What is Union Territory GST (UTGST)?

Last updated on July 13th, 2017 at 04:31 pm

In our previous blogs, we have discussed about the taxes that will be levied on supply under GST.

  • On intrastate supplies, the taxes levied are Central GST (CGST) and State GST (SGST).
  • On interstate supplies, the tax levied is IGST.

Another component of GST is now being talked about – UTGST. UTGST stands for Union Territory Goods and Services Tax.

Let us understand UTGST, the circumstances in which it is levied, and the manner of its levy.

Union Territory GST (UTGST)

A union territory is directly under the governance of the Central Government. This differentiates them from the states, which have their own elected governments. Currently, there are 7 union territories in India:

  1. Chandigarh
  2. Lakshadweep
  3. Daman and Diu
  4. Dadra and Nagar Haveli
  5. Andaman and Nicobar Islands
  6. Delhi
  7. Puducherry

Among these, Delhi and Puducherry have their own legislature, with elected members and a Chief Minister. Hence, they function as semi-states.

Under GST, the SGST Act applies to all the states in India. The definition of ‘States’ in the Indian Constitution includes union territories with their own legislature. Hence, the SGST Act also applies to the union territories of Delhi and Puducherry. This means that on supplies within the union territories of Delhi and Puducherry, the taxes levied will be CGST +SGST, and on supplies from Delhi/Puducherry to another state/union territory, the tax levied will be IGST.

As the SGST Act cannot be applied on a union territory without its own legislature, the GST Council has introduced the UTGST Act, to levy a tax, called UTGST, in the union territories of Chandigarh, Lakshadweep, Daman and Diu, Dadra and Nagar Haveli and Andaman and Nicobar Islands. UTGST will be levied in place of SGST in these union territories.

UTGST is applicable in the union territories of Chandigarh, Lakshadweep, Daman and Diu, Dadra and Nagar Haveli and Andaman and Nicobar Islands. Click To Tweet

Levy of Tax

Supply within the Union Territory

On supplies within a union territory, CGST + UTGST will be levied.

For example: Furniture Centre in Chandigarh supplies 50 sofa sets for Rs. 10,00,000 to Veena Furnitures in Chandigarh.

This is a supply within the union territory of Chandigarh. Assuming a GST rate of 12% on sofa sets, the tax calculation in this case will be as follows:

Particulars Amount (Rs.)
Sofa sets   10,00,000
CGST @ 6%         60,000
UTGST @ 6%         60,000
Total    11,20,000

Hence, the only difference here, is that on supplies within union territories, UTGST will be levied in place of SGST.

On supplies within a union territory, CGST and UTGST will be levied. Click To Tweet
Supply outside the Union Territory

On supplies from a union territory to another state or union territory, IGST will be levied.

For example: Furniture Centre in Chandigarh supplies 50 sofa sets for Rs. 10,00,000 to Ramesh Furniture Town in Delhi.

This is a supply outside the union territory of Chandigarh. Assuming a GST rate of 12% on sofa sets, the tax calculation in this case will be as follows:

Particulars Amount (Rs.)
Sofa sets   10,00,000
IGST @ 12%      1,20,000
Total    11,20,000

Hence, similar to the levy of tax on supplies outside a state, IGST will be applicable on supplies outside a union territory.

IGST will be applicable on supplies outside a union territory.Click To Tweet
Order of utilization

UTGST credit can be utilised to set-off the tax payable in a manner similar to utilization of SGST credit, i.e.:

Input Tax Credit Set-off against liability
UTGST UTGST and IGST (in this order)

Also, UTGST credit cannot be utilized to set-off CGST liability.

Example: At the end of August ’17, Furniture Centre in Chandigarh has input tax credit and tax liability as shown below:

Input tax credit (Rs.) Tax liability (Rs.)
CGST 1,00,000 CGST    80,000
UTGST 1,00,000 UTGST    80,000
IGST 2,00,000 IGST 2,50,000

Here, Furniture Centre can utilise the UTGST credit of Rs. 1,00,000 as follows:

Particulars Amount (Rs.)
UTGST credit   1,00,000
(-) Set-off against UTGST liability (-) 80,000
Balance      20,000
(-) Set-off against IGST liability (-) 20,000
Balance          Nil

UTGST will be levied in place of SGST in union territories without their own legislatures. The UTGST bill, along with CGST and IGST bills, which will be administered by the Central Government, has been passed on 6th April, ’17.

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