UTGST: Union Territory Goods and Service Tax

Union Territory Goods and Service Tax or UTGST was passed in the year 2017, at the same time when the general GST laws were passed. The idea of GST was to conduct and account for all taxes in different businesses under the ‘One Nation, One Tax’ regime. Just as there is a distinction between SGST (state goods and service tax) and CGST (central goods and service tax), there is another distinction for the businesses that are located and registered in union territories. They come under Union Territory Goods and Service Tax or UGST. To read more on SGST and CGST click here.

The UTGST full form came into play since India has around 9 union territories. To ensure the fair representation of the geographical location of the union territories and that they are taxed in the right location that they are registered in, UTGST was introduced. Just as the taxes that come under the IGST regime are collected by the central government, the same way taxes under the UTGST are collected by the central government too. More on this in the coming article, so continue reading to know what is the meaning of UTGST, its application and different procedures that need to be kept in mind while filing for returns under UTGST.

UTGST Meaning: What is it and why is it needed?

The union territory goods and service tax is a tax regime that is based on the geographical location of where the business is registered and located. The UTGST is an indirect tax that is collected when the intrastate goods and services or both, by businesses that are in union territories and are supplied across borders.

Even though most union territories are usually located within the state, the reason for having an autonomous head for the union territory goods and service tax or UTGST is because the common state goods and service tax cannot be applied to a union territory without legislature. To address the issue of the state conflict and the union territory conflict, the government introduced the Union Territory Goods and Service Tax to ensure ease of business and filing of taxes and returns.

The UTGST was needed to ensure the union territories experience the same advantages and perks that state goods and service tax, SGST experience.

Which Union Territories are included in UTGST, Union Territory Goods and Service Tax?

Do note: Even though our country has 9 union territories, namely Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli and Daman and Diu, National Capital of Delhi, Jammu and Kashmir, Lakshadweep, Ladakh and Puducherry, not all 9 are included in the UTGST list. Even though there are 9 UTs in India, only 5 are included in the list of  UTGST.

This is because the union territories have their independent legislature. Union territories such as New Delhi and Puducherry are not included in the Union Territory Goods and Service Tax, UTGST because they have their independent legislature. They can register themselves under State Goods and Service Tax and operate freely under that regime.

Union Territories that are included in Union Territory Goods and Service Tax, UTGST are:

• Chandigarh
• Lakshadweep
• Daman and Diu
• Dadra and Nagar Haveli
• Andaman and Nicobar Islands

What transactions qualify under the UTGST?

As mentioned before, businesses that are registered under the union territories and that do not have independent legislature are required to file their goods and service tax under the UTGSt regime. This means all goods, services or both, transactions that have taken place intrastate or within union territories are both required to be qualified under UTGST.

The transactions are:

• Supply of goods or services or both from one location to another within the same state, i.e. intrastate. (CGST + SGST)
• Supply of goods or services or both from one union territory to another union territory, i.e. interstate. (CGST +UTGST)
• Supply of goods or services or both from one union territory to another state, i.e. interstate. (IGST)

What are the UTGST Rates? Is there any difference?

No. Just like the rates of State Goods and Service Tax and Central Goods and Service Tax, the tax rate for Union Territory Goods and Service Tax, UTGST is the same. There is no difference in the tax rates and the same benefits and rules are applied to UTGST.

The tax slabs for Union Territory Goods and Service Tax, UTGST are:

0%
5%
12%
18% and
28%

These tax rates are applied to goods and services the same way they are applied to goods and services in the state and central tax regime. Alongside, the tax exemption criteria are the same under UTGST.

Example of Union Territory Goods and Service Tax, UTGST

Mehta and Co. stationery shop have a business registered in the area of Daman, Gujarat. Since Daman is a union territory under Daman and Diu and does not have its own independent legislature, the business needs to register and file for taxes under Union Territory Goods and Service Tax, UTGST.

Suppose, Mehta and Co. supply goods to other clients in the state of Gujarat itself then the taxes that need to be paid come under IGST.
This is because Daman and Diu are considered a separate body from Gujarat so even though Daman is situated in Gujarat, it being a union territory the regulations are different and hence this transaction comes under Integrated Goods and Service Tax.

Now for instance, if Mehta and Co. supply goods or services to within Daman and Diu itself or to another union territory, then the transaction will be a little different. Suppose for instance the tax slab is 18% and the value of goods in the transaction is INR 2,00,000. Then instead of the amount going in IGST, the transaction is broken up as

CGST 9% = INR 18,000
UTGST 9% = INR 18,000

The respective amounts of the different governing bodies will then be sent to them, ensuring smooth sailing of the transactions. That is, INR 18,000 will be credited to the central government and the other half of INR 18,000 will be credited to the union territory government.

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