A Comprehensive Guide On UTGST Act In The Union Territories Of India

The UTGST Act expands the Union Territory Goods and Service Tax. UTGST, Union Territory Goods and Services Tax, is a GST applicable on the goods and services supply that takes place in any of the union territories of India. 

The Goods and Services Tax (GST) is applied to the sale of goods or services within a State or a UT and outside. However, when goods are moving intra-State, an SGST (State GST) is applicable. When it comes to union territories, the SGST does not apply. If the goods or services are supplied intra-UT, the UTGST is applied. 

As such, if you supply goods or services to a union territory or if you live in a UT and supply goods and services to another State, knowledge of the UTGST is essential. So, let’s understand what UTGST is and how it works.

What is UTGST?

The full form of UTGST is Union Territory Goods and Services Tax. The rules for UTGST are specified under the Union Territory Goods and Services Act, 2017. While the Act was passed by the Parliament, the President governed each UT. The President appoints an Administrator on his behalf who, in turn, appoints commissioners and officers to administer UTGST rules.

UTGST is a form of GST applicable when goods or services are supplied intra-UT, i.e., within a union territory. In these cases, SGST cannot be applied in the case of UTs that do not have a legislature. Furthermore, besides the UTGST, the CGST (Central GST) is also charged for such a supply of goods or services.

UTGST Act 2017

As mentioned earlier, the rules of UTGST are contained in the UTGST Act. This Act was passed in 2017 so that the Government could lay down rules for GST in union territories. 

The UTGST Act, 2017 encompasses guidelines related to the following –

• The levying and collection of GST in the intra-UT supply of goods and services
• The power to allow exemption from the tax liability 
• Transfer of the Input Tax Credit
• Recovery of pending tax
• Payment of tax
• Other transitional provisions, etc.

UTGST Regions

There are nine identified union territories in India. For UTGST, only six UTs are recognised. These six territories comprise the UTGST States, which are as follows –

• Lakshadweep
• Andaman & Nicobar Islands 
• Dadra & Nagar Haveli
• Daman & Diu
• Chandigarh
• Ladakh 

In the case of New Delhi and Puducherry, though they are Union Territories, they have a legislature of their own. As such, in these States, SGST is applicable, not UTGST. Moreover, in the case of Jammu and Kashmir, the J&K GST (Jammu & Kashmir GST) is applicable since the UT has its own legislature. 

Features of UTGST

Here are some of the salient features of UTGST that you should know about –

1. When Ladakh separated from Jammu & Kashmir, it became a union territory. However, Ladakh does not have its own legislature and is, thus, eligible for the UTGST rules.
2. However, in the case of Jammu & Kashmir, there is separate legislation governing the UT. As such, UTGST is not applicable. A new GST Act, the J&K GST Act, was passed, which lays down the GST rules for Jammu & Kashmir.
3. UTGST is similar to SGST. The only difference is that UTGST is meant for territories without a legislature while SGST is meant for States with their own legislature.
4. The UTGST rate is not fixed and might vary depending on the recommendations of the GST Council.
5. There might be an UTGST invoice format which you would have to follow when issuing bills.

Also Read

Goods And Services Tax (GST): Rates, Registration, Eligibility, Benefits And Returns

What is Input Tax Credit (ITC) in GST – Eligibility and Documents Required To Claim ITC

UTGST Tax Rates

The GST Council is empowered with authority to make changes to the rates of GST, including UTGST rates. The UTGST rates are similar to the SGST rates. Moreover, the Central Government has the power and authority to recommend rate changes to the GST Council.  

The UTGST tax rates differ across different types of goods and services. There are five slabs of UTGST rates which are as follows:

• 0% (This slab includes goods and services that do not attract UTGST)
• 5%
• 12%
• 18%
• 28%

Applicability of UTGST

If any business in a union territory supplies goods or services to another business or even an individual, an output tax liability is created on such supply. If the supply is within the same union territory, UTGST becomes applicable, along with CGST. If the supply is out of the union territory, then IGST would be applicable, not UTGST or SGST.

Here’s a quick look at when UTGST becomes applicable and when it doesn’t 

How is UTGST Charged?

There are three different instances of how UTGST can be charged. These instances and their UTGST rules are as follows:

1. UTGST Charged on a Forward Charge Basis

In the case of the intra-UT supply of goods, except the supply of alcohol meant for human consumption, UTGST is charged. The UTGST is levied under Section 15 of the CGST Act, 2017. The rate of UTGST would be determined by the GST Council on the recommendation of the Central Government. UTGST would be collected in a manner specified by the GST Council and paid by taxpayers. 

The business that supplies goods or services is responsible for collecting UTGST from the recipients of such goods and services. The business then deposits the collected UTGST to the Government. This process of charging UTGST in the hands of the supplier of goods or services is called charging tax on a forward charge basis.  

2. UTGST Charged on a Reverse Charge Basis

In some cases of supply, the Central Government specifies tax to be levied on a reverse charge mechanism. Under the reverse charge mechanism, the supplier is not liable to pay UTGST on the supplies. Instead, the recipient of the goods or services is required to pay the applicable UTGST.

Moreover, if a supplier unregistered under GST supplies goods or services to a registered individual or business, the liability of paying UTGST would fall on the recipient and the reverse charge mechanism would become applicable.  

3. UTGST Charged for e-commerce Operators 

In the case of e-commerce operators, the UTGST rules might vary if the supply of the goods is intra-UT and an e-commerce operator is making the supply. In such cases, the e-commerce operator would be liable to pay UTGST.

Example of How UTGST is Charged

Here is a quick example of how UTGST is charged on the intra-UT supply of goods and services.

M/S ABC Limited supplies goods worth Rs.10 lakhs from their Chandigarh warehouse to a retailer in Chandigarh. They also supply goods worth Rs.5 lakhs from Chandigarh to New Delhi. The applicable GST rate on the goods is 12%.

Here’s a look at the relevant GST that would be charged and how it would be calculated:

When goods are moved within the Union Territory, UTGST is applicable. However, once the goods moved out of the UT, IGST (Integrated GST) was applicable. 

Differences Between CGST, SGST, UTGST and IGST

The Central GST (CGST), State GST (SGST), Union Territory GST (UTGST) and Integrated GST (IGST) are all different from one another. The following table shows the difference –

Final Word

If you are a registered business in a union territory or if you would be registering your business under GST, understand what Union Territory GST is and how it is applicable. Comply with the UTGST rules of your union territory, design your invoices in UTGST bill format and pay your GST liability on time to avoid penalties.

FAQs on UTGST