"Service tax will be applicable for transportation of all leased and non-leased parcel traffic and merchandise items for commercial use booked as luggage with effect from October 1," a Railways statement said.
Items to be exempted from service tax net are transportation of defence or military equipment, postal mail or mail bags, newspaper or magazines registered with the Registrar of Newspapers and agricultural produce.
Foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil would also be exempted, the statement said.
The exemption list also includes relief material meant for victims of natural or man-made disasters, calamities, accidents or mishaps.
Service tax of 3.708 per cent is being levied on AC First Class, Executive Class, AC-2 tier, AC-3 tier, AC Chair Car and freight from October 1.
The government exchequer is expected to earn about Rs 3,000 crore from the service tax levied on Railways.
