Next-Gen GST reforms 2025: How the Latest Reforms Impact Hotel Tariffs, Restaurant Bills & Your Wallet

Last updated on 19 Sep 2025

The Goods and Services Tax (GST) regime has once again undergone a major shake-up. At the 56th GST Council meeting held on 3rd September 2025, the government announced sweeping changes to GST rates on both goods and services. These reforms, effective from 22nd September 2025, aim to simplify taxation, reduce consumer burden in certain sectors, and streamline compliance.

For the hospitality industry - hotels, restaurants, wellness centers, and travel providers - these reforms bring significant changes that directly affect how tariffs are calculated and what customers ultimately pay. Let's unpack what this "GST reforms 2025" means for hotels, restaurants, and your own wallet.

Key GST Changes Affecting Hotels & Restaurants

1. Hotel Accommodation

• Rooms priced at INR. 7,500 or below (per night): GST reduced from 12% with Input Tax Credit (ITC) to 5% without ITC.
• Rooms priced above INR. 7,500 per night: GST remains 18% with ITC.

Impact: Budget and mid-range hotels will now appear more affordable to guests since the tax rate has dropped. However, hotels lose the benefit of ITC, which may affect backend cost structures.

2. Restaurants

• Stand-alone restaurants: GST fixed at 5% without ITC. These establishments cannot declare themselves as "specified premises" to claim 18% with ITC.
• Restaurants within hotels where room tariff > INR. 7,500: GST continues at 18% with ITC.

Impact: Dining out in standalone restaurants may cost less for customers, but fine-dine restaurants within premium hotels remain under the higher slab.

3. Transport Services

• Premium passenger transport (e.g., chauffeur-driven cars, luxury pickups): GST increased from 12% with ITC to 18% with ITC.

Impact: Luxury airport transfers and premium car bookings will become more expensive.

How This Affects Guests' Wallets

• Cheaper stays in budget and mid-range hotels (thanks to lower GST).
• Fine-dining in five-star hotels may remain expensive (18% slab unchanged).
• Spa sessions and beauty services may feel more affordable.
• Luxury transfers become pricier.

In short, middle-class and budget travelers benefit the most, aligning with the Council's stated goal of providing relief to the "common man and aspirational middle class."

Challenges for Hoteliers

• Loss of ITC: Hotels under the 5% slab cannot claim input credits, leading to higher internal costs.
• Advance Bookings: Reservations made before 22nd September but consumed after the new rules may require credit notes or refunds if tax rates differ.
• Guest Communication: Guests need clear explanations on why their final bill differs from the time of booking.
• OTA Bookings: For hotels heavily dependent on OTAs, GST changes add another layer of complexity.

How Djubo Simplifies GST Compliance for Hotels

1. Automatic GST Rate Application: PMS auto-detects whether room tariffs are INR. 7,500 or above, and applies the correct GST slab instantly.
2. Advance Booking Adjustments: System prompts hoteliers to issue credit notes or refunds for bookings affected by the GST transition.
3. POS Compliance for Restaurants: Stand-alone restaurants are restricted from selecting the 18% option, ensuring accurate billing.
4. Guest Communication Support: Djubo provides ready-to-use templates that hotels can send to guests.
5. Reconciliation Reports: Hoteliers get detailed reports comparing GST collected vs. applicable GST, ensuring smooth audits and compliance.

What Hotels Should Do Next

1. Update Systems: Ensure PMS/POS is fully compliant before 22nd September.
2. Train Staff: Front desk and restaurant teams must know the FAQs and guest handling scripts.
3. Communicate Clearly: Add a line to booking confirmations: "As per GST regulations, applicable GST at the time of check-in will be charged, which may differ from the GST rate at the time of booking."
4. Monitor Margins: Evaluate how the loss of ITC impacts costs and adjust pricing strategies accordingly.
5. Adjust Tariffs as Needed: With the new GST structure in place, hoteliers can review and fine-tune their tariff plans.

The GST reforms 2025 is a mixed bag: great news for guests booking budget hotels and standalone restaurants, but a challenge for premium hotels and businesses that relied heavily on ITC. For the hospitality industry, it's a reminder that tax laws can change quickly, and agility is key.

With Djubo's automated PMS and POS solutions, hotels can stay compliant, avoid billing errors, and focus on delivering memorable guest experiences instead of worrying about tax complexity.

The bottom line? Guests save more on certain services, hotels must adapt quickly, and technology like Djubo is the bridge that makes the transition smooth.