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"The Finance Minister should reconsider it. This will have a very bad impact on the hospitality industry," Federation of Hotel & Restaurant Associations of India (FHRAI) Secretary Vijai Pande said.
He said the move will mean an additional burden on customers.
Expressing similar sentiments, McDonald's India (North & East) JV Partner & Managing Director Vikram Bakshi said: "By introducing service tax on AC restaurants, the discretionary spends of consumers which are already tight are expected to come under further pressure."
Expressing concern over the proposal, Indian Association of Tour Operators President Subhash Goyal said: "It is unfortunate that the government is systematically killing the goose that lays the golden egg. How long you can tax the same sector. This taxation part has made India very cost prohibitive."
He also said the increase in import duty on high end motor vehicles from 75% to 100% is also going to negatively impact the tourism industry as the sector uses a substantial amount of luxury vehicles.
While announcing the levy on all air-conditioned restaurants in the Budget for 2013-14, Chidambaram said:"At present, service tax does not apply to air conditioned restaurants that do not serve liquor. The distinction is artificial..."
As per Tourism Satellite Account (TSA) data 2009-10, the contribution of tourism to India's GDP was 6.8% (3.7% direct and 3.1% indirect) and its contribution to total employment generation was 10.2% (4.4% direct and indirect 5.8% indirect), Economic Survey for 2012-13 tabled in Parliament yesterday had said.
