Effective September 22, 2025, India's GST on travel has been restructured to 5% for economy class air travel and a higher 18% for premium/business class. This shift aims to make travel more affordable for the masses while taxing luxury travel more heavily, with 0% GST on travel insurance.
In the past, different GST rates for buying flights, hotels, and package tours made things confusing for travel providers. For now, the tours and travels GST rate stays the same: 5% for domestic tour companies (without ITC) and 18% for those who choose to claim an ITC.
The GST Council has introduced a new tiered tax system, increasing the GST rate on non-economy air travel in India. From September 22, 2025, the GST on premium economy, business, and first-class tickets will rise from 12% to 18%, while the GST rate for economy class tickets will remain at 5%.
GST on hotel rooms is reduced from 12% to 5% for tariffs up to ₹7,500 per day, effective 22nd September 2025. No ITC is allowed at 5%, so hotels with both budget and premium rooms must carefully manage their tax credits. Rooms priced above Rs. 7,500 will continue to attract 18% GST, and ITC is fully available here.
The GST on tours and travels depends entirely on whether you claim the Input Tax Credit. If you are claiming ITC, the applicable GST rate will be 18%, but without ITC, the rate will be 5%. These rates have a significant impact on the price of the tour packages. If you do not choose ITC, you will get a lower cost.
What is the airfare GST on international travel? Ans. For travellers flying on Economy class tickets, a GST rate of 5% will be applicable on international travel. On the other hand, the applicable GST rate is 12% for Business and Premium Economy class fliers.
Compliance & Procedural Changes
From April 1, 2025, Input Service Distributor (ISD) registration will be compulsory for businesses having multiple Goods & Services Tax Identification Numbers (GSTINs). The time limit for the validity of an E-Way bill will be 180 days, and it can be extended to 360 days.
GST, or Goods and Services Tax, is an indirect tax imposed on the supply of goods and services. It is a multi-stage, destination-oriented tax imposed on every value addition, replacing multiple indirect taxes, including VAT, excise duty, service taxes, etc.
You can claim a GST refund in the following situations, when additional tax is paid or deposited due to errors or omissions. When dealers and deemed export goods or services are subject to refund or refund. Refunds can also be made for purchases made by UN agencies or embassies.
Availing ITC for GST on Domestic Flights in India
Under the Goods and Services Tax regime, firms are eligible to get GST Input on air tickets. This stands true for air travel expenditure that is incurred when employees travel for official reasons, i.e., business purposes.
Private agencies: Visa services provided by private agencies are taxable under GST. The GST rate applicable to private agencies depends on the type of service being provided. Issuance of visa: The GST rate for the issuance of a visa is 18%.
GST applies to domestic air travel, other than where: a domestic flight forms part of a ticket for international travel or is cross-referenced to an international ticket and is purchased at any time up to and including the date of international travel, or.
The changes to the GST in September 2025 are a clear step towards making travel cheaper. The tax on hotel rooms up to ₹7,500/night is now 5% without ITC, while the tax on luxury stays stays at 18%.
It covers expenses such as salaries, electricity, rent, transportation costs, food and beverages, hotel rooms, insurance, legal and professional fees, and more. For each expense, it specifies whether the rate is exempt, non-GST, or a percentage under GST as well as whether the supplier can claim input tax credit.
Calculation: Base Price: ₹50,000. GST Amount: ₹50,000 × 18% = ₹9,000. Total Amount: ₹50,000 + ₹9,000 = ₹59,000.
Yes and no. Hotel VAT is levied by the government and charged to the guest. The hotel forms the middleman, transferring VAT from guests to the government. VAT, GST and sale taxes therefore don't really represent a hotel cost or a hotel fee in the traditional sense.
GST is applied to most goods and services, including hotel accommodations, dining, and additional services. GST Rate: As of 2024, the GST rate is 9%. This tax applies to the following: Room Rates: GST is added to the rate charged for hotel rooms, making it essential for hotels to include this in their pricing model.
Good news is, Starting July 2025, the HST/GST credit has increase by 2.7%, helping low- and modest-income households stretch their budgets. This tax free quarterly payment can put hundreds of extra dollars into your pocket each year.
Starting September 22, 2025, GST in India will be simplified to primarily two rates: 5% and 18%, with a special 40% rate on luxury and sin goods like tobacco and high-end vehicles. Many essentials, including certain medicines and foods, are now zero-rated, while several items see reduced rates.
For any standard-rated supplies of goods or services that you make on or after 1 Jan 2024, you must charge GST at 9%. For instance, if you issue an invoice and receive payments for your supply on or after 1 Jan 2024, you must account for GST at 9%.
Key Categories of Goods under 40% GST Slab
Key items exempted from GST: