Train fares of all AC classes will become costlier by more than 3 per cent from tomorrow. The new service tax of 3.708 per cent, as per the government notification, will be levied on AC First Class, Executive Class, AC-2 tier, AC-3 tier, AC Chair Car and freight.

Passengers travelling in AC-2 and AC-1 will be additionally burdened by the service tax as the fares of these classes were already hiked by about 20 per cent in April as part of the proposals of the Rail Budget 2012-13.

“No service tax will be levied on tickets bought before October 1. In case of ticket cancellation, the service tax component will be returned to passengers,” a senior Railway Ministry official said.

Besides, service tax will also be levied on auxiliary service such as catering and parking at stations.

The government exchequer is expected to earn about Rs 3,000 crore from the service tax decision coming into force from tomorrow.

Service tax, which would also be imposed on rail freight from tomorrow, will exempt petroleum products, foodgrains, pulses, fruits and vegetables and other essential items from its purview.

According to Railways, the service tax is 12.36 per cent but after the adjustment of 70 per cent, it will effectively be 3.708 per cent on passenger fares in AC classes and freight services.

However, auxiliary services rendered at stations like catering and parking will have to bear the burden of 12.36 per cent hike as there will be no adjustment on these services.

The decision comes within a week of Trinamool Congress, which was holding railway portfolio, exiting from theUPA government. TMC had been consistently opposing the service tax being levied on these services.