A hotel cancellation policy is a promise in both directions. The guest learns what they lose if their plans change, and you learn how much of a booking you can count on. Write it too loosely and a festival weekend empties the night before. Write it too harshly and guests book the property next door with "free cancellation" in green.
This guide covers what a good policy contains, three templates you can adapt, separate terms for groups and weddings, and the GST and consumer-law points every Indian owner should know. For what happens when a guest simply does not turn up, see our guide to no-show charges in hotels.
What a cancellation policy has to answer
A guest reading your policy wants four answers, in plain words:
- Until when can I cancel for free? State a time and a date reference: "until 12 noon, two days before arrival", not "48 hours prior".
- What do I pay if I cancel after that? One night, a percentage, or the full stay.
- What if I do not turn up at all? Usually the same as a late cancellation.
- How and when do I get any refund? The method (back to the original payment method, or UPI) and a realistic time.
Add two lines for your own protection: what counts as a cancellation (a message to your number or email, or through the booking site the guest used), and what happens if the guest leaves early.
Then put the policy where the guest sees it before paying: on the rate on your website, in the WhatsApp quote, on the confirmation and on the registration card. A policy the guest never saw is very hard to enforce.
A typical hotel cancellation policy in India
There is no single legal standard for Indian hotels, but the common pattern on booking sites and among independent properties looks like this:
- A flexible rate with free cancellation up to a set time before arrival, often 24 to 72 hours.
- A charge of one night's room rate for cancellations after that point, and for no-shows.
- A cheaper non-refundable rate for guests who are sure of their dates.
- Firmer terms on peak dates: New Year, long weekends, festival nights and wedding season.
The OTAs let you set a policy per rate plan on their extranets. Keep those policies matched to the ones on your own website, so a guest is not treated differently just because of where they booked. If you sell the same room on several sites, make one decision and apply it everywhere.
Three templates you can adapt
Each template below is a starting point, written for a guest to read. Replace the times and amounts with your own, and keep the wording short.
Flexible (best for quiet periods and business travellers)
Moderate (best for weekends and most of the year)
Non-refundable (best for a discounted rate)
A non-refundable rate is fair when the discount is real. A common choice is 10 to 15 per cent below the flexible rate. Do not make it the only option on your website: many Indian guests, especially families, want to know they can change plans.
Choosing between them (illustrative)
Take a ₹4,000 room on a three-night booking (₹12,000 before GST). Here is what you would keep if the guest cancels at different points.
| When the guest cancels | Flexible | Moderate | Non-refundable (at ₹3,500 a night) |
|---|---|---|---|
| 5 days before | ₹0 | ₹0 | ₹10,500 |
| 2 days before | ₹0 | ₹2,000 | ₹10,500 |
| Day of arrival | ₹4,000 | ₹4,000 | ₹10,500 |
| No-show | ₹4,000 | ₹4,000 | ₹10,500 |
The flexible and moderate rates recover one night, because a room cancelled late can often still be resold for the second and third nights. The non-refundable rate gives up ₹1,500 of revenue up front in exchange for certainty. Pricing peak dates more firmly works best alongside the rules in our guide to dynamic pricing for hotels.
Early departures, date changes and refunds
Most disputes are not about clean cancellations. They are about the guest who checks out two days early, the family that wants to move the same stay to next month, and the refund that took three weeks. Decide these in advance.
- Early departure. Say whether unused nights are charged. A fair middle path is to charge the next night if the guest tells you after the free cancellation time for that night, and release the rest.
- Date changes. Allow one free change to new dates within, say, 90 days, subject to availability and the rate for the new dates. A date change keeps the revenue and usually the guest's goodwill. Many owners offer it instead of a charge on borderline cases.
- Refunds. Refund to the original payment method where you can, and state the time. Bank and card refunds take time to reach the guest, so give a range rather than a promise you do not control.
- Advances on OTA bookings. If the guest paid the booking site, the refund normally goes through that site under its own process. Do not refund the guest separately, or you may pay twice.
- Who decides. Write down who at the property may waive or reduce a charge, up to what amount, and record the reason on the booking. Without this, the charge depends on who is at the desk.
Keep a short note on every cancelled booking: when the guest cancelled, how, what was charged and why. It makes month-end reconciliation easier, and it is your record if a guest disputes the charge with their bank. For card disputes and chargebacks, see our guide to no-show charges in hotels.
Group and wedding cancellation terms
A group or wedding block of 15 or 30 rooms is a different risk. You turn away other guests for months, and a late cancellation can empty the property on its best weekend. Put the terms in a short written contract signed by the organiser, covering:
- Deposit schedule. For example, 25 per cent on signing, 50 per cent 60 days before arrival and the balance 15 days before.
- Rooming list date. The date by which you need names for every room.
