In compliance of the provisions contained in Finance Bill 2012 and subsequent notifications issued by the Ministry of Finance, the Service Tax in case of transportation of parcel traffic (leased or non-leased parcel traffic) by rail, which was exempted upto 30th September 2012, would now be levied on total freight charges with effect from 1st October 2012.
Since an abatement of 70% has been permitted on freight for the taxable commodities by the Ministry of Finance, the Service Tax will be charged on 30% of the total freight inclusive of all charges would be calculated as follows:-
i) Service Tax of 12% will be charged on 30% of freight (equivalent to 3.6% on the total freight charges)
ii) Education Cess of 2% on Service Tax will be added (equivalent to 0.072% on total freight) and
iii) Higher Education Cess of 1% on Service Tax will also be added (equivalent to 0.036% on total freight)
iv) Total Service Tax implication will be (i)+(ii)+(iii)=3.708% on the total freight charges.
Service tax will be levied for transportation of all description of parcel traffic (leased or non-leased parcel traffic) and merchandise items (for commercial use) booked as Luggage with effect from 1st October 2012. Luggage traffic i.e. personal baggage belonging to the travelling passengers, (excluding merchandise items for commercial use), shall be exempted from service tax. The list of commodities exempted from payment of service tax is as follows:
(a) Relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap;
(b) Defence or military equipments;
(c) Postal mail or mail bags;
(d) Household effects;
(e) Newspaper or magazines registered with the Registrar of Newspapers;
(f) Agricultural produce;
(g) Foodstuff including flours, tea, coffee, jiggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages.
Further details on the modalities of levy and collection of Service Tax on transportation of parcel traffic by rail, may be ascertained from Indian Railways’ web site i.e. www.indianrailways.gov.in
The amount of Service Tax collected by Railways would be deposited with the Ministry of Finance as per prescribed procedure.