The railway fares that had been hiked from July1under the new service tax regime, has postponed by Prime Minister Manmohan Singh by three months, on request of Railway Minister Mukul Roy, according to source report.
“No hike has been effected on rail passenger fares from Sunday,” an official told reporters on Monday.
The introduction of a hike in service tax on passenger fare and freight traffic that had to been released from Sunday, delayed due to a threat of additional issue over increasing burden on travelers.
Source said, other reason is of having confusion over whether the Railways have been exempted from it.
Earlier, Mr. Singh who is performing the role of finance ministry had received a letter from Roy in form of request to delay the introduction of service tax on rail fare under new tax regime on Sunday.
Being confident Roy told reporters that Mr. Singh would realize the situation and accept his request. “The railways are not a profit-making body and never before the service tax was levied on railways”, he added.
As per him, if the new service tax regime will issued, the burden on travelers of AC classes will increase, but Railways Ministry will have to bear close to Rs 6000 crore.
Hike in AC-I, AC-II and first class fares are by about 3.6 per cent in all AC classes and first class if service tax is imposed.
From the general budget for 2009-10, while the service tax on passenger travel and freight was introduced, it kept on hold by Mamata Banerjee‘s opposition, the head of Railway Ministery then. And after that on quarterly basis the exemption has been extended, reports said.
Now this year, finally the Ministry has decided to fully exclude transport of goods or passengers fares, freight charges and AC rail travel from the negative list, offering service tax exemption.