Tax Reform
A new industry report by Ernst & Young in collaboration with FICCI has recommended reducing GST on premium hotel room tariffs above ₹7,500 from 18% to 9%, positioning it as a key lever to enhance India’s global tourism competitiveness.
The proposal, unveiled during GITB 2026, aims to realign India’s hospitality pricing with competing destinations such as Thailand and Vietnam, where lower tax structures make travel more affordable for international visitors.
From a hospitality standpoint, the current 18% GST on higher room categories has long been viewed as a deterrent to inbound travel, particularly in the luxury and upscale segments. The report argues that a reduction to 9% could significantly improve value perception, stimulate demand, and drive higher occupancy across premium hotels.
Inbound Growth
The recommendation retains the existing 5% GST slab for mid-scale room tariffs between ₹1,000 and ₹7,500, signalling a targeted approach focused on boosting high-value tourism without disrupting broader pricing structures.
The report, titled Reimagining Inbound Tourism in India: Trends, Technology & Transformational Opportunities – Towards Incredible India 4.0, also highlights deeper structural challenges impacting the sector. These include fragmented destination branding, limited global marketing reach, and gaps in experience-led travel packaging—areas that directly influence how India competes on the global tourism stage.
India’s tourism economy already contributes approximately ₹21 trillion to GDP and supports over 46 million jobs. However, foreign tourist arrivals remain relatively modest at around 9.9 million annually, indicating untapped potential—especially when compared to regional competitors.
For hotel developers and operators, the timing of this recommendation is critical. With a pipeline of over 100,000 new hotel rooms in development, aligning pricing with global benchmarks could be essential to ensuring sustainable demand absorption and stronger returns on investment.
The report also points to the growing importance of experience-driven travel segments such as culinary tourism, wellness, wildlife, and live events—areas where premium hospitality plays a central role in shaping visitor experiences.
As international travel spending is projected to rise steadily over the next decade, the suggested GST rationalisation could serve as a catalyst for India to reposition itself as a more competitive, value-driven global destination—provided it is supported by broader policy coordination and infrastructure readiness.
