AC rail travel and freight services fares are set to increase by 3.7% from October 1.

Finance ministry has decided to levy service tax on AC rail travel and freight services fares, which are set to increase by 3.7% from October 1.

Fares of AC first class, executive class, AC-2 tier, AC-3 tier, AC chair car will go up by 3.7% from October 1.The decision for levying service tax on AC classes and freight and auxiliary services was taken on Wednesday at a meeting between railway minister CP Joshi and finance minister P Chidambaram.

The service tax will apply to tickets issued in advance for journeys to commence on or after the date of its implementation. In case of tickets already issued excluding service tax, it will be ensured that the same is recovered either by TTEs in the train or by the booking offices before commencement of journey.

In case of cancellation of tickets by the passengers, service tax will not be refunded by railways, the official said.

On concessional tickets, service charges will be 30% of the total fare.

The service tax is 12.36% but after the abatement of 70% it will be 3.708% on passenger fares in AC classes and freight.

Passengers travelling in AC classes were brought under service tax from July this year as per theFinance Bill 2012 but the levy had since been kept in abeyance because of opposition by the TMC.