GST Council Removes Exemptions on Certain Services, Including Hotel Accommodations
In a significant development, the GST Council has decided to remove exemptions on certain services, including hotel accommodations, with the aim of increasing tax revenue and streamlining the tax system. This move is expected to have a significant impact on the hospitality industry, as well as on consumers who will now have to pay GST on hotel stays.
As per Notification No. 02/2026, dated May 10, 2026, the exemptions on services provided by hotels, including hotel accommodations, have been removed, effective from October 1, 2026.
In plain English, this means that hotel stays will now be subject to GST, with the tax rate depending on the type of accommodation and the location of the hotel. For example, a hotel stay in a luxury hotel in a major city may attract a higher GST rate than a budget hotel in a smaller town.
Let’s consider a real example. Suppose a person books a hotel room in a luxury hotel in Mumbai for Rs. 10,000 per night. If the GST rate is 18%, the person will have to pay an additional Rs. 1,800 as GST, making the total cost of the hotel stay Rs. 11,800.
According to tax expert, CA Siddharth S. Sancheti, ‘The removal of exemptions on hotel accommodations is a significant development that will have a far-reaching impact on the hospitality industry. While it may lead to increased tax revenue for the government, it may also lead to higher costs for consumers, which could affect demand for hotel stays.
1. Review your hotel booking policies to ensure compliance with the new GST rules.
2. Consider the impact of the GST on your hotel stay costs and adjust your budget accordingly.
3. Consult with a tax expert to understand the implications of the GST on your business or personal finances.
What is the effective date of the removal of exemptions on hotel accommodations under GST?
A. October 1, 2025
B. October 1, 2026
C. January 1, 2027
D. April 1, 2027
Answer: B