The finance ministry has deferred levying 10 per cent service tax on railway freight by three months to July 1 amid inflation nearing double-digit mark.
"The service tax on railways freight has been deferred by three months," a Central Board of Excise and Customs (CBEC) spokesperson told PTI.
The 10 per cent levy was to be imposed from April 1.
Finance Minister Pranab Mukherjee in the the Union Budget 2010-11 had proposed a service tax of 10.3 per cent on "service provided in relation to transport of goods by rail".
However, Railways Minister Mamata Banerjee stepped up pressure on the Finance Minister for withdrawal of the tax.
"New projects need Rs 80,000 crore. The pending projects are there. If there is service tax it will be very difficult to implement them," she had said while replying to supplementaries during the Question Hour in the Lok Sabha.
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The wholesale price-based inflation rose to 9.89 per cent in February from 8.56 per cent in the previous month due to increase in prices of certain food items such as sugar and the hike in excise duty on fuel.
However, food inflation has started easing and it touched its lowest in four months at 16.22 per cent for the week ended March 13.