Union Territory Goods & Services Tax (UTGST)


Want to start a business in any of the Union Territories in India? Don’t forget to get the UTGST registration done! Complete it with a few simple steps & enjoy all the benefits provided by this uniform tax structure.

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How does GST registration work for you?

Any business offering sale of goods with annual turn over of 40 lacs or service with annual
turn over of 20 lacs would require the registration for GST and have a valid GST Number.

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We help you get a Secure GSTIdentification Number.

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We make it easy for you to get your GSTfrom the comfort of your own home.

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We will file your returns and complete all othercompliances as and when required.

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Union Territory Goods & Services Tax (UTGST)

In the earlier days, Union Territories had the right to charge sales tax / VAT on products, while in the case of goods and services the central administration had the right to charge the excise duty/service tax. This resulted in various authorities levying a multitude of indirect taxes. Union territories had to face several difficulties because of this, which eventually led to the introduction of UTGST.

Benefits of Implementing UTGST

The full form of UTGST is Union Territory Goods and Services Tax. The UTGST is levied on the Union Territories within the nation, as its name suggests. There are seven union territories namely

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

The GST council for which the UTGST has been adopted by the apex body will continue the profit of SGST is the principal agenda. Besides this, the SGST provisions will still apply in New Delhi and Puducherry, since both Union Territories have their distinct parliamentary bodies and can freely continue to function on SGST terms. They have also been regarded as states by the GST board.

The legislation and the regulation in the constitution are found on the topic of Union Territory GST. It states that under Article 246(4) of the constitution, the parliament is permitted to create laws on any subject for any section of India not included in the state, including the subject matter specified in the state list.

Two UTGST combinations:

So with UTGST, in GST as below, there will be two tax combinations:

Intra-state (including Union Territory) provision of goods and/or services: CGST + SGST OR CGST + UTGST;

In the case of inter-state supply of goods and/or services: IGST;

Since UTGST will be at the same level as SGST, the order for use of the UTGST input tax credit (ITC) would be the same as SGST. In other words, the SGST / UTGST ITC would initially be set off against SGST or UTGST output tax liabilities, if there is any balance, then it could be set off against IGST output tax liabilities.

GST legislation for union territories

In the context of the GST system, union territory tax and related GST laws replaced previous taxes. It allows the central government to levy Union territory tax on the production of goods or services, and also within a Union Territory that does not have a legislature.

The laws of GST:

  • Provide for a tax levy on all intra-state supplies of goods or services or both at the rates recommended by the GST council. The only exception is alcoholic liquor for human consumption.
  • Authorize the central government to grant exemptions on the recommendation of the GST Council.
  • Enable the distribution of taxes and the settlement of funds on account of the transfer of input tax credits between the central, state government, and the union territories.
  • Enable the recovery of tax, interest or penalty payable by a person and remaining unpaid.
  • Allow the setting up of an Advance Ruling Authority to make it possible for taxpayers to gain binding clarification on tax issues.

Benefits of GST for businesses

There are several benefits for businesses through GST.

  • GST eliminates the impact of tax cascading
  • The amount of regulatory compliance is reduced
  • Defined e-commerce operator care
  • Greater registration threshold
  • Small enterprise composition scheme
  • Enhanced logistics efficiency
  • Quick and efficient online process
  • The unorganized sector is regulated according to GST

Earlier difficulties faced by the Union Territories before implementing UTGST

  • Higher trade and manufacturing expenses covered by numerous taxes on central and union territories.
  • Tax cascade.
  • Lack of tax rate and fiscal structure uniformity, enforcement procedures in the union territory.
  • The payment of taxes levied by one union territory or state cannot be offset against taxes levied by other union territories or states.
  • The non-usability of cross-use of credits, i.e. the use of excise duty and service tax credits against taxes levied by the union territories, and vice versa.

Checklist features of UTGST Act

  • The Union Territory Goods & Services Tax Bill, 2017, was introduced in Lok Sabha on 27 March 2017. The bill stipulated that the Union Goods and Services Tax should be applied for.
  • UTGST charge: The Union Territory GST tax will be imposed on the provision of goods and services on the territories of the Union.
  • Tax rates: The Union Territory GST rates are 0%, 5%, 12%, 18%, and 28% and are the same as that of the state GST rates. The tax exemption criteria for goods and services is the same for both SGST and UTGST.
  • Under UTGST applicability exemptions: the centre may, by notification of recommendations from the GST Council, exempt certain goods and services from UGST jurisdictions.
  • Search assistance, seizure, and arrest assistance: the tax administrative agents will be assisted by all police, rail, customs, and land-related officers, including village and central tax officers, in the implementation of this Act.
  • The Central Goods and Services Tax Act 2017 provisions applicability - This act applies to several provisions of the Central Tax Act of 2017 on Goods and Services. Those provisions include:
    • A. The distribution time and importance
    • B. levy for composition
    • C. Registration.
    • D. Returns
    • E. Taxation payment
    • F. Demands and recovery
    • G. Evaluation
    • H. Refunds
    • I. Compliance
    • J. Search and confiscation
    • K. Advancing ruling ( the decision to move forward )
    • L. Appeals or complaints
    • M. Offences or infringements
    • N. Funds settlements
    • O. Penalties etc

How is the UTGST levied and collected?

