Freight users of Railways have been spared an effective service tax hit of 3.6 per cent for three more months, though there is no such relief for air-conditioned passengers as yet.

Mr Pranab Mukherjee has deferred the implementation of service tax for rail freight users till July 1, a step that will prevent adding to inflation by not increasing transportation cost of core commodities such as coal, steel and cement. This is the seventh such deferment by the Finance Ministry since April1, 2010.

The Finance Ministry issued a notification to this effect on March 17, as a part of other Budget-related notifications.

ANTI-INFLATIONARY

The move will help curtail inflation, which was hovering around 6.9 per cent in February. Since then, there have been hike in train freight rate, excise and service tax, all of which will contribute to inflation.

Earlier this month, the Railway Ministry had increased freight rates by about 20 per cent, leading to higher prices of coal, cement, steel, fertiliser and power. This Union Budget also had a move to increase excise duty and service tax by two per cent each.

PASSENGER

While sparing the freight segment, the Finance Minister has not yet been as large-hearted for the high-end passengers.

So, over 360 crore train passengers who travel in air-conditioned and non-AC first class every year will continue to attract an effective 3.6 per cent hike from April 1 on account of service tax.

The extent of increase in train fares will be higher for all first class passengers as they will also take on the impact proposed in the Railway Budget.