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 with the service tax coming into force on these services.
"However, service tax is not leviable on tickets issued prior to October 1, and it would not be collected on board and railways have modified its earlier order on it," said a senior Railway Ministry official.
"Since service tax is leviable from October 1, it will be collected on the tickets issued on or after that date," he said.
The earlier order stated that 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," as per the earlier notification issued by railways.
Besides AC fares, railways is levying service tax on freight and auxiliary service such as catering and parking at stations.
The service tax is 12.36 per cent but after adjustment of 70 per cent of this, it will effectively be 3.708 per cent on passenger fares in AC classes and freight services.
It is expected that the exchequer will be richer by about Rs 3,000 crore from service tax on AC fares and freight. In case of cancellation of tickets, service tax will be refunded by railways, the official said.
Passengers travelling 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 TMC.
It was decided after a meeting between Railway Minister C P Joshi and Finance Minister P Chidambaram.