The last Budget levied a 12.24% service tax on 30% of the freight carried by a rail container. Similar service taxes are also levied on the freight when carried by freight forwarders and shipping lines. The entire tax burden at the end stands at 30.8%, which is billed to the customer.However, the railways are of the view that this is leading to a business loss to road transporters, who are taxed for only 25% of the freight carried. A Rail Bhawan official said, "We feel that the tax is making us uncompetitive vis--vis the road transport sector."
The railways have already sent a letter to this effect to the finance ministry and have the backing of the commerce ministry. Exporters too are feeling the pinch and at a recent meeting with the minister of state for commerce Jairam Ramesh made a case for a reduction in the service tax.Commenting on the levy of the tax, Concor managing director Rakesh Mehrotra said, "We feel that the tax is unnecessary and is causing loss of business to us. If it cannot be withdrawn then some provision must be made to lessen the cascading effect of the tax on the customer." Concor has come up with two alternatives either their bill (including service tax) should be added as an annexure by the shipping company to the customer. Alternatively, a clarification can be issued saying once the tax is collected from the rail operator, then no further service tax should not be levied on the freight.
The entire tax burden at the end stands at 30.8%, which is billed to the customer
The issue has gained importance as railways trys to attract more players for private container operations and is afraid that this may prove to be a deterrent to prospective applicants.