Service tax levy to add nearly 4 per cent to AC / first class train fare from 1 October

Indian Railways will levy a service tax on fares for all air-conditioned and first class railway travel beginning 1 October 2012, which will raise passenger fares except for second-class train journey by around 3.708 per cent.

The levy will be applicable to AC first class, executive class, AC-2 tier, AC-3 tier, AC chair car, AC economy class and first class, an official release said today.

However, since the finance ministry has permitted an abatement of 70 per cent on passenger services, the service tax will be charged on 30 per cent of the total fare, which includes reservation charge, development charge, superfast surcharge etc, the release added.

The service tax would be calculated as follows:

• Service tax of 12 per cent will be charged on 30 per cent of fare (equivalent to 3.6 per cent on the total fare);
  
• Education cess of 2 per cent on service tax will be added (equivalent to 0.072 per cent on total fare); and
  
• Higher education cess of 1 per cent on service tax will also be added (equivalent to 0.036 per cent of total fare).

The total service tax implication will thus be 3.708 per cent of the total fare.

On concessional value tickets/PTO tickets etc service tax will be levied on 30 per cent of the total fare actually being paid by the passengers.

The service tax will also apply to tickets issued in advance for journeys to commence on or after date of implementation of service tax. In the case of tickets already issued, excluding service tax, the service tax on total fare, including development charge, superfast surcharge, reservation fee, etc will be recovered either by TTEs in the train or by the booking offices before commencement of the journey by the passengers.

Commercial inspectors and TIAs have been instructed to visit all important stations and ensure that service tax is levied on tickets issued as per the revised rates. They have also been asked to make surprise checks at the stations and ensure that service charges are levied from the date of implementation of service tax, the release said.

The amount of service tax collected from passengers will be deposited with the finance ministry as per procedure.  Finance departments of zonal railways have been instructed for proper accounting and remittance of service tax amount to the government.

In case of refund of passenger fare, if any, passengers would have to claim refund of service tax from the concerned service tax authority. No refund will be made by the Railways on this account. For the purpose of claiming refund, the chief commercial manager (CCM) office of concerned zonal railway will issue a certificate to passenger detailing the amount of refunds to be signed by an officer authorised by CCM, which should be countersigned by the Dy chief account officer (DCAO) or officer authorised by them for this purpose, the release added.

The service tax impost on railway passengers is in compliance with the provisions of the Finance Bill 2012 and subsequent notifications issued by finance ministry.

Service tax in case of railway travel was exempt up to 30 September 2012.