Railway passenger fares in all Air Conditioned classes and first class may rise by 3.6 per cent from July 1 as there are little indications that Finance Ministry would extend service tax exemption to Railways beyond this month.
The hike would put an additional burden on travellers on AC classes. Fares in AC-I and AC-II was increased by about 20 per cent in this year’s Rail Budget.
Service tax on passenger travel and freight was introduced in the general budget for 2009-10, but was kept on hold due to the then Railway Minister Mamata Banerjee’s opposition.
The exemption has been extended since then on quarterly basis but this time the Finance Ministry has decided to exclude freight charges and AC rail travel from the negative list, which gets service tax exemption.
With freight and passenger fares enjoying a 70 per cent subsidy, the impact on the increase in freight charges and fares of First Class and AC-I, AC-II and AC-III will be 3.6 per cent.