Finance minister Pranab Mukherjee has rejected withdrawal of 10 per cent service tax on cargo moved on railways, inland waterways via ships, international and domestic air tickets. He has apparently cold shouldered the requests made by his top cabinet colleagues railways minister Mamta Banerjee, shipping minister GK Vasan and civil aviation minister Praful Patel.

Cargo movers on railways, shipping companies and airlines have been clamouring for relief from the impost citing double digit inflation and already high prices ruling in their respective segments.

Citing revenue considerations, Pranab Mukherjee has apparently told his cabinet colleagues politely but firmly during last one week that there will not be any rollback in service tax on the three transport sectors moving goods and passengers.

Mukherjee has taken credit for mopping up additional revenue of Rs 3,000 crore from his service tax proposals in the budget for next fiscal presented by him on February 26. Internally, finance ministry has estimated that net additional revenue owing to budget proposals via service tax would cross over Rs 4,500 crore.

Only two days back, when Mamta Banerjee got a "firm no" from her elder colleague. Finance minister has clearly told the railway minister that the ministry is not going to oblige her on service tax exemption demand.

“The idea is to expand service tax base, minimise exemptions and increase compliance by streamlining service tax directorate procedures. Given the tight revenue situation, the minister is in no mood to rollback the impost” said a finance ministry official.

Mukherjee in his budget withdrew the exemption of service tax on goods transported by rail. While all other service tax proposals come into effect when the finance bill is adopted by Parliament, the impost on goods moved by railways will come into effect beginning April 1, 2010.

This has been a sore point between Mamta Ban-erjee and Pranab Mukherjee. Th-ough he moved the impost in the budget for this financial year, he had obliged the railway minister by exempting railways goods movement from the impost. This time round, only essential commodities continue to be exempt from the levy owing to steep increase in prices of rice, wheat, pulses, vegetables, fruits and flowers.

Railways have been arguing that service tax impost on cargo carried by it has two-fold impact. One, prices of steel, coal, cement and other bulk commodities like iron ore are bound to go up. Already, steel companies have announced increase in steel prices. Further increase is in the offing, a railway ministry official said on condition of anonymity. Secondly, it limits the scope for the railway minister to enhance the cargo tariff after having refrained from doing so in her own budget.

Only last week, She has ordered increase in cargo tariff on steel meant for export purposes by about Rs 300 per tonne. The railways minister is seriously considering more off-the-budget cargo tariff hikes.

Presently, the railways carry about one third of total cargo in the country. It proposes to carry 944 million tonne cargo during 2010-11, 54 million tonne more than revised targets for this financial year.

Mamta Banerjee has apparently taken the position that higher transportation costs may impact the volumes on railways. But, Railway ministry officials are mum on the adverse impact of higher freight charges being contemplated.

“At the moment, we can not calculate what exactly the service tax burden would be. Whatever it is, the railways would have to pass it on to the customers. The only problem is that it may affect the total volume of commodities that the railways target to carry this year,” a railway ministry official, who did not wish to be named, said.

“We have been writing to the finance ministry for an exemption, however, no response has come,” a shipping ministry official said.

Inland waterways comprise transportation of commodities through river, can-als and backwaters. At present, India has about 14,500 km of navigable waterways.