A Study on the Impact of GST on the Hotel Industry: Pre-GST and Post-GST Analysis with Special Reference to NCR

Abstract

The Goods and Services Tax (GST), implemented in India on 1 July 2017, unified a fragmented system of central and 
state levies (service tax, VAT, luxury tax, etc.) under “One Nation, One Tax, One Market”. The hotel industry, a key 
pillar of tourism, has been deeply affected. Previously, hotels faced multiple cascading taxes varying by state, creating 
compliance burdens and opaque pricing. The National Capital Region (NCR) — encompassing Delhi, Gurugram, 
Noida, Ghaziabad, Faridabad — is a major hub for business and leisure travel, hosting diverse hotel properties, 
making the impact of GST on NCR hotels a critical subject for investigation. 
Objective: This study systematically analyses the pre-GST tax structure for hotels, traces the evolution of GST rates 
for accommodation and restaurant services, and assesses the effects on key performance indicators: occupancy rates, 
average daily rates (ADR), revenue per available room (RevPAR), and profitability. Special focus is placed on the 
NCR, where high operational costs and intense competition amplify tax policy consequences. 
Methodology: Using a systematic literature review, this paper synthesises legislative notifications, CBIC circulars, 
industry reports (FHRAI, HAI), financial analyses of hotel chains, and peer-reviewed studies (2015–2026). The 
comparison covers pre-GST vs. post-GST tax burdens, rate evolution, and financial trajectories of NCR hotels. 
Key Findings: GST has streamlined India’s indirect tax system. The 56th GST Council decision (effective 22 
September 2025) is the most significant revision: hotel rooms with tariff up to Rs. 7,500 per night now attract 5% GST 
without input tax credit (ITC) (down from 12% with ITC); rooms above Rs. 7,500 remain at 18% with full ITC. While 
the rate cut reduces consumer costs and is expected to boost domestic tourism, ITC removal for budget and mid-market 
hotels challenges profitability. Critics note the Rs. 7,500 threshold is outdated due to inflation (should be Rs. 10,000
12,000). FHRAI and HAI advocate for uniform 12% GST with ITC. In the NCR (average occupancy 72.9% in 2024), 
the 5% slab will likely stimulate mid-market demand, but hoteliers must strategically manage ITC loss. 
Implications: The study provides policymakers a synthesised framework for tax reforms that foster industry growth, 
offers practitioners evidence-based guidance for financial planning and pricing, and identifies structural inequities 
requiring regulatory attention.