GST 2.0 & Tourism: What Travel Agents, Airlines & Planners Must Know

GST 2.0 & Tourism: What Travel Agents, Airlines & Planners Must Know

Published on September 23, 2025

Overview

On 22 September 2025, India implemented GST 2.0, a sweeping reform of its Goods & Services Tax structure. The government has consolidated GST slabs and reduced rates across key sectors—including hotels, transport, and cultural goods—to make travel and tourism more accessible, boost domestic demand, and support traditional artisans.

For stakeholders across the B2B travel ecosystem—corporate travel managers, airline professionals, travel agents, and tour consolidators—these changes present new opportunities and strategic implications.

What’s Changed: Key Reforms

1. Hotels & Accommodation

• Rooms under ₹7,500/night now attract 5% GST (without input tax credit, or ITC), reduced from 12% with ITC.

• Rooms below ₹1,000/night remain GST-free (i.e. 0%)—this slab was already exempt and continues so.

• Travellers booking rooms under ₹7,500 will save up to ₹525 per room per night, roughly 7% on room rates.
  
  

Implications for B2B partners: Mid-range and budget hotels become more competitive. Expect increased demand in Tier-2 and Tier-3 cities. Corporate stays and group travel packages can leverage more attractive pricing.

2. Transportation: Buses & Public Travel

• GST on buses with seating capacity of 10 or more has been lowered from 28% to 18%.

• This will reduce upfront purchase cost for operators (fleet, minibuses), and help reduce ticket prices, especially in shared and public transport services on semi-urban/rural routes.

For travel agents and tour operators, costs for including coach or bus transport in itineraries may decline—opening door for more competitive packages. Airlines or consolidators offering multi-modal travel (fly + coach) might seize an advantage.

3. Cultural & Artisan Goods

• Certain art and cultural goods (statues, statuettes, original engravings, prints, stone artware, stone inlay work, ornamental items) now move from 12% GST to 5%.

• This puts authentic souvenir-type products and cottage-industry crafts at lower cost, which helps artisans, stimulates home-market purchases, and enhances appeal of heritage tourism.
  
  

Impacts & Opportunities for the B2B Travel Sector

Travel Agents & Tour Consolidators

• Lower costs for hotels & transport = cheaper packages

• Stronger demand from cost-sensitive travelers

• Chance to bundle & pass savings to clients

• Must renegotiate supplier contracts

• Adjust profit margins carefully

• Ensure transparency of savings in client quotes

Corporate Travel Planners

• Reduced mid-market hotel costs

• More options for group travel to less crowded areas

• Better value for corporate budgets

• Verify vendor compliance with GST cuts

• Track rate fluctuations closely

• Update company travel policies & guidelines

Airlines & Intermodal Operators

• Benefit indirectly from cheaper feeder transport

• Potential rise in domestic leisure travel

• Higher off-peak season volumes

• Need to adapt pricing strategies

• Explore partnerships with ground transport providers

• Promote packages highlighting overall cost savings

Hotels (Mid/Budget Segment)

• Higher occupancy rates expected

• Broader demand from budget-conscious segments

• Competitive edge against luxury hotels

• Opportunity to expand into under-served regions

• Must manage operations without ITC benefits

• Balance rising costs with guest expectations for value

What to Watch For / Challenges

• Input Tax Credit (ITC): The reduced GST for hotels under ₹7,500 is without ITC, which may increase cost burden on hoteliers for purchases of goods/services that still attract a higher GST.

• Thresholds & Classification: Hotel properties that have had any room tariffs over ₹7,500 in the previous fiscal year may be treated differently—leading many star‐category hotels to still attract 18% or the higher rate for all services.

• Pricing Transparency & Revisions: Some services/vendors may delay passing on the benefit or adjust other fees. Agents need to verify final pricing.

• Infrastructure & Service Quality: As demand increases in mid-market segments and smaller cities, need to maintain quality standards (amenities, safety, connectivity) to match customer expectations.
  
  

Conclusion & Takeaways

India’s GST 2.0 reforms mark a turning point for tourism and travel-related industries. For B2B players—travel agents, consolidators, corporate planners, and airlines—they open up significant opportunities:

• Accommodation and ground transport costs drop, making travel packages and domestic travel more profitable and accessible.

• A stronger push toward Tier 2/3 markets and heritage/pilgrimage/ecotourism circuits as travellers seek value.

• Cultural goods tax cuts reinforce the heritage economy, adding value to tourism beyond just stays and transport.
  
  

To harness these advantages, stakeholders must adapt quickly: update pricing models, renegotiate with suppliers, promote savings to clients, and ensure compliance with the new tax slabs. The early movers will likely capture a bigger share as travel demand adjusts.

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