“The government had given service tax exemption on goods carried by railways till June 30, 2012. From July 1 using railways to transport goods will come under service tax net,” Central Board of Excise and Customs (CBEC) Chairman SK Goel told reporters on the sidelines an Assocham meet.
When asked whether the Railways has approached the Revenue Department for exemption from service tax, he replied in negative.
Before presentation of Budget in Parliament, the Railways had raised the overall freight charges by 20 per cent. Earlier this month, railways had increased the parcel and luggage rates by 25 per cent.
Besides grains and vegetables, railways transport important items like steel, crude oil, coal and fertiliser. Industry fears high freight charges would fuel inflation. Goel, however, said service tax on freight would have only marginal impact on prices as the state run transporter enjoys 70 per cent abatement on gross freight charges.
“This level of duty is unlikely to be a big burden on consumers and would not fuel inflation,” he said. An abatement of 70 per cent means that effective service tax would be only about 3.6 per cent as against 12.3 per cent (including education cess).
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