What does it mean by GST Registration Cancellation?

The cancellation of registration under GST simply means that a taxpayer is no more a GST-registered person. It automatically implies that one shall not be required to pay or collect the tax, nor be able to claim input tax credit, and not even file the GST returns. In other words, post-cancellation, the GST Number (GSTIN) becomes inactive, meaning the same for the taxpayer.
Cancellation of GST registration may take place in two ways: voluntarily by the taxpayer under Section 29 of the CGST Act, or through compulsory cancellation by the authorities under Rules 20-22 of the CGST Rules. After the cancellation of registration, no taxpayer can collect GST from the customers or be able to claim input tax credit in respect of anything.

Reasons for GST Registration Cancellation

GST registration may be cancelled for several reasons, including:

1. Failure to file GST returns for six consecutive months by a taxable person.
2. Non-commencement of operations within six months from the date of voluntary registration.
3. Business closure, change in business name or structure, or business transfer/sale due to amalgamation or demerger.
4. Entities registered under pre-GST tax laws not meeting mandatory GST registration criteria or no longer being liable for registration.
5. Changes in business constitution resulting in a change of PAN.
6. Business transfer due to amalgamation, merger, demerger, sale, lease, or other reasons.
7. Ceasing to be liable to pay tax.
8. Discontinuation or closure of business.

Cancellation is essential under these circumstances to alleviate compliance obligations and avoid associated penalties or late fees. This list is not exhaustive and there may be other reasons for cancellation of GST Registration.

Eligibility and Procedures for GST Registration Cancellation

Eligibility for Filing Cancellation Application

1. By the Taxpayer: Taxpayers can initiate the cancellation of their GST registration if they no longer need it or meet specific cancellation criteria. This process involves submitting a request through the appropriate channels. Applications for GST registration cancellation can be submitted by: 
2. Existing taxpayers.
3. Migrated taxpayers with approved enrollment applications.
4. By Tax Authorities: Tax authorities have the power to cancel a GST registration if they detect non-compliance or inconsistencies in a taxpayer’s activities or records. They can initiate this process by issuing a show-cause notice via Form GST REG-17. Tax officers, either on their own initiative or upon request from the registered person or legal heirs following the death of a sole proprietor.
5. By Legal Successors: In the event of a taxpayer’s death, legal successors or heirs can request the cancellation of the deceased’s GST registration. Legal heirs can file for cancellation of a sole proprietor’s registration by submitting Form REG-16 on the GST Portal.

Exceptions include Tax Deductors/Collectors and holders of Unique Identification Numbers (UIN), who are not eligible to apply for GST cancellation.

(a)  Voluntary Cancellation by the Taxpayer

Taxpayers may voluntarily request cancellation under specific circumstances by submitting Form REG-16 on the GST Portal within 30 days of the event prompting cancellation, such as:

• Business cessation or closure.
• No longer being liable to pay taxes or needing GST registration.
• Business transfer due to combination, merger, split sale, lease, or other factors.
• Changes in business constitution requiring a new PAN.
• Obtaining voluntary registration but not starting business within the required timeframe.
• Death of a sole proprietor.

Application Procedure of cancellation

The taxpayers and legal heirs of the deceased taxpayer will follow the same procedure to cancel the GST registration as below: 

1. Log In: Access the GST portal using your registered user ID and password.
2. Navigate to Cancellation: Go to Services > Registration > Application for Cancellation of Registration.
3. Complete Form GST REG-16: Enter all necessary details, including the reason for cancellation, the date of cancellation, and information about the authorized signatory.
4. Attach Supporting Documents: Provide any required documents to support your application.
5. Submit the Application: After submission, a GST officer will review your application. If additional information or documentation is needed, the officer will contact you.
6. Respond Promptly: Address any requests from the officer quickly to avoid delays in processing.
7. Receive Confirmation: If your application is approved, you will receive a confirmation of cancellation order, Form GST REG-19, within 30 days from the application date.

