written by khatabook | April 14, 2021

UTGST: Full Form, Meaning & Applicability

UTGST or Union Territory Goods and Services Tax was passed under UTGST Act, 2017 on 12th April. UTGST is an Act to make a provision for the charging and collection of tax on all goods and services which are intrastate. UTGST is collected by the Central Government.

Still, confused about UTGST? Don’t worry. In this article, we will cover everything about UTGST 

  • It's meaning, 
  • Why was it needed, 
  • It's applicability, 
  • Territories that come under UTGST  
  • The process of charging, 
  • Payment of tax, 
  • Power of exemption from tax
  • Demand and Recovery of Tax

What is UTGST?

 UTGST means Union Territory Goods and Service Tax, and is an indirect tax that is collected when intra-state goods or services supplied, along with tax charged as under CGST ACT, 2017. Generally, intra-state supply is treated where the location of the supplier and the place of supply of goods or services are in the same Union Territory.

Further, where the location of the supplier and the place of supplying goods or services are not in the same union territory it is treated as an inter-State supply of goods or services. 

Any goods or services that are transferred out of or brought in to a union territory will be chargeable under Integrated Goods and Services Tax (IGST). A combination of CGST and SGST/UTGST equals IGST which is imposed by the Central Government on all supplies which take place inter-state.

UTGST Full Form

UTGST stands for Union Territory Goods and Service Tax Act, 2017 

UTGST Territories 

UTGST applicable territories as mentioned in Section 2 of UTGST Act, 2017 are as follows:

  1. Andamans and Nicobar Islands
  2. Lakshadweep
  3. Dadra & Nagar Haveli
  4. Daman and Diu
  5. Chandigarh and 
  6. Other territories

According to Schedule 1 of the Indian Constitution, the territory of India consists of States and Union Territories. This Schedule provides that there are 29 states and 7 Union Territories There are 7 union territories out of which, 

  • 2 Union Territory with the legislature - Puducherry and Delhi and
  • 5 Union Territory without legislature - Andamans and Nicobar Islands, Dadra & Nagar Haveli, Lakshadweep and Daman and Diu

Why Was It Needed

The main agenda taken up by the GST council was that the benefits of Union Territory GST would provide the same benefits as SGST. Apart from that, New Delhi and Puducherry will still enjoy the SGST provisions. Both states have their separate legislatures and can operate freely on the terms of SGST and have also been considered as the states by the GST Council

Also Read: GST FAQ – Search Your GST Queries | GST Frequently Asked Questions

Applicability Of UTGST

As prescribed under section 2 (7) ‘‘output tax’’ concerning a taxable person, means the Union territory tax chargeable under UTGST Act on the taxable supply of goods or services or both made by the business(or by its agents) but excludes tax payable by it on reverse charge basis.

Output Tax liability of the taxable person that needs to be paid by him as follows

The Type of Supply Output tax liability Prescribed under 
Supplies between one state and another state  CGST SGST Section 9(1) of CGST Act, 2017 as well as in the SGST Act, 2017
Supplies between two Union Territories without legislature Integrated GST (Between two or more UT) Section 7(1) & 7(3) of the IGST Act
Supplies within a Union Territory without legislature UTGST CGST (within the UT) Section 8(1)& 8(2) of the IGST Act
Supplies between a Union Territory without legislature and a State or UT with the governing body Integrated GST Section 7(1) & 7(3) of the IGST Act

Example Of UTGST

Let’s understand with an example. Assuming the rates of CGST, SGST, UTGST are 9% and IGST 18%

  1. Goods or Services or both are transferred within Gujarat 
Particulars Amount
Amount of goods or services or both 10,00,000
Add : CGST @ 9% 90,000
Add : SGST @ 9% 90,000
The total amount of goods or services or both  11,80,000

Since the goods are supplied in intra-state, within Gujarat itself then tax should be levied under section 9(1) of CGST Act (as well as in the SGST Act). The amount of CGST will be transferred to the Central Government and SGST will be transferred to the State government. SGST would also be charged on Union Territory with Legislature.

