22nd April 2017
Even ‘State’ as per clause 26B of the Indian Constitution, for the purposes of GST, includes a Union territory with Legislature but technically SGST cannot be levied in a Union Territory without legislature.To plug this loophole, GST Council has decided to have Union Territory GST Law (UTGST) – which would be at par with SGST. However, SGST can be applied in Union Territories which have their individual legislatures, and can be considered as “States” as per GST process.Post approval from the GST Council, the Central Government shall forward the UTGST Law in the Parliament. Once approved by the Parliament, there could be the following combination of taxes applicable for any transaction:
1. For Supply of goods and/or services within a state (Intra-State): CGST + SGST;
2. For Supply of goods and/or services within Union Territories (Intra-UT): CGST + UTGST;
3. For Supply of goods and/or services across States and/or Union Territories (Inter-State/ Inter-UT): IGST
Union Territory GST (UTGST)
We have already discussed about CGST, IGST and SGST. In India, duel GST is implemented. CGST and SGST against intra state supply (within the state) of goods and services and IGST for interstate supply.
A separate Act is being implemented for Union Territory states to impose and administer GST in India in the name of UTGST Act. Under UTGST Act, the details of GST rates payable against the movement of goods and services in Union territories are explained.
A union territory is directly under the governance of the Central Government. This differentiates them from the states, which have their own elected governments. Currently, there are 7 union territories in India:
3. Daman and Diu
4. Dadra and Nagar Haveli
5. Andaman and Nicobar Islands
Among these, Delhi and Puducherry have their own legislature, with elected members and a Chief Minister. Hence, they function as semi-states.
Under GST, the SGST Act applies to all the states in India. The SGST Act also applies to the union territories of Delhi and Puducherry. This means that on supplies within the union territories of Delhi and Puducherry, the taxes levied will be CGST +SGST, and on supplies from Delhi/Puducherry to another state/union territory, the tax levied will be IGST.
As the SGST Act cannot be applied on a union territory without its own legislature, the GST Council has introduced the UTGST Act, to levy a tax, called UTGST, in the union territories of Chandigarh, Lakshadweep, Daman and Diu, Dadra and Nagar Haveli and Andaman and Nicobar Islands. UTGST will be levied in place of SGST in these union territories.
Levy of Tax
Supply within the Union Territory
On supplies within a union territory, CGST + UTGST will be levied.
For example: Furniture Centre in Chandigarh supplies 50 sofa sets for Rs. 10,00,000 to VeenaFurnitures in Chandigarh.
This is a supply within the union territory of Chandigarh. Assuming a GST rate of 12% on sofa sets, the tax calculation in this case will be as follows:
Hence, the only difference here, is that on supplies within union territories, UTGST will be levied in place of SGST.
On supplies from a union territory to another state or union territory, IGST will be levied.
For example: Furniture Centre in Chandigarh supplies 50 sofa sets for Rs. 10,00,000 to Ramesh Furniture Town in Delhi.
This is a supply outside the union territory of Chandigarh. Assuming a GST rate of 12% on sofa sets, the tax calculation in this case will be as follows:
Hence, similar to the levy of tax on supplies outside a state, IGST will be applicable on supplies outside a union territory.
Order of utilization
UTGST credit can be utilised to set-off the tax payable in a manner similar to utilization of SGST credit, i.e.:
Also, UTGST credit cannot be utilized to set-off CGST liability.
Example: At the end of August ’17, Furniture Centre in Chandigarh has input tax credit and tax liability as shown below:
Here, Furniture Centre can utilise the UTGST credit of Rs. 1,00,000 as follows:
Furthermore, section 7 of UTGST Act 2017, explains more about levy and collection of GST.UTGST will be levied in place of SGST in union territories without their own legislatures. The UTGST bill, along with CGST and IGST bills, which will be administered by the Central Government, has been passed on 6th April, ’17.
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