With the exit of Trinamool Congress from United Progressive Alliance, Finance Ministry has decided to levy service tax on AC compartments and freight services fares, which are set to increase by 3.7 per cent from October 1.
Fares of AC First Class, Executive Class, AC-2 tier, AC-3 tier, AC Chair Car will go up by 3.708 per cent from October 1 and a notification to this effect will be issued on Thursday, a senior Railway Ministry official said.
The decision for levying service tax on AC classes and freight and auxiliary services was taken on Wednesday at a meeting between Railway Minister CP Joshi and Finance Minister P Chidambaram.
The service tax will apply to tickets issued in advance for journeys to commence on or after the date of its implementation.
In case of tickets already issued excluding service tax, it will be ensured that the same is recovered either by TTEs in the train or by the booking offices before commencement of journey.
In case of cancellation of tickets by the passengers, service tax will not be refunded by railways, the official said.
On concessional tickets, service charges will be 30 per cent of the total fare.
The service tax is 12.36 per cent but after the abetment of 70 per cent it will be 3.708 per cent on passenger fares in AC classes and freight.
Passengers traveling in AC classes were brought under service tax from July this year as per the Finance Bill 2012 but the levy had since been kept in abeyance because of opposition by the Trinamool Congress.
Freight rate will also go up by 3.708 per cent from October.
However, auxiliary services rendered at stations like catering and parking will have to bear the burden of 12.36 per cent as there will be no abetment on these services.
Service tax on freight was announced in 2009-10 Union Budget but then Railway Minister Mamata Banerjee had protested the move.