BAJAJ BROKING
June 02, 2025
6 mins read
Union territories in India have always been a special part of the country. So, the taxes here are also unique. As you may know, in 2017, the multiple taxes in India were replaced with a new tax, the Goods and Services Tax (GST). Under GST, there are several other components that you must understand, especially as a business. For union territories, the GST charged is termed the UTGST. It stands for Union Territory Goods and Services Tax.
India has 8 union territories, and in each of these, UTGST is applicable to the supply of goods and services. In this guide, we aim to cover all the aspects of UTGST that a business must be aware of. Continue reading to understand ‘what is UTGST’ and how it is benefiting businesses!
Note: Delhi and Puducherry do not follow UTGST. In these UTs, state GSTs are followed.
The Union Territory Goods and Services Tax (UTGST) is imposed on the intra-state supply of services and goods within Union Territories (UTs) lacking a legislature like Chandigarh, Lakshadweep, Andaman & Nicobar Islands, etc. It is charged in addition to the Central GST (CGST). Both UTGST and CGST are charged on the same transaction but with a rate split between the two.
The tax rate of UTGST is the same as that of State GST (SGST). Therefore, if a commodity falls in the 5% GST slab, then 2.5% is charged as UTGST and 2.5% as CGST. Likewise, if the GST rate is 18%, it is divided into 9% UTGST and 9% CGST.
Let's try to grasp this with an example from real life:
Assume that a mobile phone is bought in Chandigarh (a Union Territory) for ₹20,000. Mobile phones are in the 18% GST slab. Here, the tax will be:
UTGST: 9% of ₹20,000 = ₹1,800
CGST: 9% of ₹20,000 = ₹1,800
Total GST paid = ₹3,600.
Therefore, the final cost of the mobile phone is ₹23,600.
This framework guarantees that income is divided equally between the Union Territory and the Centre. It also streamlines compliance for companies doing business in UTs.
Following is a table showing various GST slabs and the corresponding UTGST and CGST rates:
GST Slab Rate | UTGST Rate | CGST Rate | Particulars |
0% | 0% | 0% | Essential goods like fresh fruits, vegetables |
5% | 2.5% | 2.5% | Tea, coffee, sugar |
12% | 6% | 6% | Packaged food, basic electronics |
18% | 9% | 9% | Soaps, mobile phones |
28% | 14% | 14% | Cars, tobacco, chocolates |
The Goods and Services Tax (GST) Union Territory is part of the Goods and Services Tax system of India, meant specifically for Union Territories (UTs) that do not have their own legislative body, like Lakshadweep, Andaman and Nicobar Islands, Dadra and Nagar Haveli and Daman and Diu, Chandigarh, and Ladakh. UTGST is charged along with the Central Goods and Services Tax (CGST) on intra-UT supplies of goods and services to promote a uniform tax regime in these areas.
This double taxation facilitates a straightforward tax process, superseding numerous indirect taxes earlier charged by the central government, and brings down the tax regime in UTs to the level of the states. In reality, when a transaction is made within a Union Territory, both CGST and UTGST are charged.
For example, if a company sells products within Chandigarh, it charges CGST and UTGST on the bill. The central government receives the revenue generated from CGST, whereas the UTGST amount is received by the administration of the concerned Union Territory. This mechanism guarantees that UTs get a reasonable share of tax revenue, which can be used for public services and local development. The UTGST Act also adopts provisions of the CGST Act, such as those pertaining to supply scope, time and value of supply, input tax credit, and registration process.
This incorporation promotes consistency in compliance and administration of tax across jurisdictions. Companies operating in UTs adopt similar processes for registration, filing of returns, and payment of tax as states, promoting ease of business and minimizing compliance costs. In addition, the UTGST system facilitates the use of the Input Tax Credit (ITC), which enables businesses to use their tax liability as a set-off against the tax paid on inputs. It prevents the cascading effect of taxes and encourages cost-effectiveness.
IGST credit takes priority of ITC utilization, with CGST and then UTGST, making optimal use of available credits. Through simplification of tax procedures and clarity in tax burdens, UTGST contributes significantly to promoting economic growth and transparency in Union Territories
Some of the highlighting benefits of implementing UTGST are as follows:
Simplified Tax Structure
UTGST, being a part of the GST regime, replaces several indirect taxes such as VAT, service tax, and excise duty. This single structure simplifies the tax compliance burden for businesses.
Ease of Doing Business
Businesses in union territories enjoy a single tax regime. This uniformity across the regions facilitates easier interstate and intra-UT trade and expansion.
Encourages Business Expansion
By eliminating the necessity of dealing with varied tax regimes in every union territory, UTGST stimulates entrepreneurs and businesses to establish and expand their activities across UTs.
Less Tax Fraud
The combined framework under GST, such as UTGST, reduces tax fraud and evasion by enhancing monitoring and transparency using digital records and periodical audits.
More Transparency and Accountability
UTGST, in combination with CGST, facilitates the collection and recording of taxes digitally. This increases accountability and shrinks the scope for errors and corruption.
Revenue Generation for Development
UTGST adds to the revenue streams of the Central and Union Territory governments. The revenue collected goes towards the construction of infrastructure, social welfare schemes, and public services.
Increased Compliance through Technology
The GST network offers a central online platform to file returns and pay taxes, facilitating ease for union territory businesses to remain compliant.