(b)  Suo Moto Cancellation by Tax Officer

Tax officers may unilaterally cancel GST registration under certain conditions, including:

1. Non-filing of GST returns for six consecutive months.
2. Supplying goods/services without issuing invoices, violating GST laws to avoid tax.
3. Issuing invoices without actual supply, leading to false input tax credit claims or tax refunds.
4. Collecting tax but failing to remit it to the government within the stipulated timeframe.
5. Failing to pay tax, interest, or penalties within the required period.
6. No longer needing to deduct or collect tax at source as per GST provisions.
7. Ineligibility for GST registration.
8. Misconduct during GST proceedings.
9. Business closure or termination.
10. Changes in business constitution resulting in a new PAN.
11. Ceasing tax liability.
12. Business transfer due to amalgamation, merger, demerger, sale, lease, or other reasons.
13. Death of a sole proprietor.
14. Composition scheme taxpayers not filing returns for three consecutive tax periods.
15. Obtaining GST registration through fraud or wilful misstatement.

Cancellation Process: Before cancelling a GST registration, the taxpayer must be given a reasonable opportunity to be heard. This involves:

• Issuing a show-cause notice in Form GST REG-17, stating the reasons for proposed cancellation.
• Allowing the taxpayer seven working days to respond.
• Scheduling a personal hearing if necessary.

If the proper officer is satisfied with the response, they may drop the proceedings and issue an order in Form GST REG-20. If unsatisfied, they will issue an order for cancellation in Form GST REG-19 within 30 days of receiving the reply to the show-cause notice.

Effects of GST Registration Cancellation

When GST registration is cancelled, the following consequences will ensue:

• Notification: Taxpayers will receive information about the cancellation via SMS and email.
• Cancellation Order: The cancellation order, issued in GST Form REG-17, will be sent to taxpayers and made available on their GST portal dashboard for viewing, printing, and downloading.
• Filing Restrictions: After the cancellation date, taxpayers will no longer be able to file returns or upload invoices. GST Practitioners (GSTPs) will also be unable to perform their functions post-cancellation.
• Update Restrictions: Following the issuance of the cancellation order, taxpayers cannot modify their core registration details. However, updates to non-core details such as email addresses and mobile numbers can be made until all dues are settled.
• Status Change: The GSTIN status will transition from ‘Proceeding for Cancellation Initiated’ to ‘Inactive.’ This change will be communicated to the relevant tax authorities.
• Continued Business Operations: For businesses where GST registration is mandatory, continued operations without an active registration will be deemed an offense, potentially resulting in significant penalties.
• Revocation: Even after cancellation, taxpayers may apply for the revocation of their registration if needed.

Revocation of Cancellation

Revocation of cancellation refers to the reversal of a previously made decision to cancel a GST registration, thereby reinstating its validity.

When is Revocation Applicable?

Revocation is applicable when a tax officer has cancelled a registration on their own initiative (suo moto). In such cases, the affected taxpayer can apply for revocation within thirty days of receiving the cancellation order.

Procedure for Revocation

1. Application Submission: The taxpayer must file an application for revocation using Form GST REG-21 if their registration was cancelled suo moto by the tax officer. This application should be submitted within 30 days from the date of the cancellation order through the Common Portal.
2. Review by Tax Officer: Upon receipt of the application, the tax officer has 30 days to decide whether to approve or reject the revocation request. If approved, the officer will issue a revocation order in Form GST REG-22, documenting the reasons for this decision.
3. Rejection of Application: If the tax officer decides to reject the application, they will issue a rejection order in Form GST REG-05. The officer must first issue a show-cause notice in Form GST REG-23, asking why the application should not be rejected. The taxpayer must respond within 7 working days using Form GST REG-24.
4. Decision Timeline: The tax officer will make a final decision within 30 days from receiving the taxpayer’s response to the show-cause notice.

Important Note: Applications for revocation cannot be processed if the registration was cancelled due to the non-filing of returns. In such cases, the outstanding returns must be filed, and all tax, interest, and penalties must be paid before applying for revocation.

Conclusion

In summary, the cancellation of GST registration is a significant process with specific implications for taxpayers. Whether initiated voluntarily by the taxpayer or by tax authorities due to non-compliance, business changes, or other reasons, it marks the end of GST obligations for the registered entity. Understanding the effects of cancellation—such as the inability to file returns, make changes to registration details, or collect GST—helps taxpayers navigate the complexities involved.

The procedure for revocation of cancellation provides a pathway for reinstating a registration if it was cancelled suo moto, allowing for continued compliance and operational stability. It is crucial for taxpayers to adhere to the prescribed timelines and procedural requirements to ensure a smooth resolution.

