The Centre is mulling imposing a 5 per cent service tax on rail passenger fares in the forthcoming Budget. Freight traffic is, however, likely to be spared for the time-being from the tax.
According to government sources, the Centre can mop up over Rs 500 crore from the service tax on rail fares for passengers.
While the Railways are considering the possibility of raising passenger fares, the proposal for a service tax has found more support in the finance ministry as the money raised from a tax will accrue to the general exchequer instead of finding its way into the Railways