Mumbai, Feb. 29: The hospitality sector has welcomed the finance minister’s budget and praised the five-year tax holiday, terming it a “major impetus” in promoting tourism.

However, the travel and tourism industry has not taken kindly to the service tax imposed on money changers and tour operators.

“The government’s decision to grant a five-year tax holiday for hotels coming up at Unesco sites is a welcome development. We’ve looked at some of these destinations in the past and will now look at them again with greater aggression and greater energy,” said Ajay Bakaya, executive director of Sarovar Hotels and Resorts. Prabhat Pani, CEO Ginger Hotels, seconded him.

“We already have plans to go to some of these cities and the tax holiday only makes our case stronger. We now have to get there faster and quicker,” said Pani.

“Since the government has provided for amortisation of preliminary expenses over 10 years for the service sector under Section 35 (D), it will help us in handling expenses of drafting project reports and feasibility studies,” he added.

Industry watchers believe the decision to increase personal income tax exemption will lead to an increase in disposable income and consequent growth in travel spends.

“The government’s tax holiday for these sites is a welcome step. India goes beyond the Taj Mahal. Unesco declared sites such as Ajanta/Ellora, Sanchi Buddhist temples, Hampi temples in Karnataka and Elephanta Caves in Maharashtra have a crying need for quality accommodation,” said Peter Kerkar, director, Cox and Kings India Ltd.

“The service tax imposed by the government on money changers is a big disaster. This will be a major deterrent for foreign tourists. Also, the tax on tour operators and car rental agencies will prove to be a major damp squib,” said Ashwin Kakkar, managing director of Mercury Travels.

Service charge on the hiring of vehicles would also hamper the transport industry, he said.