  • The Union Territory Goods and Services Tax shall be levied upon at no more than the suggested percentage of all intra-state supplies of or both goods or services, other than supplies of alcoholic liquors for human consumption. The tax value is determined according to Article 15 of the Central Goods and Services Tax Act. It shall be notified by the central government on the recommendation of the council, and collected in such manner as prescribed and shall be paid by the taxable person.
  • The UTGST shall be levied in the UTGST states with effect from the date notified by the central government on the recommendations of the council for the supply of petroleum crude diesel fuel, high-speed diesel fuel, motor spirit (usually petrol), gas gas, and aviation turbine fuel.
  • The Central Government may, on the advice of the council, specify, by notification,
    • a. The categories of supply of both goods or services.
    • b. The tax on which the recipient of such goods or services is liable on a reverse charge basis, or both.
    • c. And the recipient shall be treated as if he/she were the person responsible for paying the tax-related supplies of such goods or services, or both, by all provisions of this Act.
  • The UTGST shall, in respect of the supply to the registered person (recipient) of both taxable goods and services by a supplier who is not registered, be paid by that person on a reverse charge basis. It is made possible as all the provisions of this Act shall apply to such recipients of the UTGST states as if he/she is the person liable for the payment of the tax concerning the supply of goods and services.
  • On the recommendation of the council, the central government may, by notification, specify the categories of services for which intra-state supplies are paid by the operator of electronic commerce. Where such services are provided through it, and all provisions of this Act shall apply to such an operator of electronic commerce as if he/she were the supplier liable for payment of the tax in respect of the supply of such services. Where an e-commerce operator has no physical presence in the taxable territory, any person who represents him or her shall be responsible for the payment of a tax for any intent in the taxable territory.

Power to grant exemption from tax

  • Where the central government is satisfied that this is necessary for the public interest, it may, on the advice of the council, exempt certain goods, and services from the imposition of GST by notification. It generally exempts the goods or services from any specific description of the whole or any part of the tax levied.
  • Where the central government is satisfied that it is necessary to do so in the public interest, it may in each case, on the recommendation of the council, be exempted from payment of taxes on goods or services or both, for which tax is levied under circumstances of an exceptional nature to be stated in that order.
  • In the case it considers it essential or appropriate to do so, the central government may attach an explanation into notice or order to clarify the exhibition's scope or relevance. Any such explanation influences as if it's always been included in the first notice or order.
  • Any notification issued following the CGST Act by the central government shall be considered as a notice or order issued by this Act. For this section, the tax exemption has been granted in whole or in part for any goods or services thereon. In this context, the registered person providing such goods or services shall not collect the tax above the effective rate.

The income tax credit or the credit of the tax payable on the inward supply of both goods or services that is to be used or expected in the course of business may be given to a registered individual. The conditions for the use of credit by a registered person are as follows:

  • Tax invoice possession or any other tax-paying document specified herein.
  • Products or services must be provided. Also included are 'Bill to ship' scenarios.
  • The tax was paid/deposited by the supplier.
  • The return was provided by the supplier.
  • If inputs are received in batches, the eligibility to use the credit will only arise after the last batch of inputs have been received.

What are the steps involved in GST registration through Vakilsearch?

  • Step 1: We help you get a Secure GST Identification Number.
  • Step 2: We make it easy for you to get your GST from the comfort of your own home.
  • Step 3: We will file your returns and complete all other compliances as and when required.

Documents based on which the tax credit is availed

The Input Service Distributor (ISD) may distribute the credit available for distribution in the same month in which it is available. The ISD is available for distribution. According to Rule 4(1)(d) of the ITC Rules, the CGST, SGST, UTGST, and IGST credit shall be divided. ISD will be required to make an invoice following the provisions set out in rule 9(1) of the invoice rules.

  • The invoice issued by a goods or services provider or supplier.
  • The recipient's invoice is issued with evidence that the tax is paid.
  • A supplier's debit note.
  • Bill of entry or similar document prescribed by the Customs Act.
  • Revised or updated invoice.
  • Input service distributor document.

Some of the supplies which do not require ITC are as follows:

  • Motor vehicles and other means of transport except in specified circumstances.
  • Goods and/or services made available in respect of
    • a. Food and drinks, outdoor catering, beauty care, hygiene, cosmetic and plastic surgery, except in certain circumstances.
    • b. Sports or club membership, fitness, and leisure centre.
    • c. Rent-a-cab, life insurance, health insurance, except where it is compulsory under certain law for an employer.
    • d. Travel benefits extended to staff vacations such as holiday leave or home travel concessions.
  • Work contract services when supplied to build real estate, except where it is an input service for an additional supply of contract works.
  • Goods or services received by a taxable person on their account for the construction of an immovable property, other than plant & machinery, even when used in the course of business or the continuation of the business.
  • Goods and/or services tax charged in compliance with the composition scheme.
  • Goods and/or services used for personal or private use.
  • Goods lost, stolen, destroyed, written off, sampled as gifted or free.
  • Any tax paid on account of fraud, suppression, misrepresentation, seizure, detention due to short payment.

Exporting services:

Services are considered to be exported when:

  • The supplier is in India
  • The recipient is living outside the country
  • The place of service delivery or supply is outside India. By default, the place of supply is the recipient’s location
  • If the payment is made for the exported service is through foreign exchange
  • The suppliers and the recipients are not actual establishments of a distinct person
  • When exporting with no IGST, then it is important to furnish a LUT or a bond.
  • Submit relevant purchase orders along with the documents.
  • Submit tax invoices with details such as
    • i. Endorsement reporting whether the supply for export is made with or without paying the integrated tax
    • ii. Supplier’s name, address and GSTIN details
    • iii. Recipient’s name and address including the delivery address and the country of destination
    • iv. Invoice number and date
    • v. HSN code for goods furnished with other relevant descriptions
    • vi. The number of units being transferred
    • vii. The overall quantity of goods
    • viii. The total value of goods along with per unit price
    • ix. The signature of the supplier’s authorised representative
  • When required to avoid incurring GST, a bank realisation certificate is submitted. It is submitted as proof of receipt of convertible foreign exchange within the prescribed period. GST is incurred on those transactions when exporters don’t submit the document.

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