On September 3, 2025, the Goods and Services Tax (GST) Council approved important GST reforms. The council, chaired by Finance Minister Nirmala Sitharaman, announced important GST reforms will affect tax rates on hotels and air travel and will take effect from September 22, 2025. This move comes ahead of India’s festive and wedding season, when travel spends across India typically see a surge. Here are some important points you should know about these GST reforms that will significantly influence your travel.
Hotels, Flights, And Luxury Yachts: What Gets Cheaper And What Gets Expensive Under New GST Reforms
Impact Of New GST Reforms On Budget And Mid-Budget Accommodation
The new GST reforms will significantly affect hotel rate slabs. To put it in perspective, rooms that are priced up to INR 7,500 per night were previously taxed at 12 per cent with Input Tax Credit (ITC). Input Tax Credit, for those who don’t know, is the GST amount paid by a registered person on the purchase of goods or services used for business purposes. With the new GST reforms, the new tax slab will now fall in the 5 per cent bracket without ITC.
Additionally, rooms priced below INR 1,000 per night will remain GST-free. Similarly, rooms priced above INR 7,500 will attract an 18 per cent GST. So, rooms above INR 7,500 will remain in the previously assigned tax bracket only, just a notch below the 40 per cent luxury tax levied on yachts and private jets in the new GST reforms.
To give you an example, a room that costs INR 5,000 previously attracted a GST of INR 600. With the new reforms, the same room will now attract lesser GST, that of INR 250. What this means for travelers is that mid-budget travel accommodation will become significantly affordable with lesser GST on the hotel booking.
How GST Reforms Will Affect Luxury Travel
The new GST reforms will also affect luxury travel and not just budget or mid-budget travel. Personal aircraft, helicopters, and yachts will now attract a current tax rate of flat 40 per cent. Previously, the tax rate on the same was 28 per cent GST plus a 3 per cent cess.
With the tax rate increasing by 12 per cent, owning or renting super-premium luxury automobiles (like aircrafts, helicopter, and yachts) will become more expensive. Ultra high net worth individuals and charter operators will have to pay more for the acquisition and import costs of aircrafts, helicopters, and yachts.
Airfare: Both Affordable And Expensive
Changes to the tax slabs and the new GST structure is set to make flying both affordable and expensive. How, you may ask? The economy class will see a drop in GST, from the existing 12 per cent to 5 per cent. However, on the other hand, business and first-class travelers will have to pay more for their flight tickets. GST on business and first-class flight tickets will spike up from the existing 12 per cent to 18 per cent.
To give you an example, a business-class seat booked anytime before September 22, 2025 will attract the existing 12 per cent GST. But if the same ticket is booked after September 22, 2025, i.e. after the new rules apply, the same ticket will attract a GST of 18 per cent. Financial experts have confirmed that under Section 14 of the CGST Act, the GST rate applicable will depend on the time of payment and invoice issuance and NOT the date of travel.
Summing Up
The new GST reforms will make travel both expensive and affordable, depending on the budget bracket you’re peeping into. Budget and mid-budget hotels are set to be cheaper while those already priced above INR 7,500 will cost more. Similarly, yachts and aircrafts will cost more than what they currently do. Airfare will also be more expensive for first-class and business travelers but more affordable for economy travelers. With these GST reforms coming into effect from September 22, 2025, new tax rates and tax slabs are set to influence costs of services in many sectors, including travel.
