Press Information Bureau

Government of India

Ministry of Railways

27-September-2012 18:16 IST

In compliance of the provisions contained in Finance Bill 2010 and subsequent notifications issued by Ministry of Finance, the Service Tax in case of transportation of goods by rail, which was exempted upto 30th September 2012, would now be levied on total freight charges with effect from 1st October 2012.

Since an abatement of 70% has been permitted on freight for the taxable commodities by the Ministry of Finance, the Service Tax will be charged on 30% of the total chargeable freight inclusive of all charges (like busy season charges, development charge etc.,) would be calculated as follows:-

i) Service Tax of 12% will be charged on 30% of freight (equivalent to 3.6% on the total freight charges)

ii) Education Cess of 2% on Service Tax will be added (equivalent to 0.072% on total freight) and

iii) Higher Education Cess of 1% on Service Tax will also be added (equivalent to 0.036% on total freight)

iv) Total Service Tax implication will be (i)+(ii)+(iii)=3.708% on the total freight charges.

Certain commodities have been exempted from payment of service tax as per Ministry of Finance notification. The list of such commodities and further details on the modalities of levy and collection of Service Tax on transportation of goods by rail, may be ascertained from Indian Railways’ web site i.e. www.indianrailways.gov.in

The amount of Service Tax collected by Railways would be deposited with the Ministry of Finance as per prescribed procedure.

AKS/HK/LK

Service tax on rail freight now applies to chargeable freight after abatement, with cess additions and specified exemptions. Levy of Service Tax on transportation of goods by rail applies to total freight charges from 1 October 2012, with a prescribed abatement reducing the taxable base; service tax is charged on the remaining portion, with Education Cess and Higher Education Cess added on the service tax. All freight components (including busy season and development charges) form part of chargeable freight. Certain commodities are exempted by Finance Ministry notification. Railways must collect the tax and deposit amounts with the Ministry of Finance per prescribed procedure; details and lists of exempted commodities are published by Indian Railways.