CBIC offers clarity on classification of cranes for GST, customs duty

Experts say this would reduce litigation in courts, as different classes of cranes attract different tax rates

The Central Board of Indirect taxes and Customs (CBIC) has offered clarity on the classification of mobile machines such as all-terrain cranes and truck-mounted cranes into motor vehicles and cranes. Experts say this would reduce litigation in courts, as motor vehicles and cranes attract different customs duty rates.

Mobile cranes whose working machines are merely mounted on the chassis and are not mechanically integrated with it will be treated as motor vehicles, and will attract a higher rate of customs duty than those whose work machines are specifically designed for chassis. The latter category would be treated as cranes, CBIC clarified.  

Motor vehicles attract basic customs duty of 10 per cent, while cranes attract 7.5 per cent.

However, the GST rate for the two types of mobile machines is 18 per cent. But some components in motor vehicles attract 28 per cent GST, while all the components in a crane are taxed at 18 per cent.

The CBIC has clarified this through a circular because opinions differ on the classification of these goods, since their features are similar to those of both motor vehicles and load-handling heavy machines.

While one opinion states that the goods are essentially cranes if used in lifting and handling, some rely on the ability of these goods to be moved from one place to another, which makes them similar to motor vehicles.

Apart the above criteria, cranes that can move under load are to be regarded motor vehicles, while the stationary kind are strictly cranes, the circular clarified.

Also when one or more of the propelling or control elements are located in the cab of a lifting or handling machine mounted on a wheeled chassis, then it would be classified as a crane, otherwise it is a motor vehicle.  

Experts say CBIc's clarification would help clear the confusion caused in the mind of the taxpayer by the existence of so many criteria about the manner in which these machines are to be taxed.

Saurabh Agarwal, tax partner at EY, says, "This (the CBIC clarification) would help bring clarity in the classification of such mobile machines and ease tasks of both importer as well as trade officials while determining correct classification of goods and applicable customs duty rate."

He said this circular will help in closing pending litigations.

The circular lays down aspects such as movement under load, location of propelling and control elements, integration of working machine with chassis etc for determining the correct classification, Agarwal added.

Basically, if outriggers of the cranes aren't connected to the chassis and aren't controlled by engines connected to the chassis, then the goods are motor vehicles, CBIC) clarified.

In case the chassis and outriggers in these cranes are specially designed for each other and form an integral mechanical unit, and chassis cannot be used for any other purpose, then these would be treated as cranes.