Passengers will just have to pay service tax at the rate of 3.6 per cent on AC train ticket and not at 12 per cent. Similarly, air travel and dining in restaurants will attract lower service tax because of the abatement being provided.

The Central Board of Excise and Custom (CBEC) Chief, Mr S.K. Goel, clarified various issues related with indirect taxes. "We are not charging the food but the service of serving food is taxed. We do not charge service tax on entire amount of railway ticket but only 30 per cent of gross value of ticket. That means the effective rate would be 3.6 per cent and not 12 per cent." he said.

At the same time, service tax will be levied at 40 per cent of the gross air fare which translate into effective rate at 4.8 per cent. This is the same with bill in restaurants. 

Metered taxis, entry to amusement facilities, second-class rail travel, and betting, gambling and lottery will not attract the 12 per cent service tax, as per the budget proposal.

The negative list of services, on which the increased service tax of 12 per cent will not be levied, includes admission to entertainment events, access to amusement facilities and travel by radio taxis and auto rickshaws.

In addition to the existing services, which are subject to the service tax, the negative list clarified that the tax will be levied on travel by first class and in air-conditioned rail coaches, transport of goods by a transportation and courier agencies.

As regards sale and purchase of foreign currency, it has been clarified that such activity among the banks and dealers will be kept out of the service tax net. However, by implication, the sale of foreign currency by dealers to individuals will attract the levy.