In exercise of the powers conferred by subsections 1 3 and 4 of section 7, sub section

## Report on Union Territory Goods and Services Tax Act Amendment - Notification No. 02/2021 **1. Executive Summary:** This report analyzes Notification No. 02/2021, an amendment to the Government of India's No. 11/2017 Union Territory Tax Rate notification. The amendment, effective June 2nd, 2021, primarily addresses input tax credit eligibility for landowner-promoters in real estate projects and introduces specific tax rates for maintenance, repair, and overhaul services related to ships and other vessels. The key finding is the clarification of tax credit utilization for landowner-promoters and the explicit inclusion of specific services in the tax framework. **2. Introduction:** This report aims to provide a comprehensive overview of Notification No. 02/2021, issued by the Ministry of Finance, Department of Revenue, which amends the existing Union Territory Tax Rate notification (No. 11/2017). The analysis is based solely on the provided text of the notification. **3. Policy Overview:** This notification is an **amendment** to the Government of India, Ministry of Finance, Department of Revenue Notification No. 11/2017 Union Territory Tax Rate, dated June 28th, 2017. The core objective of this amendment, as inferred from the text, is to clarify specific aspects of the Union Territory Goods and Services Tax (UTGST) framework, specifically related to input tax credit utilization and the taxability of certain services. **4. Background and Rationale:** The amendment appears to address potential ambiguities or gaps in the existing UTGST framework. Specifically, the amendment on landowner-promoters seeks to clarify the eligibility criteria for utilizing input tax credits. This suggests a need to provide more explicit guidelines for the real estate sector. Furthermore, the explicit mention of Maintenance, repair or overhaul services in respect of ships and other vessels, their engines and other components or parts suggest the services was not already specifically covered, or coverage needed clarification. **5. Key Provisions / Changes:** This notification introduces two key changes to the existing Union Territory Tax Rate notification: * **a) Landowner-Promoter Tax Credit:** * **Original Policy Part Affected:** Conditions in column 5 of serial number 3 in the Table of Notification No. 11/2017, specifically the fourth proviso and the Explanation. * **New Rule/Provision:** A new clause (iii) is inserted after clause (ii) in the Explanation, stating: "the landownerpromoter shall be eligible to utilise the credit of tax charged to him by the developer promoter for payment of tax on apartments supplied by the landownerpromoter in such project." * **Effect of Change:** This change explicitly allows landowner-promoters to utilize the input tax credit received from developer-promoters to pay taxes on apartments supplied by them within the project. This provides a clearer framework for tax liability and credit utilization within real estate development projects involving landowner-promoters. * **b) Maintenance, Repair, and Overhaul Services for Ships:** * **Original Policy Part Affected:** Serial number 25 in the Table of Notification No. 11/2017. * **New Rule/Provision:** An item ia after item ia is introduced: "ib Maintenance, repair or overhaul services in respect of ships and other vessels, their engines and other components or parts." Tax rate is set at 2.5 Item ii in column 3, ,ia and ib shall be substituted. * **Effect of Change:** The new entry specifically addresses Maintenance, repair or overhaul services in respect of ships and other vessels, their engines and other components or parts. The service is now subjected to UTGST and can be assumed to have addressed any ambiguity in applying taxes to services related to ships and other vessels. **6. Target Audience and Stakeholders:** Based on the amendment, the primary stakeholders affected are: * Landowner-promoters and developer-promoters involved in real estate projects in Union Territories. * Businesses providing maintenance, repair, and overhaul services for ships and other vessels in Union Territories. **7. Implementation Aspects (Inferred):** * **Responsible Agency:** The Central Government, specifically the Ministry of Finance, Department of Revenue, is responsible for implementing and overseeing this amendment. The recommendations of the Council were considered in making the amendment. * **Timelines:** The notification is effective from June 2nd, 2021. * **Implementation of Changes:** Landowner-promoters will need to adjust their tax credit utilization practices to align with the new provisions. Businesses providing services to ships will need to comply with this new tax ruling. **8. Expected Outcomes / Impact of Changes:** * **Landowner-Promoter Tax Credit:** The clarification is intended to streamline tax processes for real estate projects involving landowner-promoters, potentially reducing disputes and promoting compliance. It could also encourage more transparent and efficient tax planning within these projects. * **Maintenance, Repair, and Overhaul Services for Ships:** The explicit inclusion of this sector likely seeks to increase tax revenue and ensure consistent application of GST regulations. **9. Conclusion:** Notification No. 02/2021 introduces targeted amendments to the Union Territory Tax Rate framework. The clarification regarding landowner-promoter tax credits and the inclusion of specific ship maintenance services aim to provide greater clarity and consistency within the UTGST system, ultimately impacting stakeholders in the real estate and maritime industries. These changes streamline the tax system for these industries.

Key Entities Referenced