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The implementation of service tax levy on transport of goods by rail has been deferred, once again. This levy will now come into effect from July 1 against the earlier announced date of April 1. It is for the fourth time that the implementation of this levy has been deferred.
Also, the service tax exemption that was to be provided to certain goods carried by the Railways — such as pulses, foodgrains, petroleum products for the public distribution system, organic and chemical manure and motor vehicles — will now come into effect from July 1, along with the 70 per cent abatement.
The move to defer the service tax levy on rail freight will come as a relief for the domestic cement and steel industries that would have otherwise been required to fork out higher freight rates for movement of coal, cement and steel.
The latest postponement comes in the backdrop of surging inflation. The Government is yet to get a handle on the inflation situation, especially food inflation. The Reserve Bank of India had taken a series of monetary tightening actions last fiscal to tackle inflationary expectations and address the situation from monetary side.
The Finance Minister, Mr Pranab Mukherjee, had in Budget 2010-11 brought transport of goods by rail in the service tax net from April 1, 2010. The Government was looking to mop up about Rs 1,000 crore in 2010-11 from this levy.
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