Tax on railway freight likely to be deferred further

Railways board makes no clear order to implement the levy

Amid confusion in Rail Bhawan, the Finance Ministry’s order for the imposition of service tax on freight is unlikely to be introduced as scheduled on July 1.

The Union government’s budget proposal had imposed a 12-per-cent service tax on railway freight, but its implementation was deferred by three months till June 30. Eventually the Finance Ministry came up with a fresh list of exemptions which did not include the Railways.

Final clearance pending

According to sources, after a direction from the Ministry to execute the budgetary proposal, the Railways issued a circular on Wednesday directing the Zonal Offices to be prepared for imposition of the service tax but told them not to levy the charge till a final clearance was issued.

That order, however, was not issued even on Saturday. Nor did the Railway Board issue any order to the contrary. Railways Minister Mukul Roy reportedly said the Railways would not collect the service tax.

Highly placed sources, not willing to be quoted on record, said the service tax would, in all probability, not be charged with effect from Sunday. The air will be cleared on Monday only, the sources said.

As per the circular, a service charge of 3.708 per cent, including education and higher education cess, was to be levied on freight transported by the Railways.

The Finance Ministry had ignored all requests from the Railway Ministry — including from Mr. Roy — for deferment of service charge.

The Railways is now hoping for some kind of intervention from Prime Minister Manmohan Singh, who has now taken over the Finance portfolio.