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Publish Date: 27 Feb, 2010
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Service tax on Transportation by Railway: An unsolved puzzle or a mystery?

 Service tax on Transportation by Railway: An unsolved puzzle or a mystery?

 

Prepared By:

CA Pradeep Jain,

Sukhvinder Kaur

Monu Toshniwal

 

The service tax on transportation of goods by railway was introduced in the Budget 2009 last year by the Finance Minister. With the levy of service tax, provisions for abatement and exemptions were also introduced. The levy was to come into effect on September 1, 2009. However, under the pressure from the Railway Minister the service on transport of goods by rail was completely scraped by granting exemption to the said service vide Notification no 33/2009-ST dated September 1, 2009 the very day the levy of service tax on Rail was to come into effect. In this regard, we have prepared an Article titled “Service Tax on Transport of Goods by Rail-Shortest Journey”. The same can still be viewed on our website www.capradeepjain.com

 

Changes introduced by Budget 2010:

 

However, this all may not be history yet. In the Budget 2010 announced on 26.02.2010, the Finance Minister have again issued another Notification No. 7/2010-ST, dated 27.02.2010. This notification has rescinded the Notification No. 33/2009-ST with effect from 01.04.2010. Thus, the service tax may once again be levied on transportation of goods by Rail from April 1, 2010.

 

Exemption also restored:

Accordingly, the exemption granted to transport of several items by Railways vide Notification No. 28/2009-Service Tax dated 31.08.09 has also been restored. Under this notification, the exemption from payment of service tax was granted for the transportation of following items:

 

v    Defence/ military equipments

 

v    Railway equipments/ materials

 

v    Postal mail bags

 

v    Relief materials meant for victims of natural or manmade disasters, calamities, accidents and mishap

 

v    Luggage of train passengers, whether carried as personal luggage in the train compartments or booked separately in the luggage van/Household effects

 

v    Parcels [including newspaper/magazines registered with Registrar of Newspapers] booked in the luggage vans, where the goods/commodity heads fall below train load class 130 as per the Indian Railway Conference Association(IRCA) Goods Tariff

 

v    The following goods which are classified in the IRCA Goods Tariff, as below train load class 130 and wagon load class 130 ( Formula: Train Load Class 120+10) including ‘Low Rate’ goods viz., LR1, LR2, LR3, LR4:

 

Food grains, flours and pulses(9), Chemical Manure(6), Gunnies(21), Oil cakes and seeds(16), Soap(19), Starch(21), Salt for industrial use(18), Sugar(20), Salt (18),De-oiled cakes(16), Machinery and machine tools(14), Hides and Skins(12), Leather(12), Rubber and plastic(12), Electrical appliances and fittings(22), Empty drums(22), jerry cans and barrels(22), Jaggry (22), Jute(22), Milk and Milk products(22), Organic Manure(22), Paints and polishes(22), Timber(22), Vegetable oil pitches(22), Water(22), Fireworks(23), Boiler components(24), Charcoal(24), Paper(24) Bamboos(25), Brooms(25), Coffee and Tea(25), Cotton and other textiles(25), Fodder and Husk(25), Fruits and vegetables(25) and other perishables like fishery and marine produce, Groceries(25), Live stock(25), Motor vehicles(25), Sugar cane and Bagasse (25),Fire clay(7),Edible oils booked in covered wagons and charged as LR4, booked in 4 wheeled Tank wagon and charged as Train Load class-100

 

v    Kerosene oil meant for supply through public distribution system; Petroleum products including LPG Cylinders (filled and empty) booked by public sector Oil Marketing Companies transported by Indian Railways

 

Moreover, the abatement was also restored in notification 1/2006-ST. Thus, the levy was reintroduced as was done earlier. Also, these all provisions will be applicable from April 1, 2010.

 In the end:

If this service tax becomes leviable then the entire transportation of goods services by various modes (like road, waterways, air) may come under the Service Tax net. Also with growing inflation rate, lets see if the Railway Ministry can protect the Indian Railways to runway from the burden of paying service tax.

Only time will tell, whether the Railway minister is prepared to collect service tax or if it will again fight back to revert the levy. Lets wait and watch.

 

**********

 

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