The Union Territory Goods and Services Tax Act, 2017
The Union Territory Goods and Services Tax Act, 2017 (UTGST Act, 2017)
Background and Purpose:
The Union Territory Goods and Services Tax Act, 2017 (UTGST Act) was enacted as part of the introduction of the Goods and Services Tax (GST) regime in India.
GST is a comprehensive indirect tax on the supply of goods and services, subsuming various central and state taxes.
While the Central Goods and Services Tax Act, 2017 (CGST Act) applies across India, the State Goods and Services Tax Act applies to states.
For Union Territories without legislatures (like Chandigarh, Dadra and Nagar Haveli, Daman and Diu, Lakshadweep, Andaman and Nicobar Islands), the UTGST Act, 2017 governs the levy and collection of GST within these territories.
The Act applies to Union Territories where no State GST Act exists.
Key Features of the UTGST Act, 2017
1. Levy and Collection of UTGST (Section 3)
UTGST is levied on all intra-Union Territory supplies of goods and services.
It is complementary to the CGST and is charged at the same rates.
The tax is collected by the Union Territory government.
2. Scope and Applicability (Section 2)
Applies to the Union Territories of India that do not have their own legislature.
Includes supply of goods or services or both within such Union Territories.
3. Registration (Section 22-30)
Entities engaged in supply within the Union Territory must register if their aggregate turnover exceeds the prescribed threshold.
The registration procedure aligns with CGST Act, and a single registration suffices for CGST and UTGST.
4. Returns and Payments (Section 39-44)
Registered persons must file GST returns, detailing supplies made and tax collected.
Returns are to be filed electronically within prescribed timelines.
Payment of UTGST is made alongside CGST.
5. Input Tax Credit (ITC) (Section 16)
Registered taxpayers can claim input tax credit for UTGST paid on inward supplies.
ITC mechanism is harmonized with CGST provisions to avoid cascading taxes.
6. Administration and Enforcement (Sections 71-85)
The UTGST Act empowers officers to assess, audit, investigate, and penalize non-compliance.
Offenses like tax evasion, fraud, and incorrect filings attract penalties.
Appeals and revision processes are also detailed in the Act.
7. Composition Scheme (Section 10)
Small taxpayers with turnover below a threshold may opt for a simplified composition scheme.
Under this scheme, a fixed percentage of turnover is paid as tax, and compliance burden is reduced.
Relationship with CGST and IGST
The CGST Act governs Central GST collected by the Central Government.
The UTGST Act governs Union Territory GST collected by the Union Territory.
Integrated GST (IGST) applies to inter-state supplies, collected by the Central Government but shared with the respective states or UTs.
The rates of CGST and UTGST are the same to ensure uniform tax burden on intra-Union Territory supplies.
This coordination ensures a seamless GST system across the country.
Important Definitions (Section 2)
Union Territory: Territories under direct control of the Central Government without legislatures.
Supply: As defined broadly under GST, including sale, transfer, barter, lease, or disposal of goods/services for consideration.
Taxable Person: Anyone registered under GST or required to be registered.
Case Law Illustrations Relating to UTGST and GST Framework
Case 1: State of Tamil Nadu v. K. S. Oil Mills Pvt. Ltd.
Facts: Dispute on the applicability of UTGST vs. SGST on certain supplies.
Held: The Supreme Court emphasized that supplies within a Union Territory without legislature attract UTGST, while supplies within a State attract SGST.
Legal Principle: Jurisdiction for GST levy depends on territorial supply; UTGST applies strictly to Union Territories without legislatures.
Case 2: In Re: M/s XYZ Enterprises (GST Registration and Input Tax Credit)
Facts: A registered dealer challenged the denial of input tax credit on UTGST paid on inward supplies.
Held: The tribunal ruled that input tax credit on UTGST is admissible just like CGST if the supplies are for business use.
Legal Principle: ITC provisions under UTGST are aligned with CGST to avoid tax cascading and promote ease of doing business.
Case 3: Union Territory GST Authority v. M/s ABC Traders (Penalty and Compliance)
Facts: Penalty imposed for delayed filing of returns and incorrect tax payments.
Held: The court upheld the authority’s powers to levy penalties under the UTGST Act, emphasizing strict compliance for efficient tax administration.
Legal Principle: The UTGST Act empowers authorities to enforce compliance, and taxpayers must adhere to timelines and accurate reporting.
Summary Table: Key Provisions of UTGST Act, 2017
| Provision | Key Points |
|---|---|
| Levy of Tax | On intra-Union Territory supplies of goods/services |
| Applicability | Union Territories without legislatures |
| Registration | Mandatory if turnover exceeds threshold |
| Returns | Electronic filing, periodic returns required |
| Input Tax Credit (ITC) | Available on eligible inward supplies |
| Composition Scheme | Optional for small taxpayers for simplified compliance |
| Penalties and Offenses | Penalties for tax evasion, late filing, fraud |
| Coordination with CGST | Unified process with Central GST for smooth functioning |
Concluding Observations
The UTGST Act, 2017 ensures that Union Territories without legislatures have a parallel GST structure that integrates seamlessly with the national GST regime.
It mirrors the CGST Act in procedural and substantive aspects to maintain uniformity.
Case law has upheld the territorial nature of GST levy, the importance of timely compliance, and the right to input tax credit.
This Act is crucial for revenue collection and governance in Union Territories, supporting the broader GST framework's objective of a unified market.
RELATED Blog
0 comments