The reduction of the GST rate on hotel accommodation spurred the travel and hospitality industry; however, the elimination of the ITC and increase in premium tax on airfares elicit mixed feelings.

The new GST changes to be introduced will provide advantages to the travel and hospitality sector in India, and the government has cut down the GST levied on mid- to upper-mid hotel accommodations by half to 5 percent. According to industry stakeholders, this will boost domestic tourism by making it cheaper to stay in the country and sparking off demand. The withdrawal of the input tax credit (ITC) has not, however, been responded to well due to the fear that hotel members are afraid it will reduce investment.

According to the Confederation of Indian Industry (CII) and EY report, current travel and hospitality industries employ approximately 8 percent of overall Indian workers and are expected to rise going forward to 2036-37. With the reduced GST, leisure and business travelling will get a boost, which would further massage India as a tourism destination.

The government maintained the 5% GST on fares in the economy class on air travel but welcomed it by the travel and hospitality players targeting economy. This growth of the GST, however, has been criticized by the International Air Transport Association (IATA), who feel the GST can affect route profitability.

Despite the issue of ICT removal and premium fare taxation, reforms generally indicate a positive change in the travel and hospitality ecosystem.