Cancellation and Revocation of GST Registration

Registration under GST can either be cancelled by the GST officer or by the registered person or by the legal heirs in case of death of a registered person. GST act also provides for the provision of revocation of cancellation of GST registration in case registration is cancelled by GST officer.

In this article, we are highlighting the key provisions related to GST registration cancellation and revocation by GST department.

Legal Provisions:-

Key reasons for cancellation:

GST registration can be cancelled under the following circumstances:

1. In the case of business discontinuation, death of proprietor, amalgamation, demerger or any other form of disposal;
2. Change in constitution of business (e.g. from Company to LLP);
3. When the taxable person is no longer liable to be registered other than the person who has taken voluntary registration under section 25(3) of CGST Act, 2017;
4. In case of contravention of certain provisions of the GST act or the rules made thereunder;
5. Not filing of GST returns for a consecutive period of three months in case of composition dealer and six months in case of the regular dealer;
6. Registration obtained by way of fraud, wilful misstatement or suppression of facts;
7. 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;

Provided that during the pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.

 Procedure for cancellation of registration:

Below procedure shall be followed by GST department and registered person in case of registration cancellation proceedings:

1. A notice in Form GST REG-17 shall be issued by the GST superintendent, requiring the registered person to show cause, within a period of seven working days from the date of the service of such notice, as to why the registration shall not be cancelled;
2. The registered person shall furnish the reply in Form GST REG-18 within a period of seven working days;

• In case the reply is found satisfactory then cancellation proceedings shall be dropped and order in Form GST REG-20 shall be passed by the Superintendent of GST.

1. However, in case the reply is not found to be satisfactory then the superintendent will issue an order in Form GST REG-19 cancelling the registration within a period of thirty working days from the date of reply of Show cause notice;
2. The superintendent shall decide the effective date of cancellation and notify the taxable person, directing him to pay arrears of any tax, interest or penalty;
3. The registered person shall pay an amount,(by debiting the electronic credit ledger or electronic cash ledger) equal to the ITC contained in input held in stock and contained in semi-finished goods or finished goods held in stock  or capital goods or plant and machinery on the date immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher;

• In case of capital goods or plant and machinery, the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery, reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher.

As per Rule 44(1)(b) the amount to be paid on capital goods shall be the ITC involved in the remaining useful life in months (ignoring part thereof) shall be computed on pro-rata basis, taking the useful life as five years.

• The cancellation 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

Final Returns:

In case of cancellation of registration, other than ISD or a non-resident taxable person or composition taxpayer or the person paying tax under TDS/TCS, shall file a final return in Form GSTR-10 within a period of three months from the date of cancellation or date of order of cancellation, whichever is later.

Final Return in Form GSTR-10 shall contain the details like Application reference number (ARN) of application of cancellation, the effective date of cancellation, Unique ID and date of cancellation order, details of closing stock and the amount payable thereon.

Revocation of Cancellation of registration:

Since the Indian laws are drafted on the principle of Natural Justice, the GST Act provide an option to the taxable person whose registration was cancelled to make an application for revocation of cancellation order and for which the procedure is enumerated as below:

1. The registered person, whose registration has been cancelled, can submit an application for revocation of cancellation of registration, in FORM GST REG-21, to the Proper Officer (Assistant or Deputy Commissioners of Central Tax), within a period of thirty working days from the date of the service of the order of cancellation of registration at the common portal;
2. However, if the registration has been cancelled for failure to furnish returns, application for revocation shall be filed, only after such returns are furnished and any amount due as a 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.
3. On examination of the application if the Proper Officer (Assistant or Deputy Commissioners of Central Tax) is satisfied, for reasons to be recorded in writing, 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.
4. However, if on examination of the application for revocation, if the Proper Officer (Assistant or Deputy Commissioners of Central Tax) 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 in FORM GST REG24 within a period of seven working days from the date of the service of the notice;
5. The Proper Officer (Assistant or Deputy Commissioners of Central Tax), in case the information or clarification provided is satisfactory, shall within a period of thirty days from the date of the receipt of such information or clarification dispose the application as per para (iii) above. In case it is not satisfactory the applicant will be mandatorily given an opportunity of being heard, after which the Proper Officer (Assistant or Deputy Commissioners of Central Tax) after recording the reasons in writing may by an order in FORM GST REG- 05, reject the application for revocation of cancellation of registration and communicate the same to the applicant.

Further special attention of the readers is invited to Circular No. 95/14/2019-GST dated 28^th March 2019 regarding verification by GST officials of applications for grant of new registration in those specific cases wherein the taxable person is continuing the business with a fresh application of GST registration instead of applying for revocation of registration. The same is done with the intention to avoid the tax, interest and penalty which the taxable person was liable to pay in respect of old/cancelled registration.

Therefore to plug the above instances the CBIC in exercising its power under section 168(1) of CGST Act,2017       has issued the following instructions:

• It is hereby instructed that the proper officer may exercise due caution while processing the application for registration submitted by the taxpayers, where the taxpayer is seeking another registration within the State although he has an existing registration within the said State or his earlier registration has been cancelled.
• It is clarified that not applying for revocation of cancellation of registration along with the continuance of the conditions specified in clauses (b) and (c) of sub-section (2) of section 29 of the CGST Act shall be deemed to be a “deficiency” within the meaning of sub-rule (2) of rule 9 of the CGST Rules.
• The proper officer may compare the information pertaining to earlier registrations with the information contained in the present application, the grounds on which the earlier registration(s) were cancelled and the current status of the statutory violations for which the earlier registration(s) were cancelled.
• The data may be verified on the common portal by fetching the details of registration taken on the PAN mentioned in the new application vis-a-vis cancellation of registration obtained on the same PAN.
• Further, if required, information submitted by the applicant in S. No. 21 of FORM GST REG-01 regarding details of the proprietor, all partner/Karta/Managing Directors and whole-time Director/Members of Managing Committee of Associations/Board of Trustees etc. may be analysed vis-à-vis any cancelled registration having same details.
• If the proper officer finds that earlier registration was cancelled for violation of provisions of Section 29(2)(b)/(c) and the applicant has not filed for revocation of registration and the default under section 29(2)(b)/(c) continues then the same shall be a ground for rejection of fresh application of registration.

Conclusion,

Since there is strong automation in GST, the taxable person should take utmost care in complying with the provisions of the GST Act to avoid cancellation of their registration and in case registration got cancelled then the correct route of revocation shall be followed to avoid any action by the GST department.

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