New Delhi: The Union government has withdrawn a proposal to impose a 10% service tax on goods transported by rail, to check price increases of products such as steel, cement and coal, a government official said on Tuesday.
In his annual budget for fiscal year to 31 March, finance minister Pranab Mukherjee announced levy of service tax on a host of new services including transport of goods through railways. The tax was to come into effect from 1 September.
“The government has decided to exempt transport of goods in containers by rail from service tax, scheduled from 1 September,” spokesperson for the Central Board of Excise and Customs Hemambika R. Priya said.
The revenue receipts of the state-run Indian Railways, which opposed new tax proposal, have been adversely affected since September due to economic slowdown and decline in exports.
In April-July period, railways’ receipts from transport of commodities rose by 4.77% to Rs18,275 crore against Rs17,442 crore during the corresponding period last year.
“Although we are in favour of expanding tax net, but keeping in view of difficult times for industry and consumers, it is perhaps a good decision,” Associated Chambers of Commerce and Industry of India secretary general D.S. Rawat said.
He said the decision would help particularly “steel, cement and coal sectors which are bulk users of the Indian Railways, and contain prices for consumers.”
Railways carried 284.77 million tonnes of commodity freight traffic during April-July 2009 against 270.73 in the same period last year—an increase of 5.19%.
Analysts said the decision to withdraw tax proposal will also help exporters maintain a competitive edge in the global market, who are already facing a fall in demand since October last year.