Title - Hike in train fares under new service tax regime not effected

A hike in railway fares under the new service tax regime, was not effected today due to a confusion over whether the Railways have been exempted from it, officials said.

"No hike has been effected on rail passenger fares from today," said a Railway Ministry official.

If brought into force, the hike would have been about 3.6 per cent in all AC classes and first class.

While transport of goods or passengers have been kept in the negative list, Railway officials said they are assuming Railways are under this category as they have received no communication from Finance Ministry that Railways have been exempted too. They said Roy, who is expected here tomorrow, could clear the confusion.

Railway Minister Mukul Roy had on last Friday requested Prime Minister Manmohan Singh, looking after the Finance portfolio, not to introduce service tax on passenger fare and freight traffic from today expressing confidence that he would realise the situation and accept his request.

Earlier, he had also requested former Finance Minister Pranab Mukherjee to exempt Railways from paying service tax.

Railways will have to bear close to Rs 6000 crore if it decided against passing on the service tax burden to the passengers.

Service tax on passenger travel and freight was introduced in the general budget for 2009-10, but was kept on hold due to the then Railway Minister Mamata Banerjee's opposition.

The exemption has been extended since then on a quarterly basis but this time the Finance Ministry has decided to exclude freight charges and AC rail travel from the negative list, which gets service tax exemption.

With freight and passenger fares enjoying a 70 per cent subsidy, the impact on the increase in freight charges and fares of First Class and AC-I, AC-II and AC-III will be 3.6 per cent.