The cost of transporting goods is set to rise with the government imposing service tax on rail freight starting next month. However, the abatement of 70 per cent on gross freight charged would limit the rise to 3.6 per cent, according to Exim News Service.
"The service tax will be applicable on 30 per cent of value of input goods and services and will not fuel inflation," Mr S. K. Goel, Chairman of the Central Board of Excise and Customs (CBEC), said. The rate of service tax was raised from 10 per cent to 12 per cent in Budget 2012-13.
It has been proposed that the tax be levied on transport of the bulk of rail freight comprising items such as coal, steel, iron ore, cement and gypsum, which constitute 70 per cent of the Railways’ freight revenue. Commodities like milk, foodgrains, kerosene, cooking gas and motor vehicles, whose prices directly impact the common man, are likely to be exempted.