An Analytical Study of GST’s Impact on the Hotel Industry in NCR: A Comparative Study of Pre-GST and Post-GST Periods
DOI:
https://doi.org/10.63665/8nth5a42Keywords:
GST, Hotel Industry, NCR, Pre-GST, Post-GST, Input Tax Credit (ITC), Occupancy Rate, Average Daily Rate (ADR), Revenue Per Available Room (RevPAR), Federation of Hotel & Restaurant Associations of India (FHRAI), Hotel Association of India (HAI), Tax Reform, Hospitality SectorAbstract
Background: The Goods and Services Tax (GST), implemented on 1 July 2017, unified India’s fragmented central
and state levies (service tax, VAT, luxury tax, etc.) under “One Nation, One Tax, One Market”. The hotel industry, a
cornerstone of tourism, has been profoundly affected. Before GST, hotels faced cascading taxes varying by state,
creating high compliance costs and opaque pricing. The National Capital Region (NCR) – Delhi, Gurugram, Noida,
Ghaziabad, Faridabad – is a critical hub for business and leisure travel, hosting branded, heritage, and budget hotels.
Thus, GST’s impact on NCR hotels warrants focused investigation.
Objective: This study compares pre-GST and post-GST periods to evaluate GST’s impact on NCR’s hotel industry. It
examines tax structure changes, assesses key performance indicators (occupancy, ADR, RevPAR, profitability), and
identifies challenges and opportunities from the September 2025 rate rationalization.
Methodology: A systematic comparative analysis uses legislative notifications, CBIC circulars, industry reports
(FHRAI, HAI), financial statements of NCR hotel chains, and peer-reviewed studies (2015–2026). The study contrasts
the pre-GST multiple-tax regime with evolving GST slabs, focusing on NCR.
Key Findings: GST has streamlined India’s indirect tax system. The 56th GST Council decision (22 September 2025)
is the most significant: rooms ≤ Rs.7,500 now attract 5% GST without input tax credit (ITC) (down from 12% with
ITC); rooms > Rs.7,500 remain at 18% with full ITC. In NCR (72.9% occupancy in 2024), the 5% slab cuts consumer
costs by ~6.25% and is expected to boost mid-market demand by 5–10%. However, ITC removal for budget and
mid-market hotels poses a serious challenge: net GST outflow per room night rises 150%, reducing net profit margins
by an estimated 3–5 percentage points. Critics note the Rs.7,500 threshold is outdated due to ~40% cumulative
inflation since 2017 and should rise to Rs.10,000–Rs.12,000. FHRAI and HAI advocate for a uniform 12% GST with
ITC across all hotel categories.
Implications: This study offers policymakers a comparative framework to refine GST rates and ITC rules, provides
NCR hoteliers actionable guidance on pricing, cost optimization, and strategic upgrading, and highlights structural
inequities needing regulatory attention for long-term industry growth.
