The Central Government has informed Parliament that it has not undertaken any post-implementation review or data-based assessment of the impact of the GST rate rationalisation for hotel accommodation services on occupancy rates, tourist footfall, affordability, or revenue trends in the hospitality sector.
The Government also clarified that no proposal is currently pending before the GST Council to review the existing 5% GST regime without Input Tax Credit (ITC) for hotel accommodation services.
The clarification came in response to Lok Sabha Unstarred Question No. 108, answered by Minister of State for Finance Pankaj Chaudhary on July 20, 2026, regarding post-GST rationalisation trends in the tourism and hospitality sector.
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GST Rate Reduced Following 56th GST Council Meeting
The Government recalled that, based on the recommendations of the 56th GST Council meeting held on September 3, 2025, the GST rate applicable on hotel accommodation services where the transaction value is ₹7,500 or less per unit per day was reduced from 12% with Input Tax Credit (ITC) to 5% without ITC.
According to the Ministry, the objective behind the rate reduction was to lower the tax burden on the tourism and hospitality sector, improve affordability for consumers, stimulate demand, and enhance the competitiveness of the industry. The Government also stated that the move was expected to reduce compliance burdens and transaction costs, thereby supporting overall growth in the sector.
No Data-Based Assessment Conducted
Despite the expectations associated with the tax cut, the Finance Ministry admitted that no formal post-implementation review or empirical assessment has been carried out to measure whether the GST reduction has actually resulted in increased hotel occupancy, higher tourist footfall, improved affordability, or better revenue performance in the hospitality industry.
The response indicates that while the policy was introduced with the expectation of benefiting consumers and businesses alike, the Government currently lacks official data evaluating whether those intended outcomes have materialised.
No Study on Tier-II and Tier-III Cities
The Government further informed Parliament that no sector-wise analysis has been undertaken to examine the impact of the revised GST structure on tourism growth in Tier-II and Tier-III cities.
Specifically, the Ministry stated that it has not carried out any assessment regarding the effect of the GST rate reduction on investment, employment generation, or the broader hospitality ecosystem in smaller cities and emerging tourism destinations.
This clarification is significant because the tourism industry has often argued that tax rationalisation can play an important role in promoting hospitality infrastructure beyond major metropolitan centres.
No Proposal Pending Before GST Council
Responding to a question on whether the Government proposes to place before the GST Council any review of the 5% GST rate without ITC, the Ministry clarified that no such proposal is currently pending.
The Government reiterated that GST rates and exemptions are prescribed only on the recommendations of the GST Council, a constitutional body comprising representatives of the Union Government and the States and Union Territories. As of now, no proposal seeking reconsideration of the present tax structure has been placed before the Council.
Government Says Benefits Were Meant to Reach Consumers
The Ministry also outlined the measures taken to ensure that the benefits of the GST rationalisation are passed on to consumers.
According to the Government, following the implementation of the GST Council’s recommendations, multiple discussions were held with stakeholders in the hospitality sector to emphasise that the benefit of the reduced GST rate should be directly transferred to consumers.
The Government highlighted that maintaining the GST rate at 5% without ITC was intended to reduce the overall cost of hotel accommodation services for end users, making such services more affordable while supporting the Government’s broader tourism promotion objectives.
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