The government plans to allow input tax credit for hotel rooms priced below Rs 7,500 a night. This move covers services like spas and restaurants. Aashish Gupta of FAITH said, “The proposed changes are directionally positive for the sector.” Many hope this will lower costs and help the tourism industry grow.
The government proposes to allow ITC for booking hotel rooms below Rs 7,500 a night. This will also extend to other services provided by a hotel on its premises, such as restaurants, spas, fitness centres and salons.
Industry insiders say such a step would considerably increase cost efficiency across the ecosystem, but they are also sceptical of the fine print, which they fear might not be as attractive as promised.
Over 60% of India’s hotel inventory lies in the budget and mid-scale segment, and a streamlined ITC framework can reduce the cascading tax impact and provide greater pricing flexibility, ultimately benefitting consumers. Aashish Gupta, consulting CEO, Federation of Associations in Indian Tourism & Hospitality (FAITH), said GST, as originally envisaged, was a tax only on value-added services, and tourism is a lengthy value chain with multiple stakeholders across hotels, tour operators, travel agents, tourists transporters and other service providers. “Any GST amendments which unlock set-offs to the tourism industry and release tax credits are always good for both the operator and the customer. The proposed changes are directionally positive for the sector and allowing input tax credit for hotels in the lower-priced segment would improve the economics of operating and investing in this part of the market.”
Hemant Joshi, CEO of Atithi Foundation, a tourism think-tank, added that the larger opportunity is to look at the tourism value chain as a whole. ITC may not automatically mean lower consumer prices, but it can improve the economics of operating and investing in the sector. “India needs a simpler, more predictable GST framework that encourages reinvestment and improves competitiveness, both for domestic tourism and for attracting international visitors and increasing their length of stay and spending.”
Manav Thadani, founder-chairman, Hotelivate, a hospitality consulting firm, would like to see more tangible policy on this front. “When the government announced the earlier proposal, input credit for GST was not made available for hotels under Rs 7,500, which had huge negative financial impact for hotel owners. So I would believe it only when it actually happens.”
An industry insider, not wanting to be quoted, said if the government allows hotels to claim ITC while retaining the concessional 5% rate, the reform would be far more effective. It would reduce embedded costs, support investment in better guest services, protect jobs and encourage hotels to add capacity as domestic travel continues to grow, especially ahead of the festive and holiday season. “A simpler, ITC-supported GST structure across hotels, tour operators, aggregators and allied hospitality services, including in-house restaurants, gyms and spas, would benefit both businesses and travellers and strengthen India’s competitiveness as a global tourism destination,” they said.
Online travel portal EaseMyTrip’s CEO & co-founder Rikant Pittie felt a well-structured ITC framework can strengthen the business environment for the sector, which is projected to reach $27.96 billion in 2026. “Greater cost efficiency and pricing flexibility can support investment in Tier-2 and Tier-3 destinations and further accelerate domestic tourism, benefiting both businesses and travellers,” he said.
Similar views were offered by Rajeev Kale, president & country head – holidays, MICE, visa, Thomas Cook (India). “A more supportive tax framework will support demand and the continued growth of domestic tourism.” SD Nandakumar, president & country head – holidays & corporate tours, SOTC Travel, added that “we believe this can play an important role in strengthening the tourism industry and enabling more Indians to travel.”
There is also a proposal for tax relief for helicopter services on a shared basis, which usually operate in hilly destinations, particularly in the northeast. Santosh Sharma, founder & CEO, BookMyJet, a tech platform for private aircraft and helicopter charters, welcomed tax incentives for these services, saying: “If the government introduces tax credits to encourage helicopter operations in unexplored regions, it could majorly open up these underserved areas. With the right support, helicopter connectivity could become an important enabler for tourism development in India’s remote and hilly regions.”