After spat over guidelines for General Anti-Avoidance Rules (GAAR) with the finance ministry last week, prime minister Manmohan Singh on Monday snubbed the finance ministry move to impose service tax on freight and passenger fare of the railways. Doing so, the economist-PM has dealt at one stroke, with industry and common man’s concerns, and has also shown political acumen by reaching out to the Trinamool Congress headed by Mamata Banerjee, the key UPA ally which differs with the Congress in the run up to the presidential elections.TMC had been fighting a battle with the finance ministry ever since it brought railway under the service tax net three years back by Pranab Mukherjee. Interestingly, Banerjee did not support Pranab as Congress’ presidential candidate.The service tax intervention comes as a great relief for passengers of all AC classes as well as the industry, which depends hugely on the railway. On the economic...
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front, additional taxation would have flared up inflation and added to the common man’s woes. This, however, would mean a loss of about Rs2,000 crore to the exchequer.The exemption of the railways from service tax, though, is effective up to September this year. A senior ministry official said, “Meanwhile, we will apprise the government about restrictions on the part of the railways and why the department should not be brought under the tax net.”Incidentally, railway minister Mukul Roy wrote a letter to the prime minister last Friday explaining the ministry’s stand on the matter.PM’s intervention on GAAR last week has excited the industry and honchos are making a beeline to meet planning commission deputy chairman Montek Singh Ahluwalia – the key lieutenant of Singh. Reliance Industries chairman Mukesh Ambani on Monday called upon Ahluwalia in New Delhi in a meeting that lasted for over an hour.Last week, Vodafone India chief Analjeet Singh also paid a courtesy call to Ahluwalia.