GST reforms in 2025 have changed how trips feel on the wallet. Hotel stays under common price bands now cost less, and many flyers notice lighter bills. Yet insurance premiums tell a different story.
In this article, you will gain a clear understanding of why flights and hotels eased, but insurance did not.
What Changed for Flights And Hotels
The latest rationalisation under the 56th GST Council has altered how a typical Indian trip is taxed. Mid-market hotel stays became cheaper because rooms priced up to ₹7,500 per night now attract 5% GST without input tax credit, down from 12% earlier with credit. That is a direct tax cut that most families will notice in their bills.
Flights are a mixed bag. Economy tickets continue to draw 5% GST, so any fare relief you feel is more about supply, competition and sales than a fresh GST cut. Premium cabins are set to increase by 18% from late September, so frequent flyers in those seats may actually see a higher tax burden.
If you plan to buy travel insurance, the GST story is different, and it matters for your final holiday budget. Keep reading.
Why Insurance Didn’t Get Cheaper
The Council’s relief targeted accommodation and several essentials. It also removed GST on individual life and health insurance, which helps households plan protection cover. Individual or student travel insurance sits in the general insurance bucket, which continues to be taxed at the standard 18% rate. That is why your policy quote still shows GST added to the base premium.
In other words, while hotels benefited from a slab cut and economy airfares kept their lower rate, travel policies did not receive a new concession. For anyone looking to buy travel insurance, the unchanged 18% GST is the key line item to budget for.
How The New Math Affects Your India Trip Budget
Here are simple illustrations to help you see where the money moves. These are indicative examples to show the GST effect only.
- Hotel stay
- Before: ₹6,500 per night × 3 nights = ₹19,500. GST 12% = ₹2,340. Total ₹21,840.
- Now: GST 5% = ₹975. Total ₹20,475. Savings ₹1,365 on the same stay.
- Economy flight
- GST remains 5% on the base fare. If the base fare is ₹8,000, GST is ₹400. No structural change from the reform for economy seats.
- Travel insurance
- Base premium ₹1,200. GST at 18% = ₹216. Total ₹1,416. No GST relief here, so the out-of-pocket remains the same under the new regime.
The takeaway for India GST travel cost is clear. Hotels under ₹7,500 now help you save, flights depend on market pricing and class of travel, and insurance continues to attract the standard rate.
Practical Ways To Keep Costs In Check
Use these quick wins to make GST reform travel work for you.
- Target the right tariff band: Choose stays priced up to ₹7,500 per night to capture the 5% rate. Verify your invoice shows “5% without ITC” under accommodation.
- Be flexible with flights: Since GST for the economy is unchanged, hunt for value with timing, alternate airports and carry-on only fares.
- Right-size your cover: When you buy travel insurance, pick a sum insured that fits your itinerary instead of over-insuring. The 18% GST applies regardless, so trimming unnecessary add-ons can keep the final bill sane.
- Bundle thoughtfully: Packages sometimes include club rooms that cost just above ₹7,500. Ask for a split-stay or a plan that keeps you within the favourable slab.
- Book at the right moment: If your protection needs include life or health cover unrelated to the trip, it now carries 0% GST after the effective date, which can free up your budget for travel.
When You Should Still Buy Travel Insurance
Even without a GST cut, it is still wise to buy travel insurance for international trips that demand proof of cover, for medical emergencies abroad, or for non-refundable bookings. A delayed bag or a missed connection can wipe out the savings you made on a cheaper hotel rate.
- For domestic breaks, buy travel insurance if you are flying during peak season or carrying expensive gear.
- Students and senior citizens should buy travel insurance that includes medical and trip-interruption benefits.
- Families on long itineraries should buy travel insurance with clear claim limits and exclusions.
If you road-trip across states, buy travel insurance that covers personal accident and trip delay.
What This Means for Travellers in 2025
The gist of GST hotel’s flight insurance is simple. Hotels under the key tariff band are cheaper, economy air travel is tax-free, and travel policies remain at the standard rate. Plan your mix so that hotel savings offset static items like insurance. That is how you shrink your India GST travel cost without cutting safety nets.
Conclusion
GST Reform 2025 rewards smart planning. Book stays that qualify for the 5% slab, shop for value on flights, and buy travel insurance for genuine risks rather than everything on the menu. You will travel confidently, keep surprises off your bill, and still protect your plans where it matters most.