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Cancellation of Registration Under GST
Cancellation of GST registration is an important step for businesses that no longer need to comply with the Goods and Services Tax (GST) regulations. Whether it’s due to business closure, a significant drop in turnover, or a merger, applying for cancellation of GST registration ensures that a taxpayer is no longer obligated to file returns or pay GST. However, this process involves legal compliance and must be carried out with care to avoid penalties.
What is the Cancellation of GST Registration?
Cancellation of GST registration means that a taxpayer is no longer registered under the GST system. Once the registration is cancelled, the taxpayer is not required to collect or pay GST. They are also relieved of the obligation to file GST returns.
For instance, a small trader with an annual turnover of less than ₹20 lakh might decide to cancel GST registration if they no longer meet the mandatory registration criteria. Similarly, businesses that close down or merge with other firms may no longer require separate GST registration. This process ensures legal compliance and avoids unnecessary obligations under GST law.
What are the Consequences of GST Registration Cancellation?
The cancellation of GST registration comes with several consequences that must be considered. Firstly, the taxpayer is no longer required to collect or pay GST. However, if the business continues to operate after the registration is cancelled, it is treated as an offence, and hefty penalties can be imposed.
For instance, if a business exceeds the ₹20 lakh turnover threshold after cancellation, it must immediately reapply for GST registration to avoid legal trouble.
Additionally, once the GST registration is cancelled, the taxpayer cannot claim input tax credit, which could affect the overall tax liability. Therefore, it’s crucial for businesses to carefully assess the consequences before deciding to cancel their GST registration.
Who Can Cancel the GST Registration?
GST registration can be cancelled by different entities depending on the circumstances.
Taxpayers themselves may voluntarily apply for cancellation if their business has closed or if they are no longer required to register under GST. For example, if a small business owner decides to shut down their operations, they can apply for GST registration cancellation to stop being liable for tax payments.
Legal heirs can apply for cancellation on behalf of deceased taxpayers.
Tax officers can initiate the cancellation process if they find any violations, such as failure to file returns for consecutive months or providing false information. This ensures that businesses comply with the GST Act or face non-compliance cancellations.
How to Cancel GST Registration?
The process of cancelling GST registration varies based on the type of taxpayer. The steps differ slightly for migrated taxpayers, other taxpayers, and cancellations initiated by a tax officer. Let’s look at each of these types of taxpayers and their cancellation requirements.
For Migrated Taxpayers
Migrated taxpayers, previously registered under VAT or Service Tax and moved to GST, may find that they no longer need GST registration. For example, businesses that previously had VAT registration with a threshold of ₹5 lakh but now fall below the ₹20 lakh GST threshold can apply for cancellation.
The process involves logging into the GST portal, selecting the option for cancellation, and filling out the necessary details, including the reason for cancellation and details of the authorised signatory. If no tax invoices have been issued, the cancellation is processed easily. However, if invoices have been issued, the taxpayer must file Form GST REG-16.
For Other Migrated Taxpayers
Other taxpayers, such as new businesses or those voluntarily registered under GST, can also cancel their registration. The owner must apply for cancellation if a business is transferred, amalgamated, or closed. This can be done through the GST portal by filling out Form GST REG-16. The application for cancellation of GST should include information such as stock details and the date of cancellation.
The tax authorities will issue a cancellation order within 30 days. Businesses undergoing restructuring, such as a change from a sole proprietorship to a limited company, must also cancel their existing GST registration.
By Tax Officer
Tax officers may cancel a taxpayer's GST registration if they detect violations of GST rules.
For example, if a business issues invoices without an actual supply of goods, the tax officer may initiate cancellation. The officer first issues a show-cause notice in Form GST REG-17, and the taxpayer must respond within seven days. If the explanation is unsatisfactory, the officer can proceed with the cancellation by issuing an order in Form GST REG-19.
What is Meant by Revocation of Cancellation?
Revocation of cancellation means that a cancelled GST registration can be restored under certain circumstances. This typically happens when a tax officer cancels the registration, and the taxpayer applies to reinstate it.
Revocation can occur if the cancellation was made by mistake or if the taxpayer has resolved the issues that led to the cancellation. For example, a business may have missed filing returns, including GSTR 3B, for a few months, leading to cancellation. If the business files all the pending returns and pays the applicable fines, it can apply for revocation of the cancellation within 30 days.
When is the Revocation of Cancellation Applicable?
The revocation of cancellation is applicable only when a tax officer has cancelled the GST registration on their own motion. The taxpayer can apply for revocation within 30 days of the cancellation order. For instance, if a business fails to file returns for six consecutive months and the tax officer cancels the registration, it can apply for revocation if it files all pending returns and clears any dues.
The revocation process ensures that businesses that inadvertently lose their GST registration can regain it by following the necessary legal procedures.
What is the Procedure for Revocation of Cancellation?
Revoking a cancelled GST registration is straightforward but requires prompt action. The taxpayer must apply for revocation through Form GST REG-21 within 30 days of the cancellation order. The application must accompany reasons for the revocation and proof that the taxpayer has complied with all GST requirements, such as filing overdue returns. Once the application is submitted, the tax officer reviews it.
If satisfied with the explanations, the officer will issue an order in Form GST REG-22 to reverse the cancellation. However, if the officer is not convinced, they may reject the application by issuing a show-cause notice.
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