Also Read: The Latest Amendments to CGST Act You Need to Know

  1. Goods or Services or both transferred from Gujarat To Daman and Diu
Particulars Amount
Value of goods or services or both transferred 10,00,000
Add: IGST @ 18% 1,80,000
The total value of goods or services or both transferred  11,80,000

Since goods or services or both transferred on inter-state (from Gujarat to Daman & Diu) then IGST would be charged which will be transferred to Central Government as mentioned above under section 7(1) and 7(3) of IGST Act.

  1. Goods or Services or both transferred within Daman and Diu
Particulars Amount
Amount of goods or services or both 10,00,000
Add : CGST @ 9% 90,000
Add : UTGST @ 9% 90,000
The total amount of goods or services or both transferred   11,80,000

Since the goods are supplied within Daman and Diu then tax should be levied under section 8(1) and 8(3) of the IGST Act. The amount of CGST will be transferred to the Central Government and UTGST to the Union Territory. 

Also Read: GST Rates in India – List of Goods and Service Tax Rates, Slab

Payment Of Tax

An input tax credit means the tax paid on inputs(purchases). It can be set off against output tax to be paid to the government.  

In UTGST Act, there is prescribed section 9 which states that if a registered person has input tax credit in his ledger (in electronic form) it should be used in the following manner:

  1. If you have an input tax credit of IGST then first it should be used against IGST then if somehow any amount remains then it should be used against CGST or SGST or UTGST in this order
  2. Similarly, the UTGST credit input should be set off against Union Territory tax first and then it must be used against the IGST provided that CGST has no balance.

In simpler words any input tax credit whether it is CGST, SGST or UTGST, IGST shall be first set off on payment of the same type. Then if any amount remains, it should be used to set off against the other Tax in the order mentioned above

Power to Grant Exemption from Tax

There are some cases where the Central Government can exempt a taxpayer from paying the tax, as prescribed in Section 8 of UTGST Act stating the circumstances  in which on exemption can be given: 

  • On proposals of the Council member, in the interest of the public, the Central Government will issue the notification on general or specified goods as decided will be granted exemption from the date of notification.
  • With having the authoritative power Central Government can bring the special order of the goods or services on which exception should be given to promote their usage or any other reason specified. 
  • If Central Government find it is necessary to clarify to the people about its applicability, then, it will be explained in the notification at any time within the one year of issue of the notification

Conclusion:  So here Section 8  meant to say that if an exception is given by the Government on any goods or services supplied by a registered person, then that tax should not be collected by the person on the goods or services as mentioned by the government.

Also Read: All you need to know about the GST State Code and how it affects you

Demands and Recovery Of Tax

Under section 12 of UTGST Act, 2017

  1. Suppose, a registered person has paid the central tax with the UTGST on a transaction considered by him to be an intra-State supply. But later it was held to be an inter-State supply. Then in such case, the registered person shall be refunded the amount of tax paid.
  2. Further, if  A registered person has paid integrated tax on a transaction considered by him which is to be an inter-State supply, but was later held to be an intra-State supply. Thus, that registered person will not be required to pay any interest on that proportion of the CGST and the UTGSTpayable. 
  3. If any amount of tax remains unpaid by a registered person then as per Sectio 13 of UTGST Act, 2017, the interest, or penalty shall also be payable by that person to the Government
  4. Also, the proper officer of central tax, during recovery of tax arrears, may recover the amount from the person (as if it were an arrear of central tax) and credit the amount so recovered to the account of the Government under the head of Union territory tax.
  5. If in case the amount recovered under section 13 (1) is less than the amount due to the Government under UTGST Act and the Central Goods and Services Tax(CGST) Act, the amount to be credited to the account of the Government shall be in proportion to the amount due as Union territory tax and central tax both

Also Read: A Step-by-Step Guide to GST Registration Procedure in India

Frequently Asked Questions (FAQs)

Who collects the UTGST?

In Union territory without Legislature, the UTGST is collected by the Central Government 

What is the Maximum rate mentioned under UTGST Act?

As per Section 7(1) in UTGST Act, 2017 the maximum rate is 20%

What is the purpose of UTGST?

To provide the same benefits as SGST to the Union Territories 

What is the difference between SGST and UTGST?

SGST is levied on goods or services which is transferred on an intra-state basis within the states whereas UTGST is levied on goods or services transferred within the Union Territory.

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