What do you mean by the cancellation of GST registration?
Cancellation of GST registration signifies that the taxpayer will no longer be registered under GST once the GST registration is cancelled. In other words, a registered person under GST cannot pay/collect any GST, claim an input tax credit, or file the GST returns.
Law governing the cancellation of GST Registration:
GST registration cancellation is covered under Section 29 of the CGST Act and Rules 20 to 22 of the CGST Rules.
The relevant provision reads as:
“(1) The proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where,-
(a) the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or
(b) there is any change in the constitution of the business; or
(c) the taxable person is no longer liable to be registered under section 22 or section 24 or intends to opt-out of the registration voluntarily made under sub-section (3) of section 25”
Analysis of the GST provisions: On reading the above provisions, it can be inferred that a GST registration can be cancelled by the proper officer due to any of the below-mentioned reasons:
Major reasons for the cancellation of GST registration can be summarized as:
- The registered person does not conduct business from the place as declared during registration.
- The registered person issues fake invoices without any actual supply of Goods and/or Services.
- The registered person violates anti-profiteering provisions
- Utilization of ITC from electronic credit ledger to discharge more than 99% of the tax liability for specified taxpayers violating Rule 86B – with the total taxable value of supplies exceeding Rs.50 lakh in the month, with some exceptions.
- Avails input tax credit in violation of section 16 of the Act or the rules
- A taxpayer who has failed to file GST returns for more than six consecutive months
- Suspension is attracted in case ‘Significant Anomalies’ are observed between the values of
- Outward supplies reported in GSTR3B vs declared in GSTR1
- ITC Value declared in GSTR 3B vs values available in GSTR 2B\\
Authorized officers under GST follow the below process to cancel the registration of a taxpayer:
- Authorities notify the concerned person by sending a show cause notice in FORM GST REG -17
- For any disagreement, the registered person is required to reply in FORM GST REG -18 within 7 days of issuance of the notice.
- If the authorized officer finds the reply to be satisfactory, he can drop the proceedings and pass an order in FORM GST REG –20.
- However, if the registered person fails to justify, why the registration should not be cancelled, the authorized officer will issue an order in FORM GST REG-19.
- The order will be sent within 30 days from the date of reply to the show cause
Against the order passed by the officer for cancellation of GST registration, a taxpayer has an option for revocation of cancellation of GST registration:
Important points to be evaluated by the taxpayer in this regard can be summarized as:
- If the registration has been cancelled for the failure of the registered person to furnish returns, unless such returns are furnished and any amount due as tax, in terms of such returns, has been paid along with any amount payable towards interest, penalty, and late fee in respect of the said returns.
- all returns due for the period from the date of the order of cancellation of registration till the date of the order of revocation of cancellation of registration shall be furnished by the said person within a period of thirty days from the date of order of revocation of cancellation of registration.
- where the registration has been cancelled with retrospective effect, the registered person shall furnish all returns relating to the period from the effective date of cancellation of registration till the date of order of revocation of cancellation of registration within a period of thirty days from the date of order of revocation of cancellation of registration.
Frequently Asked Questions (‘FAQs) on cancellation of GST registration:
Question 1: Can GST returns be filed after the cancellation of GST registration?
No, Returns cannot be filed for the period post-GST registration cancellation, however, other proceedings like filing an appeal, making payment, filing for a refund, replying to any order, notices, and filing of returns before cancellation is possible.
Question 2: Is it possible to revoke cancelled GST registration? If yes, what is the time limit for activation of cancelled GST registration?
Any registered person whose registration is cancelled by the proper officer on his own motion may apply to such officer in FORM GST REG-21 for revocation of cancellation of registration within 30 days from the date of service of the cancellation order.
In case the registered person applies for revocation of cancellation beyond 30 days, but within 90 days from the date of service of the cancellation order.
Question 3: Is it mandatory for a taxpayer to apply for revocation of cancellation of GST registration to activate the same?
If a taxpayer does not apply for revocation of cancellation, it shall be deemed to be a ‘deficiency’ within the meaning of rule 9 (2) of the Central Goods and Service Tax Rules, 2017 and can be considered as a ground for rejection of the application for fresh registration.
On the other hand, if the taxpayer continues to trade goods and supplies without GST registration, it shall be considered an offense under GST law and the taxpayer shall be liable to heavy penalties.
Hence, it is mandatory for a taxpayer to apply for revocation of cancellation of GST registration if he wishes to continue his business.
Question 4: Is it possible to apply for fresh registration under GST once GST registration is cancelled?
No, it is not possible. The taxpayer has the only option to apply for revocation of cancellation of GST Registration.
As stated before, any supplier of taxable goods and services, exceeding the given threshold limit, is required to register under GST. However, in recent times, GST officials have come across applications for fresh registration of businesses, whose registration has been cancelled by the officer, on account of non-compliance with the statutory provisions.
To avoid such circumstances, CBIC released Vide circular no. 95/14/2019-GST dated March 28th, 2019, wherein the officials have clarified the consequence the taxpayer has to face in case of non-revocation of cancelled registration.
In cases where a registered taxpayer applies for another registration within the same state, the authorised officer is required to analyse whether existing registration continues or is being cancelled.
- In case of cancelled registration, the further analysis shall commence on whether the registration is cancelled on account of violation of provisions of section 29 (2) (b) [composition dealer has not furnished returns for 3 consecutive tax periods] or section 29 (2) (c) [registered taxpayer has not furnished returns for a continuous period of 6 months]
- If the registration is cancelled, whether the taxpayer has opted/filed an application for revocation of cancellation of registration.
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