In a relief to Rail travellers, the government has decided not to levy 12 per cent service tax on passenger fares and freight till September 30.

A finance ministry statement said, the Government has exempted the core services provided by the Indian Railways, namely transportation of goods and passengers, from the levy of service tax. The exemption will for a period remain effective of 3 months, up to September 30, 2012.

The decision to exempt railways from levy of service tax follows a letter written by Railway Minister Mukul Roy to Prime Minister Manmohan Singh, who is now looking after the Finance portfolio, requesting him not to introduce service tax

on passenger fare and freight traffic from July 1.

The Finance Ministry has introduced a new regime of Service Tax based on negative list from July 1, under which only 38 services are exempted from payment of the levy.