New Delhi, September 30
With Trinamool Congress walking out of the Congress-led United Progressive Alliance (UPA) coalition, the government is all set to levy service tax on AC classes and freight and auxiliary services of the Indian Railways from tomorrow. While the fares for the AC First Class, Executive Class, AC-2 tier, AC-3 tier, AC Chair Car will go up by 3.708 per cent, the same would not be valid on the tickets purchased before October 1 as the Railways modified its earlier decision on it.

What would come as a major relief for the passengers cancelling the tickets is that the Railways has decided to alter another of its earlier decision and would now refund valid amount along with the service tax.

The Railways had earlier said the service tax will also apply to tickets issued in advance for the journeys to commence on or after the date of its implementation and that the service tax on tickets being cancelled would not be refunded. “Service tax is not leviable on the tickets issued prior to October 1 and it would not be collected on board and the Railways has modified its earlier order on it,” said a senior Railway Ministry official. “Since service tax is leviable from October 1, it will be collected on the tickets issued on or after that date,” he said.

The official further said that in the case of ticket cancellation, the service tax would also be refunded. “The applicable amount, including refundable Service Tax amount, will be refunded by the Railways as per Railway refund rules and Finance Ministry guidelines,” he said. Besides AC fares, the Railways is levying service tax on freight and auxiliary service such as catering and parking at stations.

The service tax is 12.36 per cent but after adjustment of 70 per cent of this, it will effectively be 3.708 per cent on passenger fares in AC classes and freight services. On concessional tickets, service charges will be 30 per cent of the total fare. It is expected that the exchequer will be richer by about Rs 3,000 crore from service tax on AC fares and freight.

Passengers travelling in AC classes were brought under service tax from July this year as per the Finance Bill 2012 but the levy had since been kept in abeyance because of the opposition by the TMC. Service tax on freight was announced in 2009-10 Union Budget, but the then Railway Minister Mamata Banerjee had protested the move.