GST registration cancellation procedure

Introduction: Through GST migration process, all the taxpayers registered under existing laws have been automatically migrated to GST regime. But the exemption threshold limit for registration under GST has been increased to Rs. 20 Lakhs. Such persons below taxable limit apply for cancellation of registration or may be cancelled by proper officer on his own motion for the reasons prescribed u/s 29(1) of CGST Act, 2017. This article discusses in detail about GST registration cancellation procedure.

Conditions for cancellation of GST Registration

1. Cancellation by the registered person himself

A registered GST person can himself/herself cancel their registration in one of the following conditions:

If your turnover is not more than 20 lakh and you have registered on the portal, but you do not want to file the return. Then, you should get it deactivated asap, otherwise, you may receive a tax notice from the government.
If your business has been discontinued.
The business has been sold or transferred to some other party. That other party needs to register under GST.
If the person or business is no longer liable for GST registration. (Like if the registration threshold is increased later by the government and you get out from its cover).

2. Cancellation by a GST officer

GST registration of a person or business can be cancelled by a proper GST officer in one of the following cases:

If the registered person has violated any of GST provisions or laws.
A composition registered person has not filed tax returns for three consecutive quarters.
A normal registered person who has not filed returns consecutively for six months.
A voluntarily registered person who has not commenced any business in the six months from the registration date.
If the registration is obtained by fraud methods, the proper officer has the right to cancel the registration with retrospective effect.

If the GST registration of a seller is cancelled with retrospective effect, it may result in denial of credits to the buyers who have purchased from such dealers.

The concerned person will receive a legal notice showing the cause of registration and will be given an opportunity to explain themselves before the actual cancellation.

The following persons are allowed to cancel a GST registration:

The registered person himself
A proper GST officer
The legal heir of the registered person can request cancellation through an application, in case of death of the person

The voluntary registrations can only be cancelled after one year or more from the date of GST registration.

Payment of Pending Tax after cancellation

The GST cancelled person will have to pay all the dues and liable taxes prior to cancellation.

The person will have to pay his due taxes either by reversing the input credit in semi-furnished/furnished/raw stock of goods one day before the date of cancellation or by paying taxes on these goods. (whichever is higher of the two).

For capital goods, the person will have to pay either the input credit back which was taken on these capital goods, reduced by a certain percentage or the tax applicable on the transaction value of goods. (whichever is higher of the two).

How to Cancel GST Registration?

GST registration can be cancelled by using the forms below.

GST REG 16 - this form is to be used to apply for cancellation.
GST REG 17 - A proper officer can send the show cause / cancellation notice to a registered person using this form.
GST REG 18 - The concerned person must reply back in this form within 7 days of notice explaining why his/her registration should not be cancelled.
GST REG 20 - If the proper officer is satisfied with the explanation, he can use this form to drop the cancellation proceeding and pass a formal order.
GST REG 19 - This form will be used by the proper officer to issue a formal order for cancellation of registration. The order is to be sent within 30 days from the application date or from the date of response in GST REG 18 form.

Application for Revocation of Cancellation of registration by proper officer - Sec 30 of CGST Act & Rule 23

Submit an application in Form GST REG-21 for revocation of cancellation of registration within 30 days from the date of service of the order of cancellation of registration
Application for revocation cannot be filed if cancellation is on account of failure to furnish returns or failure to pay liability unless such return is filed / liabilities are discharged.
For justified reasons, PO shall revoke cancellation of registration within 30 days of application or receipt of clarification by passing an order in Form GST REG-22.
For unjustified reasons, PO shall issue SCN in Form GST REG-23.
Reply shall be filed in within 7 days in Form GST REG-24.
For justified reasons, PO shall revoke cancellation of registration within 30 days of application or receipt of clarification by passing an order in Form GST REG-22.
For unjustified reasons, PO shall reject the application by passing an order in Form GST REG-05.

The author is a practicing CA based in Delhi and is registered Insolvency Professional. He can also be reached at cavinodchaurasia@gmail.com

Disclaimer: The views expressed in this article are strictly personal. The content of this document are solely for informational purpose. It doesn’t constitute professional advice or recommendation. The Author does not accept any liabilities for any loss or damage of any kind arising out of information in this article and for any actions taken in reliance thereon.