India’s hospitality and tourism sector stands at a pivotal moment — where policy, technology, and education converge to script a new chapter of growth. The 2025 GST rationalisation, effective from September 22, 2025, marks one of the most transformative fiscal reforms in recent years.

Under the revised framework, hotel room tariffs up to ₹7,500 per night now attract just 5% GST (without ITC) instead of 12%, while those above ₹7,500 continue under the 18% slab (with ITC). This simplified structure — along with rationalised rates for travel, food, and allied sectors — reinforces India’s standing as one of the fastest-growing tourism markets, contributing 9.2% to the national GDP and supporting nearly 39 million jobs (World Travel & Tourism Council, 2024).

Driving Affordability and Competitiveness

The revised GST rates have significantly lowered the cost of travel and accommodation, enhancing affordability for both domestic and international tourists. For instance, room tariffs below ₹7,500 now enjoy substantial tax reductions — with effective savings of up to ₹490 per night in certain categories. With nearly 90% of Indian hotels operating within this bracket, the reform primarily benefits the mid- and budget-segment properties that form the backbone of India’s tourism landscape.

Reform Benefits Across Tourism and Allied Sectors

GST 2.0 introduces wide-ranging changes across the hospitality value chain to promote affordability, efficiency, and inclusive growth.

·      Hotel Accommodation: GST reduced from 12% (with ITC) to 5% (without ITC) — a direct 7% gain for consumers.

·     Transport and Travel: GST on small and mid-sized cars and buses reduced from 28% to 18%, lowering operational costs for tourist transport operators. Luxury cars and SUVs now attract a uniform 40% tax without additional cess, simplifying compliance for premium operators.

·      Food and Household Supplies: Basic food items such as UHT milk, paneer, and Indian breads are now exempt from GST, while packaged snacks, sauces, and confectionery attract only 5%. Toiletries and tableware rates have been cut from 28% to 18%, reducing hotel operating costs.

·      Construction Materials: Cement now attracts 18% GST instead of 28%, and materials like granite, bricks, bamboo, and pallets have been reduced to 5% — encouraging new hotel and infrastructure development.

·      Handicrafts: Items such as idols, paintings, dolls, and toys now fall under the 5% bracket (from 12%), boosting India’s cultural economy and benefiting local artisans.

These rationalisations make India’s hospitality ecosystem more competitive and sustainable by reducing input costs, promoting local craftsmanship, and enhancing consumer value.

Employment Generation and Youth Empowerment

A joint analysis by the Federation of Hotel & Restaurant Associations of India (FHRAI) and the Ministry of Tourism estimates that GST 2.0 could generate between 4–5 lakh new jobs across the hospitality and tourism ecosystem between 2025 and 2027.

• Budget & Mid-segment Hotels: 2–2.5 lakh jobs in front office, housekeeping, and F&B service.
• Restaurants & Cafés: 1–1.5 lakh opportunities in culinary arts, hygiene, and service.
• Travel Agencies & Operators: 50,000–75,000 positions in travel planning, CRM, and digital marketing.
• Ancillary Tourism (Guides & Transport): 75,000–1 lakh new roles emphasizing local guiding, logistics, and soft skills.

Notably, around 60–65% of these opportunities will benefit youth under 35, strengthening India’s demographic advantage. The hospitality sector’s multiplier effect ensures that every direct job generates 1.6–1.9 indirect jobs, positively impacting farmers, transporters, suppliers, and artisans. Tier-II and Tier-III cities are expected to emerge as key growth hubs, with reduced tax burdens driving new hotel investments and destination development.

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Integrating Policy into Education: The IHM-Hyderabad Approach

At the Institute of Hotel Management, Hyderabad, GST 2.0 is not merely a fiscal change — it’s a classroom opportunity. The institute integrates real-world policy into academic learning through:

• Faculty Development Programs (FDPs) under NCHMCT on revenue management and ethics.
• Simulation-based exercises linking taxation, pricing, and profitability.
• AI-powered learning tools for menu planning, inventory control, and hospitality analytics.

“GST 2.0 gives our students a real-world understanding of business economics.” “By linking policy, education, and practice, we are shaping professionals who are not only skilled but visionary.”

Fostering Entrepreneurship and Innovation

IHM-Hyderabad also nurtures innovation and entrepreneurship by mentoring startups in food, lodging, and tourism; promoting sustainable and tech-enabled hospitality models; and encouraging creative participation in national and global competitions. These initiatives empower graduates to emerge as changemakers — driving employment, sustainability, and community development.

Reforming Policy, Reshaping Futures

The 2025 GST reforms represent a landmark moment for India’s hospitality industry — making it more inclusive, competitive, and youth-centric. At IHM-Hyderabad, this transformation aligns seamlessly with the institute’s mission to blend policy insight, industry readiness, and innovation.

“Hospitality is not merely about service — it’s about creating experiences,” says the Principal. “GST 2.0 provides the industry with structural stability to focus on quality and sustainability rather than compliance hurdles. As India’s tourism economy expands, these reforms ensure that growth remains equitable, inclusive, and future-ready.”

In essence, GST 2.0 is not just a tax reform — it is a catalyst for opportunity, empowerment, and evolution. It enables businesses to grow, youth to thrive, and educators to reimagine the future of hospitality in India — paving the way for sustainable, inclusive, and globally competitive growth.

About the Author

Sanjay K. Thakur is the Principal of the Institute of Hotel Management, Hyderabad (IHM Hyderabad), a central government institute under the Ministry of Tourism. With extensive experience in hospitality education and institutional leadership, he oversees academic programmes, curriculum development and industry partnerships at IHM Hyderabad. His role involves nurturing talent, ensuring high standards of teaching and training, and preparing students for leadership roles in the service and tourism sector.