New Delhi, June 7: Rail freight charges are likely to go up 3.6 per cent from July with the widening of the service tax net. The hike is expected to fetch around Rs 3,200 crore.
"The government had given service tax exemption on goods carried by the railways till June 30, 2012. From July 1 using the railways to transport goods will come under service tax net," S.K. Goel, chairman of the Central Board of Excise and Customs (CBEC), said today.
"The service tax will be applicable on 30 per cent of the value of input goods and services and will not fuel inflation," he said.
The proposal was last deferred till the end of June at the request of the railways over fears that it could stoke inflation. Items such as coal, cement, gypsum, steel and iron, which constitute 70 per cent of the freight traffic, will become expensive following the additional levy. However, officials said now that inflation was under check, the tax could be introduced.
The railways' freight earnings target for this fiscal has been set at Rs 90,000 crore, and the annual service tax mop-up at 3.6 per cent is expected to be around Rs 3,200 crore.
Days before the presentation of the budget, the railways had raised overall freight charges by 20 per cent. This was followed by a 25 per cent hike in parcel and luggage rates earlier this month, which is likely to rake in an additional revenue of Rs 370 crore this fiscal.
Indian Railways had earned Rs 1,600 crore from parcel and luggage in 2011-12. The rate was last revised in 2006.
Goel said the railways had not approached the revenue department for an exemption.
The government had proposed a service tax on rail freight in the budget for 2009-10 to provide a level-playing field to the transport of goods by roads. However, it was deferred on several occasions because of opposition from Trinamul Congress chief Mamata Banerjee.
In the budget for 2012-13, the government has raised the service tax rate to 12.3 per cent from 10.3 per cent after including the education cess. All services, except the 17 in the negative list, have been brought under the tax net. Thirty-four services have been kept in the exemption list.