India’s travel and tourism industry is set to witness a positive shift following the implementation of the new Goods and Services Tax (GST Reforms) rates on September 22, 2025. The reforms have been designed to make travel more affordable for domestic tourists, especially those opting for budget and mid-range options. The updated GST slabs are expected to lower the costs of hotel stays, domestic flights, dining, and tourism activities, thereby encouraging more Indians to explore the country.
Rohan Verma, Founder & CEO of JustWravel, observes:
“These GST reforms are a positive step toward making domestic travel more accessible, encouraging more people to explore India while supporting the growth of tourism businesses.”
Key Changes in GST Reforms for Travelers
The new GST rates affect various aspects of travel and tourism. Budget travelers are the primary beneficiaries, as the reforms reduce costs in multiple areas.
Accommodation New GST Reforms
One of the most significant impacts of the GST reforms is on hotel room rates:
- Rooms under ₹1,000 per night are fully exempt from GST. This makes budget accommodations more accessible for students, solo travelers, and families looking for cost-effective stays.
- Rooms priced between ₹1,001 and ₹7,500 per night now attract a 5% GST, down from the previous 12%. This is a substantial reduction for mid-range travelers and is expected to increase occupancy rates for hotels in this category.
- Luxury rooms above ₹7,500 per night continue to be subject to the 18% GST rate, ensuring that the premium segment maintains higher tax contributions.
Tourism entrepreneurs are optimistic that the reduction in GST for budget and mid-range hotels will attract more tourists and encourage compliance with tax regulations. Lower room costs may also lead to reduced package prices for domestic trips.
Air Travel New GST Reforms
The reforms also impact air travel, making domestic flights more affordable for the majority of travelers:
- Economy-class domestic flights will continue to attract a 5% GST.
- Business and premium domestic flights will now have an 18% GST, up from the previous 12% for some categories.
- First-class tickets have adjusted tax rates to reflect the revised slabs.
- International flights are affected differently: GST applies only to specific fees collected in India, such as convenience charges and surcharges, while outbound international segments are minimally affected. Domestic legs of international flights will attract GST according to the new rates.
These adjustments are designed to keep standard travel affordable while maintaining higher rates for premium and luxury travelers.
Dining, Entertainment, and Tourism Activities
Dining and leisure activities are also expected to become more cost-effective under the new GST reforms rules:
- Meals at restaurants and hotels will now attract around 5% GST, down from 12–18%. This is expected to make dining out more attractive for families and budget-conscious travelers.
- Theme parks, adventure parks, and guided tours may also experience reduced GST, benefiting group and family travelers.
- Luxury resorts and premium experiences, however, continue to have higher GST rates. The tax for high-end travel has increased to a flat 40%, compared to the previous effective rate of 31%, ensuring that luxury travel remains premium.
Transportation and Travel Packages
- Passenger transport services such as buses and taxis continue to be taxed at 5%, including fuel charges.
- Vehicle rentals also remain at 5% GST, keeping transportation costs predictable.
- Due to lower room rental costs, the overall cost of travel packages—including accommodation, meals, and local transport—may decrease slightly, providing a small but meaningful saving for travelers.
Online Booking Platforms and Tour Operators
The reforms are also expected to positively affect online booking platforms and tour operators:
- Reduced GST rates for hotel stays and travel packages may make online bookings more affordable for consumers.
- Tour operators and travel agents could see an increase in demand for organized tours due to more accessible pricing, resulting in higher revenue opportunities for the sector.
By simplifying tax structures, the reforms reduce the compliance burden on tourism businesses and create a fairer, more transparent environment for both operators and consumers.
Timing of Bookings and Cancellations
Understanding when to book is essential under the new GST rules:
- Pre-booked trips are subject to GST rates at the time of payment, not the travel date.
- Cancellations are refunded according to the GST rate applied at the time of booking.
- Post-revision bookings automatically reflect the new GST rates.
Travelers can save money by carefully timing bookings, taking advantage of lower rates, and avoiding peak-season surcharges.
Expected Impact on the Tourism Sector
The GST reforms are anticipated to have several broader effects on the travel and tourism industry:
- Budget and domestic travel are likely to see a boost, as mid-range hotels and economy-class flights become more affordable.
- Inbound tourism may benefit from reduced domestic travel costs, making India a more competitive destination for international travelers.
- Luxury travel may experience slower growth due to higher GST rates on premium hotels and flights.
- Entrepreneurship in the tourism sector could increase, as lower GST rates on mid-range services encourage young business owners to start their own ventures.
Overall, the changes are designed to make travel more inclusive, boosting both domestic and inbound tourism.
Tips for Travelers to Maximize Savings
- Choose mid-range hotels: Lower GST makes them a comfortable yet affordable option.
- Opt for economy flights: Take advantage of unchanged 5% GST for domestic journeys.
- Plan your booking timing carefully: Pre-book or wait strategically to benefit from the revised GST.
- Look for bundled packages: Combining flights, hotels, and tours can mitigate overall costs.
- Use reliable forex services for international travel: Services like Supreme Forex offer competitive rates and minimal fees, maximizing savings.
The Bottom Line: Your Travel Dreams Just Became Reality
The 2025 GST reforms are a significant milestone for India’s travel and tourism sector. Budget and mid-range travelers are expected to enjoy reduced costs, while luxury travelers continue to pay premium rates. Lower taxes on hotels, dining, and tourism activities are likely to boost domestic tourism and encourage entrepreneurship in the sector.
Careful planning, strategic booking, and the use of services like Supreme Forex for international travel can help travelers maximize savings. With these reforms, 2025 is shaping up to be a favorable year for both domestic and international travel in India.
As Rohan Verma concludes: “At JustWravel, we’ve always believed that travel should be accessible to everyone. These GST reforms align perfectly with that vision. We’re excited to help more Indians discover the incredible diversity of our country, one budget-friendly adventure at a time.”
Make the most out of this GST reform by planning a trip with JustWravel!