GST on Hotel Rooms: What Every Hotel Owner Must Know

Ask any hotel accountant about GST and you will hear the same complaint. The rate itself is simple. Getting it right on every bill, every night, for every type of guest is where things go wrong.

GST on hotel rooms decides more than what the guest pays at checkout. It affects how you price rooms, how you bill corporate clients, how you handle advances and whether you can claim input tax credit (ITC). One wrong rate in your billing software can repeat itself across hundreds of invoices before anyone spots it.

The rules changed on 22 September 2025. Since then, rooms priced at ₹7,500 or less per unit per day attract 5% GST without ITC. Rooms priced above ₹7,500 attract 18% GST with ITC, subject to conditions.

Here is what that means for your front desk and your accounts team.

1. GST on Hotel Rooms in 2026: Current Rates

The rate depends on the value of the room per unit per day.

Room value per day	GST rate	ITC
Up to ₹7,500	5%	Not available
Above ₹7,500	18%	Available, subject to conditions

Two things trip up hotel owners. First, a room priced at exactly ₹7,500 sits in the 5% slab, not the 18% one. Second, you cannot charge 18% on a cheaper room just because you want the ITC. The law does not give you that choice.

Your star rating has nothing to do with it either. A three-star property selling a suite at ₹9,000 charges 18%. A five-star hotel selling a room at ₹7,000 charges 5%.

2. How Is the ₹7,500 Threshold Calculated?

Discounts can make GST calculations confusing for hotel owners. Suppose a room is listed at ₹8,000 but booked for ₹7,200 during a sale. The hotel must determine the taxable value under applicable GST rules and maintain records supporting the calculation.

Length of stay can also cause confusion. If a guest stays three nights at ₹6,000 per night, the total room charge is ₹18,000. However, the GST threshold for hotel accommodation is assessed per unit per day, not simply on the total booking amount.

To avoid billing errors, hotels should maintain night-wise room rates, discount details, booking records and invoices. A hotel property management system (PMS) can help organise reservation and billing information, making it easier for hotel teams to maintain accurate records.

3. How to Calculate GST on Hotel Room Bills

These examples treat the room price as exclusive of GST.

Room charges	GST rate	GST amount	Total
₹4,000	5%	₹200	₹4,200
₹7,500	5%	₹375	₹7,875
₹9,000	18%	₹1,620	₹10,620

Inclusive pricing catches people out. If your website shows a room at ₹5,250 including 5% GST, the taxable value is ₹5,000 and the tax is ₹250. Adding another 5% at checkout means charging the guest twice.

Extra beds, laundry, meals and airport pickups are separate supplies. Each one needs its own GST treatment.

4.What Should Hotels Charge?

A guest from Mumbai checks into your Goa property. Do you charge IGST?

Usually not. For hotel accommodation, the place of supply is generally where the property is located, not where the guest comes from.

CGST and SGST generally apply when the location of the supplier and the place of supply are in the same state.
IGST generally applies when they fall in different states or union territories.

So if a Delhi-registered company books rooms at your Jaipur hotel, the place of supply is generally Rajasthan. You would normally charge CGST and SGST.

The registered address on the GSTIN of the guest does not change this on its own.

5. Hotel GST Invoice Format: Details to Include

Corporate guests need proper invoices to get reimbursed and to keep their books clean. A missing GSTIN or a wrong tax split can mean an email from their finance team a month later asking you to reissue the bill.

A hotel tax invoice should generally show:

Legal name, address and GSTIN of the hotel
A unique invoice number and the date
Name and GSTIN of the guest or company, where applicable
A description of the room and any other services
SAC and taxable value
GST rate and tax amount
The CGST/SGST or IGST split
Total invoice value and other prescribed details

A simple example:

Particulars	Details
Room charges	₹5,000
CGST at 2.5%	₹125
SGST at 2.5%	₹125
Total payable	₹5,250

Collect the company GSTIN and billing details at check-in, not at checkout when the guest is rushing for a flight. And remember that an invoice does not guarantee ITC for the company. The statutory conditions still have to be met.

6. What About Restaurant Bills, Advances and Cancellations?

Rooms are only part of the business. Restaurants, banquets and laundry each follow their own rules.

Restaurant services outside specified premises generally attract 5% without ITC. Restaurant services at specified premises generally attract 18% with ITC, subject to conditions. Do not let your POS copy the room tax rate onto food bills.

Advances matter too. When a guest pays in advance, GST time-of-supply rules and documentation requirements may apply, so record the payment and issue the right document. Cancellations and refunds depend on the facts of each transaction and the relevant provisions.

OTA payouts deserve a closer look. The amount an OTA deposits into your account is what remains after commission and adjustments. It is not automatically your taxable room revenue.

7. Common GST Mistakes Hotel Owners Should Avoid

Mistake	Better practice
Still charging 12% tax on lower-value rooms	Update tax settings to the revised rates
Applying one tax slab to a whole multi-night booking	Track room value night by night
Charging IGST because the guest lives elsewhere	Check the place-of-supply rule
Using room GST rates on restaurant bills	Classify each service separately
Claiming all ITC despite 5% supplies	Review eligible credits and reversals
Recording only net OTA settlements	Reconcile booking value, commission and refunds

If your property has rooms in both slabs, talk to your accountant about common ITC attribution and reversals under the relevant provisions, including Rule 42.

8. How ClearHost Helps Organise Hotel Billing

Most GST errors start when bookings live in one system, payments in another and invoices in a third.

The ClearHost Property Management System (PMS) keeps reservations, check-in and check-out, guest profiles, billing, payments, invoices, guest folios, taxes and charges, and daily reports in one place.

The ClearHost POS handles GST-compliant billing, order management, inventory tracking and multi-outlet reporting, so restaurant sales stay separate from room billing.

The ClearHost Channel Manager keeps rates and availability in sync across connected OTAs. The Direct Booking Engine takes website reservations, coupons and offers, with payment options such as Razorpay and Stripe.

When these pieces work together, your team spends less time matching records by hand. You still need to set the correct tax rates and confirm compliance yourself.

Explore the ClearHost hotel management platform to learn more.

Conclusion

Hotel GST is not difficult in theory. Most problems come from small slips: an old tax rate left in the system, a missing GSTIN, a multi-night booking billed under one slab. Keep clean records, check your settings after every rule change and reconcile your OTA payouts each month. Connected software like ClearHost makes that routine much easier to follow.

Frequently Asked Questions

1. What is the GST on hotel rooms in 2026?

Rooms valued up to ₹7,500 per unit per day attract 5% GST without ITC. Above ₹7,500, the rate is 18% with ITC, subject to conditions.

2. Is GST applicable to a ₹7,500 hotel room?

Yes. A room priced at exactly ₹7,500 per day attracts 5% GST.

3. Can hotels claim ITC under the 5% slab?

No. The 5% rate on rooms comes without ITC, and some common credits may need to be reversed.

4. Does a hotel charge IGST to an out-of-state guest?

Not automatically. For hotel stays, the place of supply is generally the location of the property.

5. What should a hotel GST invoice contain?

Supplier and recipient details where applicable, GSTIN, invoice number, date, a description of services, taxable value, SAC, the GST split and the total amount.