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What is Union Territory GST (UTGST)

Demystifying the Union Territory GST (UTGST)

In the GST regime, how the taxes are levied is decided by transactions happening within or outside the state boundaries. As we have understood till now, if the transaction is happening within the state, the taxes levied are CGST (Central GST) + SGST (State GST) and if the transaction is happening across the state boundaries then only a single tax is applicable i.e. IGST (Integrated GST).

Ever wondered what will happen in the case of Union territories? Well, the answer to this is quite simple. In case of Union territories, a state’s SGST component is replaced by Union territory’s UTGST component, i.e.,

For all Intra-Union territory transactions- CGST + UTGST will be levied

For all Inter-Union territory or Union territory to other state IGST will be levied

Application of UTGST

But will this hold true for all Union Territories? Well, the answer to this is ‘No’. We have 7 Union Territories in India which are:

  • Andaman & Nicobar Islands
  • Chandigarh
  • Dadra and Nagar Haveli
  • Daman and Diu
  • Delhi (National Capital Territory of Delhi)
  • Lakshadweep
  • Puducherry

Out of these 7 Union territories, 2 enjoy a special status of being a semi-state. These 2 outliers are Delhi and Puducherry. Both Delhi and Puducherry have their own elected legislative assemblies and the executive councils of ministers with partially state-like function. Hence, in the GST regime, these 2 semi-states will have component of SGST in place of UTGST.

Tax Levy

 To understand the tax levying better let us refer to the table below:

1.    Same Union Territory transaction

Moglix  is a company registered in Chandigarh and supplying Hand tools like Pliers and Files worth ₹ 1,00,000 to Technofab Pvt Ltd in Chandigarh only. In this case transaction is happening within the same Union Territory and applicable GST on hand tools is 18%.  Therefore, tax calculation in this case will be as follows:

As we can see in the example above, since place of supply and place of receipt is both inside the Union territory Chandigarh, CGST and UTGST have been applied separately. Had this transaction happened Intra-state or Intra-semistate, SGST would have been applicable instead of UTGST.

2.    Different State/Semi-State/ Union territory transaction

Moglix has acquired a new customer Garuda steel in Mumbai and needs to supply the same Hand tools worth ₹ 1,00,000 to Garuda Steel. The tax calculation will be as follows:

In the above example, transaction has happened from a Union territory to a different state. Hence, only IGST is applicable.

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