GST reforms: From more travellers, to jobs, and investment — Here's how rate cut for hotels, buses could benefit tourism

The new goods and services tax (GST) reforms are set to “strengthen hospitality, transport and cultural sectors” in India, according to the Centre. In a release on September 22, as the GST revision comes into effect, the Ministry of Social Welfare said that reduced tax on hotel stays and buses is a strategic move that will make travel more affordable and accessible, encourage investment, and foster job creation.

How does govt expect GST to impact tourism?

“The government has announced significant GST rationalisation measures aimed at making India’s tourism sector more affordable, enhancing public transport use, and supporting artisans and cultural industries,” the release said.

It added that these reductions will strengthen the domestic tourism ecosystem, promote cultural heritage, and encourage investment in related sectors.

Notably, from 2021 to 2024, foreign tourist arrivals (FTAs) in India showed a significant increase from 15.27 lakh in 2021 to 99.52 lakh in 2024, indicating a robust recovery and growth in tourism post-pandemic, as per data from the Ministry of Tourism.

“This surge reflects a strong revival in international travel and heightened interest in India as a tourist destination during this period. Greater affordability in travel and accommodation will expand domestic and foreign tourist inflows,” the release added.

GST reduction on hotel rooms under ₹7,500 per day

The Centre has reduced GST applicable on hotel rooms costing less than ₹7,500/day from 12 per cent (with input credit tax) to 5 per cent (without ITC). It expects the move will:

• Make hotel stays more affordable for middle-class and budget travellers.
• Make India more attractive for foreign tourists by aligning India’s hospitality tax structure with international tourism destinations.
• Boost weekend travel, pilgrimage circuits, heritage tourism, and eco-tourism.
• Encourage investment in new mid-segment hotels, homestays, and guesthouses, creating jobs and improving infrastructure.

GST reduction on buses seating over 10 people

Further, the Centre has also reduced GST on buses with a seating capacity of more than 10 people, from 28 per cent to 18 per cent. This reduces the upfront cost of buses and minibuses, and makes them more accessible for fleet operators, schools, corporates, tour providers, and state transport undertakings. It expects the move will:

• Help bring down ticket fares, especially in semi-urban and rural routes.
• Encourage a shift from private vehicles to shared/public transport, reducing congestion and pollution.
• Support fleet expansion and modernisation, improving comfort and safety standards in public transport.