Get ready to shell out more on AC train journey from October 1

Chalking out elaborate plans for the festive season ahead? Beware! The price rise Halloween is coming to spook your Dussehra and Diwali. After the diesel and LPG price hike, now comes a blow from the railways.

From October 1, passengers traveling in AC classes will have to shell out service tax. About three lakh passengers will be affected by the move every day.

Service tax will also be levied on freight – a move that will jack up input cost for industries. The government exchequer will get approximately Rs 3,500 crore from the initiative.

Transportation of essential commodities such as food grains will be exempt from the hike.

The railway ministry has been dodging the finance ministry’s efforts to bring the railway under the service tax net since 2010. With Mamata Banerjee and her party out of the railway ministry and the UPA government already on a reform spree, this will most likely become a reality beginning October 1. 

According to the ministry, service tax will be applicable on AC first class, Executive Class (First AC of Shatabdi), AC two tier, Three AC and AC chair car class. The hike will also be applicable on Garib Rath trains.

Customers will have to shell out an additional 3.6% service tax on the total price of the ticket. Add to it the education cess and higher education cess, and the total hike becomes 3.7% of the total cost of the ticket. This year’s budget raised the service tax rate to 12.36 per cent. However, the railways have been granted 70% abatement and that’s why it is being charged at a lower rate.

In a double-whammy of sorts for the passengers, the service tax once collected will not be refunded in case of cancellation of the ticket. Railway officials contend that the ministry is over burdened with an additional responsibility of collection of service tax and depositing it with the exchequer at a time when it is already short staffed. At least one lakh posts are lying vacant in the railways.