By: Tuhin Sarkar

The Hotel Association of India has welcomed the Prime Minister’s call for GST rationalisation. The industry believes the reform is critical for competitiveness and growth. The current slabs are outdated and hold India back from its true tourism potential. A new GST framework can unlock jobs, investment, and foreign arrivals. This is not just a tax issue. It is about positioning India as a global leader in tourism.

Why GST Reform Matters for India’s Tourism

Tourism is one of the most powerful engines of growth. It generates employment, supports small businesses, and drives regional development. Yet India lags behind global competitors because of high taxation on hotels. GST rates directly influence affordability for travellers and shape the country’s competitiveness. For India to achieve Vision 2047 and attract 100 million foreign tourists annually, reform of GST is no longer optional. It is a necessity.

Current GST Structure and Its Challenges

At present, hotel rooms priced up to ₹7,500 per night fall under the 12 percent GST bracket. This threshold was set six to seven years ago. Since then, inflation and rising costs have made this structure outdated. Hotels priced above this bracket fall into the 18 percent slab, which is considered globally prohibitive. Such rates push tariffs higher and risk pricing India out of international competition. The Hotel Association of India has urged policymakers to revise the threshold to ₹15,000 per night. This adjustment would align taxation with inflation and make Indian hotels more affordable to global travellers.

The Case for a Uniform 5 Percent GST

The Hotel Association of India has gone further in its recommendations. It has called for a uniform GST rate of five percent across hotels, restaurants, and tourism services, with full input tax credit. This would simplify compliance, reduce administrative burden, and enhance ease of doing business. Such a move would also encourage investment and create thousands of jobs. Simplified taxation makes the industry more attractive to investors. It also improves transparency and ensures higher efficiency in the sector.

Employment and Inclusive Growth Opportunities

Tourism contributes directly to employment creation. It also drives inclusive growth by supporting micro, small, and medium enterprises across India. From food supply chains to transport services, the impact of tourism goes far beyond hotels. With the right policies, the sector can contribute ten percent of India’s GDP. The GST reform, combined with broader tourism policy measures, would be a catalyst for this transformation. It would make India a stronger competitor in the global tourism race.

India’s Vision 2047 and the Role of Tourism

India has set a bold goal for its centenary of independence in 2047. The vision includes attracting 100 million foreign tourists annually. Tourism is central to this ambition. The Hotel Association of India has been vocal in linking tax reforms to this long-term target. Rationalising GST is essential to position India among the top five global tourism destinations. Without reform, the high tax rates will remain a barrier. With reform, India can compete with leading global markets and offer affordable hospitality without compromising quality.

The Global Benchmarking Gap

When compared with global destinations, India’s GST rates are uncompetitive. Countries competing for international tourists often apply lower taxes on hotels. Many markets in Asia and Europe have rates well below India’s 18 percent. This makes India less attractive to cost-sensitive travellers. It also discourages long-haul visitors who compare packages across multiple destinations. If India wants to match its competitors, GST must be rationalised to align with global benchmarks.

The Push for Investment and Infrastructure Growth

High tax rates reduce demand. Reduced demand discourages investment. This cycle prevents the hospitality industry from achieving its true scale. Rationalised GST would break this cycle. By lowering the tax burden, demand would increase, revenue would rise, and new investments would flow into the sector. Investors are more likely to commit when they see sustainable demand growth. India’s hotel infrastructure needs expansion to meet future tourism targets. The GST reform would play a central role in unlocking this expansion.

Balancing Revenue with Growth Potential

One argument against GST reform is the potential loss of tax revenue. However, industry experts believe that rationalisation would boost overall demand and expand the tax base. A simplified, lower rate with input tax credit would encourage compliance and reduce leakages. Over time, this would generate more revenue than the current complex structure. Growth in foreign arrivals would also increase foreign exchange earnings, offsetting any short-term revenue concerns.

Regional Competitiveness and Global Positioning

India is competing not just with its neighbours but with every global destination. Southeast Asian countries like Thailand, Vietnam, and Malaysia offer attractive hospitality packages with lower tax burdens. Europe has also rationalised hospitality taxes to strengthen its tourism flows. India cannot afford to lag behind. Rationalisation is not just about domestic reform; it is about positioning India as a serious contender in the global tourism market.

Response from Policymakers and Stakeholders

The announcement from the Prime Minister on 15 August 2025 has brought renewed hope to the sector. The Finance Minister, who chairs the GST Council, has received formal representation from the Hotel Association of India. Industry leaders see this as a turning point. The government’s willingness to consider rationalisation indicates recognition of the sector’s importance. What matters now is the speed and scale of reform. The hospitality industry has made it clear that delay will hurt competitiveness and cost India valuable market share.

Wider Economic Impact of Reform

GST rationalisation will not only support tourism but also ripple through the wider economy. Travel and hospitality drive spending across multiple sectors, from aviation to handicrafts. Local communities benefit from job creation and skill development. Lower taxes encourage domestic tourism as well, creating a double boost for the economy. Rationalisation would therefore support both foreign arrivals and local travellers, expanding the market in both directions.

Industry Commitment to Partnership with Government

The Hotel Association of India has reaffirmed its commitment to working with policymakers. The goal is to establish a fair and progressive GST framework. Such a framework must balance the government’s revenue needs with the industry’s growth potential. Collaboration between government and industry is the key to success. India has the talent, resources, and destinations to become a global leader. What it needs is an enabling policy environment.

Looking Ahead: Seizing the Moment

The time for GST rationalisation is now. India is at a crossroads in tourism. It has the potential to be one of the top five destinations in the world. But high tax rates are a roadblock. Rationalisation can remove this barrier, unlock growth, and deliver the jobs and investments the country urgently needs. This is about more than numbers. It is about securing India’s place on the global tourism map. The world is watching. India must act quickly to seize the opportunity.