Lok Sabha Question No. 2607 (UNSTARRED), answered on 2026-03-09
Subject: Impact of GST Rationalisation on Tourism and Hospitality Sector
Ministry: FINANCE
Asked by: Shri Dushyant Singh

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE LOK SABHA

## UNSTARRED QUESTION NO. 2607

## TO BE ANSWERED ON MONDAY, MARCH 09, 2026/PHALGUNA 18, 1947 (SAKA)

## IMPACT OF GST RATIONALISATION ON TOURISM AND

## HOSPITALITY SECTOR

## 2607. SHRI DUSHYANT SINGH:

Will the Minister of FINANCE be pleased to state:

- (a) Whether the Government has undertaken any assessment of the impact of reducing GST on tourism and hospitality services from 18 per cent to 5 per cent on sectoral growth, stakeholder earnings and overall revenue generation, if so, the details thereof;
- (b)  whether  any  projections  have  been  made  by  the  Government regarding  the  contribution  of  this  measure  towards  increasing  the tourism  sector's  share  in  the  country's  GDP  in  line with  the Government's vision  of  raising  it  to  10  per  cent,  if  so,  the  details thereof; and;
- (c)  whether the Government has assessed the implications for the tourism  sector  with  regards  to  the  claiming  of  Input  Tax  Credit benefits as a result of this exemption and the consequent impact on the ability of the hospitality establishments to pass down the said benefits to the consumers, if so, the details thereof?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

- (a) and (b): 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.

No  projections  have  been  made  regarding  the  contribution  of  this measure  towards  increasing  the  tourism  sector's  share  in  the country's GDP. However, based on the recommendations of the 56 th  GST Council, the reduction in tax burden on essential goods, services and emerging sectors is expected to lower the cost of living, 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.  These  measures  are likely to boost GDP growth by stimulating consumption and demand. This  rate  reduction  is  expected  to  provide  a  strong  stimulus  to domestic industry and investment. (C):  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.  This was to simplify and bring the two rate tax structure to this sector. During the discussions  with  the  stakeholders,  it  was  emphasized  that  the benefit  of  the  reduced  tax  rate  is  to  be  passed  on  directly  to  the consumers. By keeping the output tax rate low (5%), the overall cost of services for the end-consumer will become affordable, even if the service provider does not claim credit for taxes paid on inputs.

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