Service Tax on Freight in Abeyance Till March 31

Five days after finally deciding to impose 10% service tax on freight carried by railways, the government has again put the matter in abeyance till March end. The postponement will be a temporary relief for transporters of coal, steel, iron ore and cement. Other commodities were already exempt from the impost.

In a note on Tuesday, railway ministry said “service tax, education cess and higher education cess on transportation of goods now held in abeyance till 31-03-2012”. The combined impact of 10% service tax along with 2% education cess and 1% higher education cess would have been 3.09% of total freight revenue per train. For finance ministry, it would mean R1,000 crore additional revenue in 2011-12.

On December 29, 2011, railway ministry had issued a circular informing about imposing the tax from January 1, 2012. Finance ministry has been trying to impose the tax since 2009 but railways’ reservations always stymied the proposal.

Financial Express, New Delhi, 04-01-2012