By comprehensively understanding both the cancellation and revocation processes, taxpayers can better manage their GST responsibilities and avoid potential penalties, ensuring compliance with the GST regulations and maintaining smooth business operations.

Frequently Asked Questions (FAQs)

1. What should a taxpayer do if their GST registration is cancelled due to non-compliance?

If your GST registration is cancelled due to non-compliance, you need to address the issues that led to the cancellation. This typically involves filing all overdue returns, paying any outstanding taxes, interest, and penalties. Once these requirements are met, you may apply for the revocation of cancellation within the prescribed period.

2. Can a taxpayer apply for revocation of cancellation if they have outstanding dues?

No, a taxpayer cannot apply for revocation if their registration was cancelled due to failure to file returns. All pending returns must be filed, and any outstanding dues, including taxes, interest, and penalties, must be paid before a revocation application can be considered.

3. What are the consequences if a taxpayer continues business operations after their GST registration has been canceled?

Continuing business operations without an active GST registration can result in severe penalties and legal consequences. The business may be treated as non-compliant with GST laws, leading to enforcement actions and additional fines.

4. Can a GST registration be reinstated after cancellation due to business closure if the business resumes operations?

If a business resumes operations after closure, the taxpayer must apply for a new GST registration rather than revoking the previous cancellation. The previous registration cannot be reinstated if it was canceled due to business closure.

5. What steps should heirs take to handle GST registration after the death of a sole proprietor?

Heirs must notify the GST authorities about the death of the sole proprietor and apply for cancellation of the deceased’s GST registration. They may need to provide a death certificate and other relevant documents. The heirs should also ensure that all GST-related obligations are settled before applying for cancellation.

6. How can a taxpayer address discrepancies identified during the GST registration cancellation process?

Taxpayers should promptly respond to any show-cause notices or requests for additional information from the GST authorities. Providing accurate and complete documentation and addressing discrepancies as soon as possible can help resolve issues efficiently.

7. Is it possible to cancel GST registration if the business is transferred to a different state?

Yes, if a business is transferred to a different state, the GST registration in the original state must be canceled. A new GST registration must be obtained in the new state where the business will operate.

8. What should a taxpayer do if they receive a cancellation order by mistake?

If a taxpayer receives a cancellation order in error, they should immediately contact the GST authorities to rectify the mistake. They may need to provide evidence to support their claim and request the cancellation order to be revoked.

9. Can a taxpayer appeal against a GST registration cancellation order?

Yes, a taxpayer can appeal against a GST registration cancellation order. The appeal must be filed with the appropriate appellate authority within the prescribed time limit, providing reasons and supporting documents to challenge the cancellation decision.

10. What documentation is required to apply for GST registration revocation?

To apply for GST registration revocation, taxpayers need to submit Form GST REG-21 along with relevant documents such as a copy of the cancellation order, proof of compliance with GST requirements, and any other documents requested by the tax authorities.

11. Are there any special provisions for revocation of GST registration in case of a merger or amalgamation?

Yes, in the case of a merger or amalgamation, the entity must apply for cancellation of the GST registration of the merging or amalgamated entities. A new GST registration must be obtained for the resultant entity. Special provisions and procedures may apply depending on the specifics of the merger or amalgamation.

12. Can a taxpayer who voluntarily cancels their GST registration later apply for a new registration?

Yes, a taxpayer who voluntarily cancels their GST registration can apply for a new registration if they resume business operations or if their business circumstances change. The new application will be processed as per standard registration procedures.

13. How long does it take for the GST registration cancellation order to be processed?

The processing time for a GST registration cancellation order can vary, but typically, it should be completed within 30 days from the date of receipt of the application or from the date of any responses to show-cause notices.

14. What happens if a GST registration cancellation application is submitted late?

If a GST registration cancellation application is submitted after the prescribed period, it may be considered invalid. The taxpayer may need to provide a valid reason for the delay and may face complications in processing the application.

15. Can a canceled GST registration be used to claim refunds or input tax credits?

No, once GST registration is canceled, the taxpayer cannot claim refunds or input tax credits for periods after the cancellation date. All claims must be settled before the cancellation becomes effective.