The Finance Ministry of India has said that it will levy service tax on the AC class and also the freight service fares . The ministry said that the fare would be increased by 3.7 percent from October 1, 2012.

A senior official from Railway Ministry said that the fares of AC First Class, Executive class, AC 2 tier, three tier and chair car will be increased by 3.708 percent from October 1, 2012. A notification for the recent development has been issued on September 27, 2012.

In a meeting between the Railway minister CP Joshi and finance minister P Chidambaram it was decided to levy the service tax on the AC classes, freight and auxiliary services. The meeting took place on September 26, 2012.

The new service tax will be levied on the tickets which are issued in advance for the journeys to commence on or after the date of the implementation. If the tickets are already issued, then the railways will ensure that the service tax is recovered through the TTEs in the train or by the booking offices before the commencement of the journey. If the tickets are cancelled the service tax will not be refunded by the railways.