The Ministry of Finance has issued a notification today which states that the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the two kinds of services provided by Indian Railways namely Service of transportation of passengers (with or without accompanied belongings) in 1st class or in Air Conditioned Coach and services by way of transportation of goods, from the whole of service tax leviable thereon under section 66-B of the Finance Act 1994. The exemption would be effective upto 30th September 2012.
The Ministry of Railways has been pursuing the case with the Ministry of Finance for exempting Indian Railways from the levy of Service Tax in its entirety. Shri Mukul Roy, Minister of Railways had taken up the issue with the Prime Minister, in his capacity as the Minister of Finance, and had emphasized that the role performed by the Railways is primarily aimed at fostering inclusive growth through effective discharge of its social obligation. It was also brought out that Indian Railways do not operate for profit as a motive. While seeking exemption for the Railways, Shri Mukul Roy pointed out that Rail is the preferred mode of transport, not only for the bulk of passengers but also for carrying essential commodities and any levy of Service Tax would have an adverse impact on a large cross section of the society which may lead to spiraling inflationary pressure.