In what is seen as a bid to prevent further inflation spiral in the economy, the Finance Ministry has once again deferred the implementation of service tax levy on transport of goods by rail. The levy will now come into effect from January 1 next year.
The latest move has come in the backdrop of the wholesale price index-based inflation nearing double-digit level. This is the second time this year that the Finance Ministry had resorted to deferral of the proposal. The Government had in Budget 2010-11 proposed to bring transport of goods by rail in the service tax net from April 1. Its implementation was, however, deferred to July 1 in similar inflationary circumstances. Besides the postponement of the levy, the Finance Ministry has also now said that the earlier proposed exemption on certain goods (such as pulses, foodgrains, petroleum products for PDS, organic and chemical manure and motor vehicles) would now come into effect from January 1, along with the 70 per cent abatement. After the Budget announcement, the Railways had indicated that it would have no choice but to pass on the tax burden to its freight customers. A service tax levy on railway freight would have a cascading impact on coal, cement and steel prices, a section of industry had contended.