Travel and transportation by rail will be free from service tax for another three months at least.

The negative list regime came into effect from July 1, but Dr Manmohan Singh — who now holds the Finance portfolio also — refrained from adding an effective 3.6 per cent service tax levy on rail transport of such core commodities as coal, cement and steel.

Dr Singh also gave the middle and the upper middle class segments a breather by not levying the service tax on air-conditioned rail travel.

Dr Singh putting off the levy is the eighth deferment of service tax levy on rail transportation since 2009. The Government would have mopped up Rs 3,000 crore from the service tax levy on the freight segment and around Rs 300 crore from passenger side.

Ms Mamata Banerjee, Trinamool Congress Chief and a partner of the ruling United Progressive Alliance, has opposed imposition of this tax. A Trinamool representative holds the Rail portfolio.

Fares of the Indian Railways, which moves about 800 crore people a year, have always been a political hot potato.

On the freight side, the Railways has been losing traffic share to road sector because of a supply-side capacity crunch.

(This article was published on July 2, 2012)
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