What Dada did not tell Didi in Parliament – Exemption given last year to Transport of Goods by Rail withdrawn

By TIOL News Service

NEW DELHI, FEB 26, 2010: REMEMBER in last year Finance Act, transportation of goods by rail was brought into service tax net? The service was to come into effect from 1.9.2009, but immediately Notification 33/2009 dated 1.9.2009 was issued exempting the service. Vide DDT1188, we reported:

Anyway, finally the Rail Babus had the last laugh – they did not make any arrangements to collect this tax – they knew all through that it will never be implemented. We mistook their confidence for arrogance. We regret that we mistakenly thought that a law passed by Parliament is supreme – we never really understood that a Department/ministry of the Government of India will show such scant respect for the Parliament and get away with it. It is not easy to get mighty organisations to be tax compliant.

The Indian Railways have won over the Indian Revenue and Parliament. There will be no service tax on transport of goods by Rail – at least as of now.

Now, Notification No 7/2010 ST Dated 27.2.2010 has been issued to rescind Notification No 33/2009 ST with effect from 1.4.2010. However, the exemptions given for transport of specified goods has been restored.

The exemption provided to certain specified goods transported by rail vide Notification No. 28/2009-ST, dated 31st August, 2009, which was subsequently withdrawn vide notification No. 36/2009-ST dated 9th September, 2009, has been restored vide Notification No. 8/2010-ST, dated 27th February, 2010. An abatement of 70% of the gross value of the freight charged on goods (other than exempted goods like food grains, kerosene, milk, etc,.) is being provided vide notification No. 9/2010-ST dated 27th February, 2010 by substituting the service of ‘Transport of goods by rail’ in notification No. 1/2006-ST dated 01.03.2006.

Is this the end of the road for the rail Ministry or a roll back is in the pipeline?