Entry tax parity principle invalidates discriminatory levy on tractors when tax exceeds the local VAT burden.

Entry tax on tractors could not be levied at 15% by treating them as motor vehicles where similar tractors under the local tax regime attracted only 5% VAT. The Gujarat HC held that the entry tax scheme is designed to maintain parity between goods imported from outside the State and similar goods manufactured within the State, and that a levy exceeding the local tax burden is discriminatory and contrary to Article 304(a). The later exemption notification and input tax credit did not cure the defect in the levy, so entry tax could not be charged beyond the VAT rate applicable to tractors.

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Issues: Whether entry tax at 15% could be levied on tractors by treating them as motor vehicles, and whether such levy was discriminatory and violative of Article 304(a) of the Constitution of India in view of the object and scheme of the entry tax law.

Analysis: The levy of entry tax was examined against the statutory object of maintaining parity between goods imported from outside the State and similar goods manufactured within the State. The Court noted that the legislative history of the entry tax regime showed a direct linkage between entry tax and the local VAT/sales tax rate on similar goods, so that the tax would preserve a level playing field and avoid discrimination. Tractors had always been separately classified under the local tax regime and attracted only 5% VAT, whereas the impugned levy treated them as motor vehicles and subjected them to 15% entry tax, which exceeded the local burden on similar goods. The Court held that such a levy was contrary to the scheme of the Act and amounted to discrimination prohibited by Article 304(a). The subsequent exemption notification and the availability of input tax credit did not cure the illegality of the levy itself.

Conclusion: The levy of entry tax at 15% on tractors by treating them as motor vehicles was held illegal and discriminatory, and the respondents were held not entitled to charge entry tax on tractors beyond the VAT rate of 5%.

Ratio Decidendi: Entry tax on imported goods must not exceed the tax burden applicable to similar goods manufactured or sold within the State, and any levy that disrupts this parity is discriminatory and invalid under Article 304(a).

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