Introduction
Whether you're a business operating in one of India's Union Territories or want to know more about GST taxation, you are probably aware of UTGST. And it is essential to understand what UTGST is, its complete form, and where it fits into the broader GST framework for compliance and other accounting purposes. This article will provide some information on Union Territory Goods and Services Tax (UTGST), how it relates to GST tax invoices, and how to understand its relevant components in a practical way that is easy to understand.
What Is UTGST?
UTGST (Union Territory Goods and Services Tax) is part of India's nationwide GST rollout governed by the Union Territory Goods and Services Tax Act, 2017. UTGST is the tax applied to the supply of goods and services transacted within Union Territories (UTs) that do not have a Legislative Assembly, such as Chandigarh, the Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and Diu, and Ladakh. In states where State GST (SGST) is paid, UTGST is in place so that the Union Territories have a similar taxation method for their intra-territory transactions.
Whenever you purchase or sell goods within these UTs, the tax you see on a GST invoice is usually UTGST and Central GST (CGST). Collectively, they work to replace previous taxes such as VAT (Value Added Tax) and service tax. They will improve the tax process by funnelling taxation into the respective governments (the central government and the UT administration).
Why is UTGST Needed?
You may wonder why UTGST is needed when SGST works for the states. The answer lies in the structure of India's government. Union Territories without legislatures are governed directly by the Central Government, so UTGST was introduced to tax intra-UT transactions just as SGST taxes intra-state transactions. For instance, Delhi and Puducherry (with their legislative assemblies) rely on SGST, while UTs without legislative assemblies rely on UTGST.
UTGST in GST Invoices
Every time you receive or issue a GST tax invoice, it needs to be in the GST invoice format approved by the GST Council. A 'proper invoice' (with GST number) will show several things, including the supplier's GSTIN, the invoice date, a list (itemised) of goods or services, and applicable taxes. As part of invoicing differences for Union Territories, if the supply is intra-Union Territory, the tax component of your transaction is divided into CGST or Central Goods and Services Tax and UTGST or Union Territory Goods and Services Tax. For example, if you purchased a laptop in Chandigarh for ₹50,000 and it has a GST rate of 18%, your GST tax invoice will show:
CGST: 9% (₹4,500)
UTGST: 9% (₹4,500)
Total Adjusted GST: ₹9,000
This breakdown of CGST, UTGST, and the total reflects how your taxes are divided between the Central Government of India and the Union Territory government's administration. If you are thinking, "What is a GST invoice?" It is a document with transaction details and taxes, so you can claim Input Tax Credit (ITC) if you are a registered business.
UTGST Rates and Applicability
Rates of UTGST are aligned with CGST and SGST rates, typically 0%, 5%, 12%, 18% or 28% depending on the goods or services in their supply. For activity, good or service example classification:
- Basic items like grains can be 0% or 5%.
- Consumer goods such as electronics are usually in the 18%.
- Miscellaneous goods or services, such as luxury items, can be as high as 28%.
GST tax invoices clarify these rates to minimise confusion. UTGST applies only to intra-UT supplies. Integrated GST (IGST) applies when you supply goods or services across states or UTs.
Conclusion
Knowing UTGST is fundamental to understanding GST taxation in India when the subject involves Union Territories. Knowing the inclusion of UTGST will help you be compliant and make sound financial decisions, whether related to a GST tax invoice or checking the invoice with the GST number. Accepting the GST invoice format when dealing with your business and knowing the tax rules will improve business efficiency and assist your Union Territory's economic development.
Visit the official GST portal, speak with your tax professional for details, and keep your business compliant.
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