Service tax on railways fare

CA Ayush Agarwal (Kolkata-Pune-Mumbai) (27186 Points)

28 September 2012

Levy of Service Tax on Railway Passengers Travelling in AC Class/First Class from 1st October 2012

In compliance of the provisions contained in Finance Bill 2012 and subsequent notifications issued by Ministry of Finance, the Service Taxin case of railway travel, which was exempted upto 30th September 2012, will be levied on the fare of passenger services in the following classes from 1st October 2012.

(i) AC First Class,

(ii) Executive Class,

(iii) AC-2 tier Class,

(iv) AC-3 tier class,

(v) AC Chair Car class,

(vi) AC Economy class and

(vii) First Class.

Since an abatement of 70% has been permitted on passenger services by Ministry of Finance, theService Tax will be charged on 30% of total fare including reservation charge, development charge, superfast surcharge which would be calculated as follows:-

(i) Service Tax of 12% will be charged on 30% of fare (equivalent to 3.6% on the total fare)

(ii) Education Cess of 2% on Service Tax will be added (equivalent to 0.072% on total fare) and

(iii) Higher Education Cess of 1% on Service Tax will also be added (equivalent to 0.036% on total fare)

(iv) Total Service Tax implication will be (i)+(ii)+(iii)=3.708% on the total fare.

On Concessional value tickets/PTO tickets etc. service charge will be levied on 30% of the total fare actually being paid by the passengers.

The Service Tax will also apply to tickets issued in advance for journeys to commence on or after date of implementation of Service tax. In the case of tickets already issued excluding service tax, the service tax on total fare including development charge, superfast surcharge, reservation fee, etc. date of implementation of Service Tax will be recovered either by TTEs in the train or by the BookingOffices before commencement of the journey by the passengers. Commercial Inspectors and TIAs have been instructed to visit all important stations and ensure that service tax is levied on ticketsissued as per the revised rates. Commercial Officers have also been asked to make surprise checks at the stations and ensure that Service Charges are levied from date of implementation ofService Tax.

The amount of Service Tax collected from passenger will be deposited with the Ministry of Financeas per procedure. Finance Departments of Zonal Railways have been instructed for proper accountal and remittance of Service Tax amount to the Government.

In case of refund of passenger fare, if any, refund of Service Tax shall be claimed by the passenger from the concerned Service Tax authority. No refund shall be made by the Railways on this account. For the purpose of claiming refund, Chief Commercial Manager (CCM) office of concerned Zonal Railway shall issue a certificate to passenger detailing the amount of refunds to be signed by an Officer authorized by CCM, which shall be countersigned by the Dy. Chief Account Officer(DCAO) or officer authorized by them for this purpose.

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Service Tax on All Services A Reality Now

The consumption of services in India has become costlier w.e.f. 1.7.2012. The services which were hitherto not taxable at all are into tax net now. Those which were taxed earlier have a larger scope or are taxed with lesser exemptions. The valuation norms have been made tougher so that Service Tax is levied on gross value of service which will include even non monetary consideration.

In fact, what government has done is that they have levied tax on all services except services covered in negative list and exempted category. There are seventeen services in negative list and 39 services in exempted category. There are 8 activities which have been declared to be service for levy of Service Tax.

Service Tax will be levied on all service provided and also agreed to be provided in taxable territory (which means India). However, where service is provided from outside India including from Jammu & Kashmir State, Service Tax will be levied but payable by service receiver located in India. For the purpose of Service Tax, Jammu & Kashmir is excluded.

While levying Service Tax w.e.f. 1^st July, 2012, some more exemptions have been specified. The services provided by advocates to or a firm of advocates will not be liable to Service Tax. Similarly,legal services provided by advocates to business entities with turnover upto Rs. 10 lakh in a year will be exempt. Where advocate or firm of advocates provide services to business entity, tax will be paid by such business entity and not the advocate. Similarly, services of stock brokers, mutual fund agents, sub contractors etc. have been taken out of tax net. If business exhibitions are held outside India, Service Tax will not be levied. Also public libraries, employees state insurance, public conveniences and functions of the municipal corporation will not attract Service Tax.

Transport of goods by rail which was levied in 2009 but was withdrawn till date will now be applicable w.e.f. 1.7.2012 for the first time. Tax will how ever, be levied on 30 percent of freight value. In case of catering and restaurants, Service Tax will be levied on 70 percent of bill amount. All residential units will attract Service Tax on 25 percent value only.

Since the new provisions did not talked of education cess, to clear the confusion, centralgovernment has clarified that education cess will continue to be levied on Service Tax as earlier.

So, after general inflation, rising prices of all most all items / food or non food), fuel etc, Service Tax would also add to the woes of common man, from now on.