New Delhi, Sept. 27: Passengers travelling in AC coaches will have to pay 3.70 per cent more on their ticket fare from October 1 with Indian Railways agreeing to pay service tax on certain facilities just days after the Trinamul Congress moved out of the UPA government.
Trinamul, which held the railway ministry portfolio, had managed to keep these services outside the purview of the tax.
The finance ministry has been pushing for this tax for the last three-and-a-half years. In this year’s railway budget, then railway minister Dinesh Trivedi tried to raise fares, but Mamata Banerjee managed to scuttle the move. Dinesh had to give up his rail portfolio to Mukul Roy.
Following the resignation of Roy after Trinamul pulled out of the government last week, the new dispension at Rail Bhavan has decided to go ahead with the service tax.
The decision follows a meeting between railway minister C.P. Joshi and finance minister P. Chidambaram.
“I have heard that railway fares have increased. I have not yet got the detailed report. I have been told that the service tax has been imposed. During my tenure they had tried to impose service tax several times but I didn’t allow it. Now we are no longer there. Vinash kaal e buddhinash (Losing your sanity before the end). People have got their backs pinned to the wall. More pressure should not be exerted,” Mamata said at the state assembly today.
The tax will affect freight rates, too, by the same quantum. However, it will not touch other passenger train fares.
Fares of AC first class, AC 2-tier, AC 3-tier and AC chair car will go up 3.7 per cent from October 1, according to a notification.
Officials explained that since an abatement of 70 per cent has been permitted on passenger services by the finance ministry, the service tax will be charged on 30 per cent of total fare, including reservation charge, development charge and superfast surcharge.
However, auxiliary services rendered at stations such as catering and parking will have to bear a 12.36 per cent hike as there will be no adjustment on these services.
The service tax will apply to tickets issued in advance for journeys to commence on or after the date of the tax’s implementation. In case of tickets already issued, the same will be recovered either by TTEs (train ticket examiners) in the train or by the booking offices before the commencement of journey.
The railways had increased freight rates by more than 20 per cent before the rail budget was presented in March. Passenger fares in AC 2-tier and AC first class were also hiked about 30 per cent during this time.
The railways freight earnings target for the current financial year is Rs 90,000 crore. The annual service tax mop-up at 3.7 per cent is expected to be around Rs 3,200 crore.
The government had proposed service tax on goods carried by the railways in budget 2009-10 to provide a level playing field with transport of goods by roads. However, it was deferred on several occasions because of opposition by the Trinamul Congress.