth, if so, the details thereof; and
- (d) whether any comprehensive study has been conducted to assess the impact of GST rationalisation on tourism growth, investment in Tier-II and Tier-III cities and employment generation in the hospitality industry, if so, the details thereof?

## MINISTER OF STATE IN THE MINISTRY OF FINANCE

## ANSWER (SHRI PANKAJ CHAUDHARY)

(a) to (d) : GST rates and exemptions on any supply of goods and services are  prescribed  on  the  recommendations  of  the  GST  Council,  which  is  a Constitutional body comprising members  from  both the Union and State/UT Governments. Based on the Group of Ministers (GoM) Report on Rate  Rationalization, the  GST  Council  in  its  56th  meeting  held  on 03.09.2025, recommended to reduce the GST rate from 12% with ITC to 5% without ITC on supply of 'hotel accommodation' services where the transaction value is Rs 7500/- or less per day.

The rate rationalisation exercise was undertaken to simplify and bring the two-rate tax structure to this sector.  Further, the reduction in tax burden is  expected  to  lower  the  transaction  costs,  improve  affordability,  and stimulate  consumption  demand.  Lowering  of  GST  rates  is  expected  to enhance  trade  competitiveness  and  support  industry  as  it  is  likely  to reduce  transaction  costs,  thereby  encourage  small  businesses  to  enter the  formal  sector  and  supporting  greater  formalisation  with  widening  of the  tax  base.  Although  no  assessment  has  been  undertaken  to  evaluate the  impact  of  the  Goods  and  Services  Tax  (GST)  rationalisation  for hospitality industry, it is expected that these measures are likely to boost growth  by  stimulating  consumption,  demand  and  investments  and  also promoting job creation. Further, by keeping the output tax rate low (5%), the overall cost of services for the end-consumer will become affordable, even if the supplier does not claim credit for taxes paid on inputs. No  such  representation  has  been  received  from  stakeholders  regarding challenges in availing Input Tax Credit, for hotels operating in budget and premium categories and undertaking proportionate Input Tax Credit (ITC) reversal. No proposal to amend the ITC provisions for hospitality sector is pending

## with the GST Council.

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