'Service tax proposal on hotels and restaurants a setback'

Terming the proposals for levying service taxes on hotels and restaurants in the Budget as a "setback", the Indian Association of Tour Operators today said the impact will not be positive for the travel industry.

"None of our demands have been met and instead the travel industry has been further loaded with levy of service tax on hotels, hospitals, restaurants which were free from such service tax earlier," said IATO president Vijay Thakur.

Finance Minister Pranab Mukherjee has proposed to widen the scope of service tax to cover hotel accommodation above Rs 1000 per day, AC restaurants serving liquor in the budget.

Service tax has also been imposed on some category of hospitals and diagnostic centres.

The availability of world class infrastructure for providing for medical treatment attracted good number of medical tourists for treatment to India but now the service tax on hospitals will make the treatment a bit costlier.

Similarly the air travel will cost more with additional levies of service tax being proposed on domestic and international travels.

Thakur said: "Already, the air travel is costing more due to higher tax on Air Turbine Fuel. Soon India as a destination, we will out price ourselves and lose business to our competitive neighboring countries."

He said: "The tourism industry is shocked to see such new doses of taxation put on tourism sector in this year's budget. This is indeed a great setback for the industry which is just recovery gradually from the economic downturn and aftermath of various negative events like terror attacks, swine flu and natural calamities."