UTGST Explained: Meaning, Rate, Benefits and Applicability

UTGST means the Union Territory Goods and Services Tax in India.  If you have a business, you know about GST.  But GST has many types. Specifically, it has four types. UTGST, IGST, CGST and SGST.  Many people have knowledge about CGST, IGST and SGST.

However, they feel confused when it comes to Union Territory GST. Do you know that some places in India are called Union Territories? It applies to the intra-state transactions with Union Territories.  Sounds interesting, right? Let’s read more about this together.

What does UTGST refer to?

First, let us break down the term.

U means Union, and T is for Territory

G defines Goods. S is for Services

T is for Tax

So, UTGST= Union Territory Goods and Services Tax. 

It is similar to the way State GST is levied by the state governments.

To put it in a more precise way:

• Union Territory GST applies to the Union Territory governments
• It is applicable for those who don’t have their own legislature
• You need to pay this on the supply of goods and services inside the Union Territory
• UTGST Act 2017 governs this
• It is amended from time to time
• Union Territory GST is charged together with CGST
• The manner of ITC utilization in UTGST has a similarity to SGST
• If any balance remains here, it is used to set off IGST liabilities

Moreover,

• UTGST applies to supplies in the Union Territories
• This includes the Andaman Nicobar Islands, Dadra and Nagar Haveli, and Ladakh
• Daman and Diu and Lakshadweep also come under UTGST.

Here, we need to remember this:

• There are some exceptions
• Union Territories of Delhi, Puducherry, come under the SGST law
• Jammu and Kashmir it follows SGST due to its legislature
• UGST does not apply to these states
• As they have their own legislature

What is an example of UTGST?

To make you understand UTGST more simply, here is an example:

As we know, the total GST rate is 18%.

It is equally divided into CGST and UTGST.

In the 18% rate, 9% is for Central GST, and 9% is for Union Territory GST

Now, if you are supplying goods worth rupees 60000/- INR,

So, the calculation is Union Territory GST= UTGST = 60000 × 9 / 100 = 5400 INR

What is the applicability of UTGST?

UTGST is applicable when you are supplying goods and services within a Union Territory.

It applies to:

• Supplies, including all the business and individuals
• In India, there are 8 Union Territories
• But UTGST is applicable only in UTs without a legislature (currently 5 UTs).

What are the benefits of UTGST?

The benefits of this:

1. GST simplifies the tax process for you
2. It helps you to avoid juggling between multiple taxes
3. This helps you to expand across the nation and to other Union Territories
4. This is a combined tax system
5. You are saved from tax fraud
6. It makes the system more responsible and transparent
7. This generates revenue for both the Central and Union Territory governments
8. It benefits from paying for projects and social aid programs

What are the states where one has to pay UTGST?

The table below mentions it precisely:

What is the rate structure of UTGST?

Before telling you the rate structure of this, here are some more important factors:

1. The GST rates of state and Union Territories are similar
2. However, the government treats UTs and states differently
3. The CGST rates are equal to the UTGST rates.

Let’s understand:

• If you are paying 5% GST.  Under this, it is divided into 2.5% (for CGST) and 2.5% (for UTGST)
• In terms of paying 18% GST, the formula is the same.
• You need to divide it into two parts. It is 9% and 9% between Central GST and Union Territory GST.

Here is how it is calculated:

How can I calculate UTGST?

To calculate it, we need to understand this formula:

(i) You need to look for a taxable value

(ii) After this, the Union Territory goods and services tax rate needs to be checked

(iii) You need to use this formula to calculate the amount:

Can I claim ITC on UGST?

Yes, you can claim the Input Tax credit on Union Territory GST. For this, you must be:

1. Make sure to register your business under GST
2. Remember to keep a proper invoice or debit note from your supplier
3. Your supplier needs to pay GST as per the regulations
4. You must receive the services or products listed in the invoice
5. File your GST Returns on time

If you follow this properly, you can claim ITC.

After this:

• You need to apply to pay the Union Territory GST liability
• If you have credits left, you can use them to pay the Integrated GST

You need to keep this in mind:

• You are not allowed to use the Union Territory GST credit to pay State GST
• This distinction ensures that State taxes and UT taxes are different

Is there any exemption from UGST?

There are some exemptions from Union territory GST. These are listed below:

If you are:

1. Exporting goods and services outside India
2. Providing goods and services to the central government
3. It includes the state and local authorities also
4. The basic necessities
5. Healthcare
6. Education
7. Products like renewable energy equipment
8. Public welfare services

These are the categories in which Union Territory GST does not apply.

Furthermore:

• Section 8 of the UTGST Act exempts some goods and services from taxes
• It benefits the public interest
• It is applicable entirely or, in some cases, with conditions
• This helps in reducing the tax burden
• It also advocates for easy accessibility

Final Opinion

So, to complete our discussion, I will say a few things. UTGST is an essential part of India’s GST system.

It ensures that UTs without a legislature are seamlessly integrated within the system.

If you are doing business in UTs like Ladakh or Dadra and Nagar Haveli, understanding UTGST is vital for you.

Union Territory GST is just like Central GST or State GST. It is easy, simple, and compliant.

Do you still have queries? Contact Online Legal India for more information.

FAQs

1. Is UTGST similar to SGST?

Yes, Union Territory GST is kind of similar to State GST.  However, instead of states, it applies to Union Territories.

2. Is UTGST applicable to Delhi? Is it a Union Territory?

Delhi follows SGST due to its legislature.

3. Is UTGST charged with CGST?

Yes, Union Territory GST is charged with Central GST

Disclaimer

This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.