This is a battle the railway ministry doesn?t want to give up, more on principle than for the savings it brings.
The railway ministry would like its official advertisements and paid publicity to be exempt from the service tax. This is not a whimsical demand, as it may seem. After all, the savings from such tax exemption look small change for a giant ministry rolling in cash. But the issue here is parity.
The Directorate of Audio and Visual Publicity (DAVP), which does official publicity and advertising for many ministries and government organisations, is exempt from the service tax. So the Railways?amongst the few government organisations permitted to have own publicity and advertisements?too wants a similar exemption.
Fair enough? But the finance ministry has a different view. It says unlike the Railways, DAVP is not a commercial concern. To this, the Railways has a counter-point: it publishes the advertisements to fulfill social obligations, and hence merit a tax exemption.
?We had approached the finance ministry before the Budget to exempt the Railways from paying the service tax on all official advertisements. This was not addressed in the Budget, and now we are planning to take up the issue to the Cabinet,? a source in the Rail Bhavan told FE.
The source said the ministry is drafting a Cabinet note on the issue, and will circulate it by next month.
While no final figures are available, ministry sources said the Railways spends about Rs 100 crore to Rs 150 crore now on paid publicity compared to Rs 30 crore to Rs 40 crore about five years ago, mainly on account of publicising the various initiatives started by railway minister Lalu Prasad.
?The amount as such is negligent, it is basically a matter of principle for us,? a ministry official said.