This was something that the country's largest employer had been reluctant to do ever Lalu Prasad took over as its boss. But the Indian Railways has now relented and has agreed to open services other than ticketing, that are offered by its various arms, to service tax.

The Central Railway and Western Railway are among the first to register for taxation, various service rendered under their arms.

According to officials, railways offer various service apart from tickets, which are currently out of the tax net. These include restaurants on the platform or on railway premises, book shops, brokers and jobbers (For railway scrap auctions, renting out land, etc), services operating from space let out by the railways, among others. The additional cost will be passed on and consumers may have to pay more for the food items bought in the railway platform or even shoes polished by a shoesmith using space rented from the railways. Tickets and railway freight are already under the service tax net.

Railways have been opposing the move to include non-ticketing and non-freight services till date.

However, the railways relented after the finance ministry agreed to amend Section 99 of Indian Railways Act to provide exemption to Indian Railways with respect to taxable services prior to July 1, 2012. In fact, budget 2013-14 specified that exemption will be granted to the extent show cause notices have been issued up to February 20, 2012.

Incidentally, as a friendly gesture, the finance ministry may delete the clause of show cause notice and its cut off date for extending exemption for 2012 cases in the final finance bill yet. This is being considered to facilitate all such cases where show cause notices have not been sent and investigation are underway to send notices in future. Thus exemption will be allowed even in cases where show cause notice has not been sent but investigations are underway.

In the first seven months of the current financial year, indirect tax collection, which includes excise, customs and services tax, was Rs 2.57 lakh crore. while excise has yielded Rs 95,000 crore during this period, collection from customs and services tax worked out to about Rs 92,000 crore and Rs 70,000 crore respectively. The government in the current fiscal had proposed to collect from customs, excise and services tax Rs 5.05 lakh crore, an increase of 27 per cent over realisation in the previous fiscal

In order to boost service tax collection, the finance ministry has come out with an amnesty scheme called Voluntary Compliance Encouragement Scheme (VCES).

At present, service tax is the lowest contributor to the exchequer even though the sector accounts for the highest share of India’s GDP.