The exemption has been given keeping in mind the common man, a Finance Ministry official said.
The Budget 2009-10 had imposed service tax on transport of goods by rail. Separately, it had also brought services provided in relation to transport of coastal goods and goods through inland water, including national waterways under the service tax net. All the Budget announcements on service tax came into effect from Tuesday.
In case of rail services, the Finance Ministry has now said that transport of defence/military equipment, railway equipment/materials, postal mail bags, luggage of train passengers, parcels (including newspapers/magazines), foodgrains, sugar, fertilisers, milk and milk products, fruits and vegetables and motor vehicles will not attract service tax.
Also, kerosene oil meant for supply through public distribution system, petroleum products including LPG cylinders booked by public sector oil marketing companies and transported by Indian Railways will now be service tax exempt.
For transport of goods through inland water and coastal shipping, the exempted items include edible oils, foodgrains, fruits, vegetables and flowers, tea and coffee, sugar, sugarcane, grocery, fertiliser, sarees, petroleum and petroleum products, raw jute and jute textile, hank yarn made from cotton, medicine and pharmaceutical products and newspapers and magazines.
“All essential items and those used by Government have been service tax exempt in the case of transportation of goods by rail or through inland water and coastal shipping,” Mr Pratik Jain, Executive Director, KPMG, told Business Line.
Meanwhile, for transport of goods by rail, the Finance Ministry has now specified an abatement rate of 70 per cent.