Passengers who have booked AC train tickets before October 1 will not have to pay service tax imposed by the finance ministry, the railways clarified on Friday.

Also, in case of cancellation of tickets booked on or after October 1, the refundable amount will include service tax.

After a public outcry, the railways, in consultation with the finance ministry, withdrew its earlier order that service tax would apply to tickets issued in advance for journeys to commence on or after October 1.

Fares of all AC classes will go up by 3.7% from October 1 with service tax coming into force.

A railways official said, "Service tax will not be levied on tickets issued prior to October 1, and it would not be collected on board. Since service tax is leviable from October 1, it will be collected on the tickets issued on or after that date."

Finance ministry hopes to collect Rs 300 crore from service tax on passenger fare and around Rs 3,000 crore on freight tariff. (Times of India)