February 23, 2023
Pranjal Gupta

GST - Hospitality Industry in India: All You Need to Know

India's hospitality industry has been growing at a rapid pace in recent years. The industry comprises of hotels, restaurants, food delivery services, and other related businesses. With the implementation of GST, the hospitality industry has undergone significant changes. In this article, we will discuss the impact of GST on the hospitality industry in India.

What is GST?

GST is a value-added tax that is levied on the supply of goods and services. It is an indirect tax that has replaced various other taxes like excise duty, service tax, and value-added tax (VAT). Before GST, the hospitality industry was subject to different taxes and levies that were imposed by the state and central government.

Impact of GST on the Hospitality Industry

The implementation of GST has had both positive and negative impacts on the hospitality industry. Some of the significant impacts are:

1. Increased Tax Burden

Before GST, the service tax rate was 15%, and it varied across states. However, after the implementation of GST, the tax rate has increased to 18%. This has resulted in an increase in the overall tax burden on the hospitality industry.

2. Reduction in Input Tax Credit

Under GST, input tax credit is allowed only on those goods and services that are used for the furtherance of business. This has resulted in a reduction in input tax credit for the hospitality industry, as many of their inputs like food and beverages are used for personal consumption as well.

3. Simplification of Tax Regime

Even though the tax burden has increased, the implementation of GST has simplified the tax regime for the hospitality industry. Earlier, they had to comply with various state and central taxes, but now they have to comply with only one tax. This has reduced the compliance costs for the industry.

4. Increased Transparency

GST has increased transparency in the hospitality industry. Earlier, many businesses used to evade taxes by not reporting their revenue correctly. However, under GST, all transactions need to be reported online, which has increased transparency in the industry.

5. Impact on Room Rates

The implementation of GST has had a mixed impact on room rates. While some hotels have reduced their room rates to attract more customers, others have increased their room rates to compensate for the increased tax burden.


The implementation of GST has had a significant impact on the hospitality industry in India. While it has simplified the tax regime and increased transparency, it has also increased the tax burden on the industry. The government needs to address these issues and provide relief to the sector by reducing the tax rates and increasing the input tax credit.


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