Hotels Get Cheaper, Flights Costlier: GST Rate Changes from September 22

Indian travellers are set to see a shift in costs as new GST rates take effect from September 22, 2025. Hotels will get cheaper, while flights in premium cabins will cost more.

The announcement came after the 56th GST Council meeting in New Delhi, chaired by Finance Minister Nirmala Sitharaman, just ahead of the festive and wedding season when travel spending usually peaks.

New GST Rates on Hotels from September 22

For travellers, the biggest change is in hotel prices. Until now, hotel rooms costing up to ₹7,500 per night had a 12% GST with input tax credit (ITC). Starting September 22, these will be charged a lower 5% GST without ITC.

Here’s the breakdown of what changes and what stays the same:

• Rooms below ₹1,000 per night: No GST, as before.
• Rooms between ₹1,000 and ₹7,500: 5% GST (down from 12%).
• Rooms above ₹7,500: Still taxed at 18%.

This GST adjustment makes mid-range stays much more affordable, covering everything from business hotels to family-friendly resorts.

New GST Rates on Flight Bookings

Airfares are also set for a major change. Economy class passengers will continue to pay a fixed GST rate of 5%, which keeps low-cost flights available.

Business class will see a change; its rate will increase to 18% GST after September 22. Right now, these tickets have a 12% GST.

What changes

• Economy class tickets continue to attract 5% GST. No change here.
• Business class GST increases from 12% to 18%.
• Expect the same 18% GST for premium economy and first class.

Why the Date Matters for Bookings

If you’re booking flights, timing could impact how much tax you pay. For example, if you buy a business class ticket on September 5th for travel on September 24, GST will be 12% at the time of purchase. But if you wait until September 23 to book the same ticket, you’ll be charged 18% GST instead.

• GST is applied based on when you book, not when you fly.

The takeaway: book before September 22 if you’re eyeing business or premium seats.

What Happens If You Cancel?

Many travellers worry about cancellations with changing tax rates. Here’s the good news: GST refunds follow the rate that was applied when you booked.

• If you booked under 12% GST and later cancel, you’ll get a refund including the 12% GST (minus cancellation charges).
• A later increase in GST rates doesn’t affect your refund.

In short, the GST on your booking is locked in at the time of purchase.

Two-Tier GST System Explained

Alongside these travel-specific cuts, the GST Council has simplified rates for most goods and services into two main slabs: 5% and 18%. Luxury and “sin” goods will face a steeper 40% tax.

However, there’s one catch for travellers who prefer premium seating. From September 22, premium economy, business, and first-class tickets will move to the 18% GST slab.

TLDR: GST Rate Changes for Hotels and Flights (Effective September 22, 2025)

Hotels: Mid-range stays (₹1,000–₹7,500 per night) get cheaper with GST dropping from 12% to 5%. Budget rooms remain GST-free, luxury stays unchanged at 18%.

Flights: Economy tickets stay at 5%. Business, premium economy, and first class get more expensive as GST rises from 12% to 18%.

GST Rate Comparison

Category	Current Rate	New Rate
Hotel Rooms < ₹1,000/night	0%	0%
Hotel Rooms ₹1,000–₹7,500/night	12%	5% (No ITC)
Hotel Rooms > ₹7,500/night	18%	18%
Economy Class Flights	5%	5%
Business Class Flights	12%	18%
Premium Economy Flights	12%	18%
First Class Flights	12%	18%

What This Means for Travellers

The GST cuts on hotels will make stays more affordable, especially for mid-range travellers. Flights are a mixed bag. GST of economy class tickets will stay the same at 5%. However, business, premium economy, and first-class fares will become more expensive with the new 18% GST.

For most leisure travellers, holidays and wedding trips may feel cheaper due to lower hotel costs. But those booking premium seats in the air should expect higher prices unless they purchase tickets before September 22.