The Uttarakhand government has announced exemption in luxury tax for five years on all those old buildings which would be converted into hotels with an investment of 50 per cent of the current market value.

The government currently levies five per cent luxury tax on room rents for all hotels in the state.

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The exemption will be applicable from the date of commencement of the business or other conditions specified in the new notification issued by Principal Secretary (finance) Alok Kumar Jain.

"In places like Mussoorie and Nainital, there are several buildings which belong to the colonial era. In case the owners intend to convert them into hotels, we are providing them a good opportunity," said a government official.

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The notification also said the government would exempt the luxury tax for five years on new tourism units also.

The exemption will also be available for the expansion of hotels and tourism units with a minimum of 25 per cent investment of the current market value, the notification said.

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In the annual budget presented in the state assembly last month, Chief Minister Ramesh Pokhriyal Nishank had announced exemption of luxury tax on non-air conditioned rooms of small hotels and dhabas.

However, at a time when the government has announced new sops for the hotel industry, plans are also afoot to levy 10 per cent tax on all hotels where the room rent is more than Rs 3,500 per day.

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"Keeping in view our endeavour to increase the state's revenue through various taxes, we are now planning to impose fresh luxury tax on all hotels which charge room rent of more than Rs 3,500 per day," said the official.