The Central Government while introducing the provisions of negative list vide Finance Act, 2012 made the service in relation to transportation of passengers by railways in the first class or an air conditioned coach, taxable. However, the same was exempted up to 30-09-2012 vide the notification no 43/2012-ST dated 02-07-2012. Now, vide Press Release of Ministry of Finance dated 27-09-2012, Service Tax in case of railway travel, which was earlier exempted will be levied on the fare of passenger services in the following classes from 1st October 2012:

(i)           AC First Class,

(ii)         Executive Class,

(iii)       AC-2 tier Class,

(iv)        AC-3 tier class,

(v)          AC Chair Car class,

(vi)        AC Economy class and

(vii)      First Class.

In this regards, vide notification no 26/2012-ST dated 20-06-2012 an abatement of 70% has been permitted on passenger services and accordingly the Service Tax will be charged on 30% of total fare including reservation charge, development charge, and superfast surcharge.