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The hostel scene in Sikkim isn't that developed yet. I've heard people talking about this hostel called Tagalong. Check it out on Hostelworld.com
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Try OYO hotels on MG road. I have been in gangtok at they charged us 800/- for a room with a scrumptious breakfast.
If you need to cheeper hotel like in 300/- than try the hotels after getting down from stairs on MG road and try to bargain.
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