Cancellation of Registration in GST

GST registration can be cancelled by the proper officer 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. Cancellation of registration means that the taxpayer will not be a GST registered person. Thus if the registration of the person is cancelled, neither he can issue a tax invoice nor he can claim any input tax credit in respect of the goods or services received. In this article we will discuss about the process of cancellation of GST registration and the circumstance in which GST registration can be cancelled by the department and will also get to know about revocation of cancellation of registration.

Circumstances in which taxpayer can submit the application for cancellation:
(a) the business has been discontinued or transferred fully for any reason including death of the proprietor or amalgamated with other legal entity or demerged or

(b) there is any change in the constitution of the business; or

(c) the taxable person is no longer liable to be registered or intends to optout of the registration which was voluntarily obtained by him.

Circumstances in which the proper officer can cancel the registration:
The proper officer may cancel the registration of a person where:
(a) the registered person has contravened such provisions of the Act or the rules made there under as may be prescribed; or

(b) a person paying tax under section 10 has not furnished the return for a financial year beyond three months from the due date of furnishing the said return or

(c) any registered person, other than a person specified in clause (b), has not furnished returns for such continuous tax period as may be prescribed or

(d) any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or

(e) registration has been obtained by means of fraud, wilful misstatement or suppression of facts

Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard.

Procedure for cancellation:
1. Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled u/s 29, he shall issue a show cause notice to such person in FORM GST REG-17 within a period of seven working days from the date of the service of such notice, as to why his registration shall not be cancelled.

2. The reply to the show cause notice issued has to be furnished by the registered person in FORM REG-18 within a period of seven working days.

3. In case the reply to the show cause notice is found to be satisfactory, the proper officer shall drop the proceedings and pass an order in FORM GST REG –20.

4. In case the reply to the show cause notice is not found to be satisfactory, the proper officer shall cancel the registration.

5. The cancellation of registration under the SGST Act shall be deemed to be a cancellation of registration under CGST Act.

6. The registered person whose registration is cancelled shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock or capital goods on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher.

7. In case of capital goods the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods reduced by 5% per quarter or part thereof or the tax on the transaction value of such capital goods, whichever is higher.

8. The cancellation of registration shall not affect the liability of the person to pay tax and other dues for any period prior to the date of cancellation whether or not such tax and other dues are determined before or after the date of cancellation.

Revocation of Cancellation:  
1. A registered person whose registration is cancelled by the proper officer on his own motion may apply to such officer for revocation of cancellation of the registration in FORM GST REG-21, to the Proper Officer within a period of ninety days from the date of the service of the order of cancellation of registration

However, if the registration has been cancelled for the failure of the registered person to furnish returns, then in such situation no revocation of cancellation of registration would be allowed unless such pending returns are furnished and any amount due as tax has been paid along with interest, penalty and late fees.

2. On examination of the application if the Proper Officer is satisfied that there are sufficient grounds for revocation of cancellation of registration, then he shall revoke the cancellation of registration by an order in FORM GST REG-22 within a period of thirty days from the date of the receipt of the application and communicate the same to the applicant.

However, if on examination of the application for revocation, if the Proper Officer is not satisfied then he will issue a notice in FORM GST REG–23 requiring the applicant to show cause as to why the application submitted for revocation should not be rejected and the applicant has to furnish the reply within a period of seven working days from the date of the service of the notice in FORM GST REG-24.

The revocation of cancellation of registration under the SGST Act shall be deemed to be a revocation of cancellation of registration under CGST Act.

Final Return to be submitted:
When the registration of a registered person has been cancelled, the said person has to file a final return within three months of the date of cancellation or date of order of cancellation, whichever is later, electronically in FORM GSTR-10.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.