Close on the heels of railways increasing parcel rates by 25 per cent, the freight charges will go up by about 3.6 per cent from July 1 with imposition of service tax. The government had given service tax exemption on goods carried by railways till June 30, 2012. From July 1 using railways to transport goods will come under service tax net.

however, said service tax on freight would have only marginal impact on prices as the state run transporter enjoys 70 per cent abatement on gross freight charges.  An abatement of 70 per cent means that effective service tax would be only about 3.6 per cent as against 12.3 per cent (including education cess).

In Budget 2009-10, the Centre had proposed service tax on goods carried by the railways. However, the implementation remained deferred for all these years due to opposition by then Railways Minister and Trinamool Congress chief Mamata Banerjee.

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