- Release date. Up to this date the group may give back a set share of rooms (often 10 to 20 per cent) without charge. After it, the room count is fixed.
- Scale of charges. What is forfeited if the whole group cancels at each stage: more than 60 days, 30 to 60 days, under 30 days.
- Banquet and food minimums, if the booking includes them, with their own cancellation terms.
- How refunds of the deposit are made, and in how many days.
Here is a sample scale (illustrative):
| Whole-group cancellation | Charge |
|---|---|
| More than 60 days before arrival | Deposit refunded, less any agreed admin fee |
| 30 to 60 days before | 25% of the total room value |
| 15 to 30 days before | 50% of the total room value |
| Under 15 days | 100% of the first night, plus 50% of the rest |
Keep the scale in proportion to what you could realistically resell. If the group firms up, release unneeded rooms back to your booking sites on the release date, not the week before arrival.
GST on cancellation charges
CBIC Circular 178/10/2022-GST, dated 3 August 2022, deals with liquidated damages, penalties and cancellation charges. Paragraph 7.1.6 says that amounts forfeited on cancellation of a service by the customer, as contemplated by the contract, are consideration for a supply that is ancillary to the main supply, and are to be taxed as the main supply. It adds that such payments are not taxable if the main supply is exempt.
For a hotel, this is generally read to mean that a cancellation charge kept under your published policy carries GST in the same way as the room. What we cannot give you here is the exact treatment for your property: which rate band applies when only part of a stay is charged, how to invoice it, and how to handle refunds of advances on which GST was already paid. Check with your CA, agree one method, and set it up once in your billing so the desk never decides it case by case. Room rate bands are set out in our guide to GST on hotel rooms and restaurants.
The consumer-protection angle
Guests in India are protected by the Consumer Protection Act, 2019. Section 2(46) defines an "unfair contract" and gives examples, including a penalty on the consumer that is wholly disproportionate to the loss caused by the breach, and any unreasonable charge or condition that puts the consumer at a disadvantage.
We are not lawyers, and how any forum would view a particular policy depends on the facts. But the practical lessons are clear:
- Make the policy visible before payment, in plain language, and keep a record that the guest saw it (the booking confirmation is usually enough).
- Keep charges in proportion. One night for a late cancellation of a three-night stay is easy to explain. Keeping a full week's advance for a cancellation made a month out is not.
- Offer a genuine choice between a flexible and a non-refundable rate, with a real price difference.
- Refund what you owe promptly, and say how long it takes.
- Use discretion for medical emergencies, bereavement and travel disruption. A date change instead of a charge often keeps the guest and the review.
If a guest files a complaint, take advice from a lawyer. Do not ignore a notice from a consumer commission.
Checklist: writing your policy
- Decide your rate plans: flexible, standard and non-refundable.
- Set the free cancellation deadline for each, as a clock time and a number of days.
- Set the charge after the deadline and for no-shows.
- Set firmer terms for peak dates and list those dates.
- Write separate group and wedding terms with a deposit schedule and release date.
- Agree the GST treatment of cancellation charges with your CA.
- Publish the same policy on your website, every OTA extranet, quotes and confirmations.
- Train the desk on when they may waive a charge and who approves it.
- Review the policy every season against actual cancellations.
GuestHawk keeps deposits, payment links and GST billing in one guest bill, so a cancellation charge is invoiced the same way every time. See billing on GuestHawk or book a demo.
Frequently asked questions
What is a typical hotel cancellation policy in India?
Many independent Indian hotels offer free cancellation up to a set time before arrival (often 24 to 72 hours, longer in peak season), charge one night if the guest cancels later, and keep a separate non-refundable rate at a lower price. There is no single legal standard, so the right policy depends on your demand and your guests.
Is GST charged on hotel cancellation charges?
CBIC Circular 178/10/2022-GST says amounts forfeited on cancellation under agreed terms are consideration for a supply ancillary to the main service, taxed as the main supply, and not taxable if the main supply is exempt. How that applies to your bookings, including the rate band, is a question for your CA.
Can a hotel keep the full amount when a guest cancels?
If the guest booked a clearly described non-refundable rate, usually yes. For other rates, keep the charge in proportion to your likely loss. The Consumer Protection Act, 2019 lists a penalty wholly disproportionate to the loss as one kind of unfair contract term, so take advice before charging much more than the room is worth.
Do I need a separate cancellation policy for group bookings?
Yes. A group holds many rooms for a long time, so use a written contract with a deposit schedule, a date by which the group can release rooms free, and a scale of charges after that. See the group terms in this guide.
What is the difference between a cancellation and a no-show?
A cancellation is the guest telling you before arrival that they will not come. A no-show is a guest who neither arrives nor cancels. Most policies charge a no-show the same as a late cancellation. See no-show charges in hotels.