Agricultural tractors – no duty
Some field formations are trying to charge excise duty on agricultural tractors on the ground that besides agricultural work, these tractors are used for haulage of farm products, fertilizers, etc. thereby qualifying as “road tractors for semi-trailers”. “Road tractors for semi-trailers” attract Central Excise duty at the rate of 16%, if the engine capacity is more than 1800 cc.
Board has noticed that Tractors falling under Chapter heading 8701 were exempted from excise duty in Budget 2004-05 with the intention to give exemption to agricultural tractors, in order to encourage farm sector. Further a tractor meant primarily for agriculture purposes can also be incidentally used to take goods to nearby markets. But that is an incidental use, and such tractors are not primarily designed to haul trailers. Therefore, incidental use of hauling trailers will not put such tractors in dutiable category. Therefore primary use of tractor should be the deciding factor.
Board proposes to issue a circular on the above lines.