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Union Territory Goods and Services Tax Act, 2017 | Chapter III

Section 7 of the UTGST Act, 2017: Levy and Collection of Tax

Section 7 sets out when Union Territory Goods and Services Tax (UTGST) is levied, who must pay it, which supplies are excluded or deferred, and the rules for reverse charge and specified services supplied through electronic commerce operators.

Meaning and scope of Section 7

UTGST applies to taxable intra-State supplies within Union territories governed by the UTGST Act. In general, UTGST is charged alongside Central Goods and Services Tax (CGST), while the Integrated Goods and Services Tax (IGST) Act governs inter-State supplies. Whether a supply is intra-State is determined under section 8 of the IGST Act, 2017, subject to its exclusions and special rules.

Section 7: statutory provisions and explanation

Section 7(1) - Levy on intra-State supplies

Subject to sub-section (2), Union territory tax is levied on all intra-State supplies of goods or services or both, except alcoholic liquor for human consumption and un-denatured extra neutral alcohol or rectified spirit which is used for manufacture of alcoholic liquor, for human consumption. Tax is charged on the value determined under section 15 of the CGST Act, at notified rates not exceeding 20 per cent, collected in the prescribed manner and paid by the taxable person.

The extra neutral alcohol and rectified spirit exclusion was inserted by section 155 of the Finance (No. 2) Act, 2024, effective 1 November 2024. The statutory 20 per cent ceiling is not a universal applicable rate: the rate for a particular supply depends on the relevant notifications, classification and any exemptions. For valuation, see the CGST Act and its section 15.

Section 7(2) - Petroleum products

UTGST on petroleum crude, high speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel becomes leviable only from a date notified by the Central Government on the recommendations of the GST Council.

This is a deferred levy, not a general exemption notification. Check the operative commencement notifications before treating any of these products as subject to UTGST.

Section 7(3) - Reverse charge on notified supplies

The Central Government may, on GST Council recommendations, notify categories of goods or services or both for which the recipient, rather than the supplier, pays UTGST under the reverse charge mechanism. The Act then applies to that recipient as the person liable for the tax.

Reverse charge applies only where the notified supply and relevant supplier/recipient conditions are met. The notification framework includes Notification No. 13/2017-Union Territory Tax (Rate), as subsequently amended.

Section 7(4) - Specified purchases from unregistered suppliers

The Government may, on the GST Council's recommendations, notify a class of registered persons who must pay UTGST on reverse charge for specified categories of goods or services or both received from an unregistered supplier. Such recipients are treated as the persons liable to pay the tax.

This wording replaced the original broad reverse-charge rule with effect from 1 February 2019 under the UTGST (Amendment) Act, 2018. Therefore, purchases from every unregistered supplier do not automatically attract reverse charge. For an example of notified classes and supplies, see Notification No. 07/2019-Union Territory Tax (Rate), as amended.

Section 7(5) - Electronic commerce operators

For notified categories of services supplied through an electronic commerce operator, that operator is liable to pay UTGST on the intra-State supply as though it were the supplier. If the operator has no physical presence in the taxable territory, its representative there is liable. If neither the operator nor a representative has such a presence, the operator must appoint a person in the taxable territory to pay the tax.

This is a special liability rule for notified services; it does not automatically apply to all goods and services sold through online platforms. The relevant notification and subsequent amendments determine the categories covered.

Practical application

  • Normal charge: A registered taxable supplier ordinarily accounts for UTGST on taxable intra-State supplies at the applicable notified rate.
  • Reverse charge: The recipient accounts for UTGST only when a supply falls under the conditions of section 7(3) or 7(4) and the relevant notification.
  • E-commerce: The operator pays UTGST for specifically notified services covered by section 7(5).
  • Rate and value: Apply the effective classification, rate and exemption notifications and the CGST valuation provisions, rather than assuming the statutory ceiling is the actual rate.
Important: Section 7 must be read together with the exemption provisions in section 8, the applicable notifications and section 21, which applies relevant CGST Act provisions to UTGST.

Official legislation and notifications

The following historical rate lists and guides are retained for reference. Older rate lists may have been superseded; use current notifications for compliance.