The Central Government while introducing the provisions of Negative List vide Finance Act, 2012 made the service in relation to transportation of goods by rail 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 transportation of goods by rail, which was earlier exempted will be levied from 1st October 2012.

However, Since an abatement of 70% has been permitted on freight for the taxable commodities by the Ministry of Finance vide Notification No. 26/2012-ST, the Service Tax will be charged on 30% of the total chargeable freight inclusive of all charges (like busy season charges, development charge etc.,). Thus, in totality Service tax implication will be 3.708% on total freight charges w.e.f. 1^st October 2012 except in respect of certain commodities that have been exempted vide Notification No. 25/2012-ST, namely:

(a)     petroleum and petroleum products falling under Chapter heading 2710 and  2711 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);

(b)     relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap;

(c)      defence or military equipments;

(d)     postal mail or mail bags;

(e)     household effects;

(f)       newspaper or magazines registered with the Registrar of Newspapers;

(g)      railway equipments or materials;

(h)     agricultural produce;

(i)       foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages; or

(j)      chemical fertilizer and oilcakes;