Facilitates Formalization of the Economy
By increasing businesses under the tax net, UTGST facilitates the formalization of the economy, allowing for a better-organized and documented business environment.
Overall, UTGST has facilitated taxation in union territories as more business-friendly, transparent, and efficient, resulting in long-term economic benefits.
The table below is the list of Union territories where UTGST is applicable:
Union Territories | UT Abbreviation | UT Code |
Andaman and Nicobar Islands | AN | 35 |
Lakshadweep | LD | 31 |
Dadra and Nagar Haveli | DN | 26 |
Daman and Diu | DD | 25 |
Chandigarh | CH | 04 |
Puducherry | PY | 34 |
Jammu and Kashmir | JK | 01 |
Ladakh | LA | 38 |
Now that you know ‘what is UTGST’, let's compare it with SGST (State Goods and Services Tax) and understand the differences between the two. The table below shows a detailed comparison:
Aspect | SGST (State Goods and Services Tax) | UTGST (Union Territory Goods and Services Tax) |
Applicability | Levied on intra-state transactions of goods and services within a state. | Levied on intra-union territory transactions of goods and services within a union territory. |
Jurisdiction | Applies to all Indian states with their own legislative assemblies. | This applies to union territories without their own legislative assemblies, such as Chandigarh, Lakshadweep, etc. |
Administered by | Respective State Governments. | Union Territory Administrations. |
Revenue Collection | Collected by the respective State Government and contributes to the state's revenue. | Collected by the Union Territory Administration and contributes to the Union Territory's revenue. |
Legislative Authority | Governed by the State Goods and Services Tax Act, enacted by the state legislature. | Governed by the Union Territory Goods and Services Tax Act, enacted by the Parliament of India. |
Tax Rate Structure | Rates vary between 0% to 28%, determined by the GST Council and respective state governments. | Rates also vary between 0% to 28%, determined by the GST Council and administered by the central government. |
Input Tax Credit (ITC) | ITC of SGST can be utilized against SGST and IGST liabilities but not CGST. | ITC of UTGST can be utilized against UTGST and IGST liabilities but not CGST. |
Combined Levy | In intra-state transactions, SGST is levied alongside CGST. | In intra-union territory transactions, UTGST is levied alongside CGST. |
Purpose | Ensures state governments receive tax revenue from intra-state transactions, replacing various state-level indirect taxes. | Ensures UT administrations receive tax revenue from intra-UT transactions, replacing previous indirect taxes. |
In short, although both SGST and UTGST have the function of raising tax revenue on intra-jurisdictional transactions, SGST is levied within states and is managed by state governments, while UTGST is levied within union territories and is managed by union territory administrations. Both taxes form part of the dual GST framework in India, complementing CGST to provide a uniform system of taxation in the nation.
Calculating union territory goods and Services Tax is not a tough task. In the following ways, you can easily calculate UTGST:
UTGST, or Union Territory Goods and Services Tax, is a type of GST applicable when a supply of goods or services is made within any Union Territory in India without a legislature (like Lakshadweep, Chandigarh, etc.). Calculating UTGST is simple if you follow a few easy steps.
Step 1: Determine the Taxable Value
Start by finding the taxable value of the goods or services. This is the price on which tax will be calculated. It usually includes the selling price along with any additional charges like packing, commission, and freight, if they are part of the sale.
Step 2: Identify the UTGST Rate
The UTGST rate is decided by the government and varies depending on the type of goods or services. Generally, UTGST is charged at rates like 0%, 5%, 12%, 18%, or 28%. For instance, basic household goods might attract 5%, while luxury items may attract 28%.
Step 3: Apply the UTGST Formula
Once you have both the taxable value and the applicable tax rate, use the following formula:
UTGST = (Taxable Value of Goods or Services) × (UTGST Rate ÷ 100)
For example, if you sell goods worth ₹10,000 and the UTGST rate is 12%, the calculation will be:
UTGST = ₹10,000 × (12 ÷ 100) = ₹1,200
So, ₹1,200 is the UTGST amount that must be paid.
This amount is then submitted to the government, and an equal amount of CGST (Central GST) is also charged on the same transaction, making the total GST 24% in this case.
By following these steps, businesses can ensure accurate UTGST calculation and compliance with tax laws.
UTGST is a critical part of the GST regime, levied on intra-state supplies in Union Territories without legislatures. It complements CGST to provide equitable distribution of taxes. Knowing how it is calculated keeps businesses compliant and penalty-free. With easy steps, businesses can calculate UTGST accurately and meet their tax liabilities effectively under the GST regime.
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UTGST means Union Territory Goods and Services Tax. It is charged on the intra-state supply of goods and services in Union Territories that do not have a legislature.
UTGST is used in Union Territories such as Chandigarh, Lakshadweep, Andaman and Nicobar Islands, Dadra and Nagar Haveli, Daman and Diu, and Ladakh, where there is no state legislature.
UTGST is levied in Union Territories, whereas SGST is levied in the states. Both are collected in addition to CGST but vary based on the geographical position of the transaction.
UTGST provides equal taxation in Union Territories, prevents double taxation, makes compliance with tax easier for businesses, and helps in easier implementation of the Goods and Services Tax regime.
The central government administers and collects UTGST on behalf of Union Territories, allowing centralized administration and uniform application across all Union Territories under GST.
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