The Indian government has announced a significant reform in the Goods and Services Tax (GST) structure, introducing two primary slabs of 5% and 18%. The decision was taken at the 56th GST Council meeting and will take effect from 22 September 2025, coinciding with the beginning of Navaratri.

Under the revised system, essential food items such as bread and paneer will be exempt from GST, while agricultural and food products will attract only 5%. This move is expected to reduce costs for consumers and the food service industry alike. Sin goods, including gutka, tobacco products, and carbonated drinks, will face a higher rate of 40% GST.

For the hospitality industry, the changes bring notable relief. GST taxation on rooms in hotels are also comes under the new GST slabs.

Hotel rooms with tariffs of less than or equal to Rs 7500 per day will be taxed at 5% without input tax credit (ITC) from 12% with inputs tax credit (ITC), as per recommendations made by the 56th GST Council. This move will enhance both the hospitality and tourism industry, with hotel stays now becoming more affordable.

This system continues to simplify hotel accommodation taxation, while the reduction of GST on essential goods and appliances used in hotels, such as air conditioners and televisions, paves the way for operational cost savings. Additionally, milk products and butter now fall under 0% from 5%, that means no tax for these products, creating the potential for reduced prices of dairy-based dishes and desserts like ice creams and pastries in hotel restaurants.

Mr. Varadharajan, Chartered Accountant and Hotel Tax Consultant, welcomed the move, stating that the revised GST will help bring down costs for both hotel operators and guests, making hospitality more accessible.

The GST 2.0 reform signals the government’s intent to balance affordability with economic growth, offering a direct benefit to hotels, restaurants, and consumers. With its timing aligned with the festive season, the initiative is expected to boost travel, dining, and overall demand in the hospitality sector.