DS Mahajani 


As we know Goods & Service Tax (GST) Council at its meeting to be held on 16th March 2017 shall approve State GST law (SGST) and Union Territory GST Law (UTGST).

Here there is a question amongst the stakeholders – why the new born baby, UTGST has arrived in GST scenario now, when GST is just round the corner for its implementation.

I have tried my best to answer the question as under-

The Constitution (101st Amendment) Act, 2016, (through which GST Law is to be introduced in India), has inserted a new Clause – Clause 26B on “State” in Article 366, which reads as under:

“State” with reference to articles 246A, 268, 269, 269A and article 279A includes a Union territory with Legislature.

As per General Clauses Act, 1897, ‘State’ shall mean a State specified in the First Schedule to the Constitution and shall include a Union Territory.

However, ‘State’ for the purposes of GST includes a Union territory with Legislature (like Delhi and Puducherry).

As we know India has adopted dual GST Model, wherein for each transaction there will be two types of taxes i.e. Central-GST (CGST) and State-GST (SGST). Hence, technically speaking SGST kind of a tax cannot be levied in a Union territory without Legislature. To put it simple, Union Territories of Andaman and Nicobar Islands, Silvassa, Dadra and Nagar Haveli, Daman and Diu and Lakshadweep would not have a SGST kind of tax at all.

To plug this technical loophole, GST Council has decided to have Union Territory GST Law (UTGST) – which would be at par with SGST.

Now, who will pass UTGST?

As per Article 246(4) of Constitution, Parliament has powers to make laws with respect to any matter for any part of the territory of India, which is not included in the State, including the matters enumerated in State List.

Accordingly after approval of GST Council, the Central Government shall pass the UTGST Law in the Parliament.

Hence with UTGST, there are going to be two combinations of taxes in GST as under:-

  • For Intra-State (including Union Territory) Supply of goods and/or services: CGST + SGST OR CGST + UTGST;
  • For Inter-State Supply of goods and/or services: IGST;

As UTGST will be at par with SGST, order of utilization of Input Tax Credit of UTGST would be the same like SGST.

That is – Input Tax Credit of SGST or UTGST would first set-off against SGST or UTGST Output Tax Liabilities and balance, if any, can be set-off against IGST Output Tax Liabilities.

I hope this clarify the position of UTGST Law in GST scenario.

(Author: DS Mahajani, M.Com, A.C.S, A.C.M.A. can be reached at DSMAHAJANI@YAHOO.COM )

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2 responses to “Why Union Territory GST law (UTGST) is important under GST”

  1. CMA ANIL SHARMA says:

    Good piece of information Sir.

  2. Saurabh Chokhda says:

    Dear Sir, as per my understanding Article no 240 is relevant here.

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