GST rate cut boosts tourism but small hotels in Goa say relief bypasses them

Panaji: Budget and mid-market hotels stand to gain from Centre’s decision to reduce Goods and Services tax (GST) on rooms costing up to Rs 7,500. However, uncertainty hangs over hotels in the Rs 6,000 –– Rs 8,000 bracket, where rates often fluctuate with demand.

The GST was lowered from 12% with input tax credit (ITC) to 5% without ITC for stays up to Rs 7,500. While the move simplifies taxation, hoteliers say benefits are mixed.
Veteran South Goa hotelier Serafin Cota said the cut makes Goa more competitive internationally.


“Govt always says GST was paid by the customer, whether 5% or 28%. But with charter operators, contracts specify that new taxes are borne by hotels. They look only at the rack rate. So hotels were paying the tax. With GST reduced, the burden eases,” Cota said.

Small and Medium Hoteliers Association of Goa (SMHA) president Santosh Divkar disagreed, arguing govt should have exempted hotels, guesthouses, and homestays charging up to Rs 2,000 per night. “In this new structure, small and medium hoteliers get crushed, while larger ones benefit. If exemption was extended to Rs 2,000, it would have transformed the sector,” said Divkar.
Travel and Tourism Association of Goa (TTAG) president Jack Sukhija flagged confusion over fluctuating tariffs. “If the price of a room is more than Rs 7,500, tax is 18% with full ITC. Below that, it is 5% without ITC. Sometimes rates vary. How do you calculate input tax for rooms sold at different levels?” he said.

Hotelier Gaurish Dhond said the industry sought relief, but loss of ITC is a setback. “The 5% GST is good, but we cannot claim input tax credit. Earlier we could, and that benefit could be passed to customers. Now we cannot. We are a bit saddened,” Dhond said.

Mid-market chains, however, welcomed the change. Tejus Jose, director of operations at ibis & ibis Styles India, said the new structure eliminates confusion. “It brings clarity and ease to the booking experience. For guests, it boosts affordability, while for hotels it supports smoother compliance,” Jose said.