No business & suspened GST registration

Hi Sujit,

Here’s a detailed look at the implications and possible consequences in this scenario:

Situation Recap:

• Dealer registered under GST in 2017.

• Submitted only one return in Dec 2017; no returns thereafter due to no business.

• Surrendered GST registration in March 2022.

• Did not respond to any notices or clarification requests.

• GST registration got suspended by authorities.

• Authorities are still sending notices/messages to file returns for Dec 2021 & Feb 2022.

• Dealer has not taken any action, citing no business.

Possible Implications & Consequences:

1. Non-filing of GST returns despite registration:

   • Under GST law, every registered dealer is required to file returns even if there is no business (Nil return).

   • Non-filing of returns can lead to penalties and prosecution.

   • Penalty under Section 47: Rs. 100 per day (Rs. 50 CGST + Rs. 50 SGST) for each day delay, subject to max Rs. 5,000 per return.

   • Continuous non-filing can attract interest on any tax due, and may lead to cancellation or suspension of registration.

2. Suspension of GST Registration:

   • Suspension means the dealer cannot file any returns or claim refunds.

   • It’s usually due to non-compliance or suspicious activities.

   • During suspension, the dealer is barred from conducting any taxable supplies.

3. Surrender of Registration without compliance:

   • Surrendering registration requires filing all pending returns.

   • If returns for earlier periods were not filed, surrender may not be accepted or may be subject to scrutiny.

   • Authorities can reject surrender application or keep it pending until compliance.

4. Failure to respond to notices:

   • Non-response can be treated as non-cooperation.

   • Authorities may initiate adjudication proceedings leading to penalties or prosecution.

   • May attract inspection, audit, or investigation.

5. Demand for Returns post-suspension:

   • Authorities can insist on filing past returns to update records and calculate any dues.

   • Even with no business, nil returns are mandatory.

   • Failure to comply can lead to enforcement actions, penalties, and prosecution.

6. Possible legal consequences:

   • Repeated failure can lead to prosecution under Section 122 and 132 of the CGST Act.

   • Penalties up to Rs. 25,000 or 100% of tax evaded (if any).

   • Court proceedings or fines.

Recommended Action:

• Even if no business was conducted, file nil returns for all pending periods ASAP.

• Respond to the notices to avoid escalation.

• If registration is surrendered, ensure all pending returns and dues are cleared.

• Consult a GST practitioner or legal advisor to regularize the status.

• Keep records ready for any inquiries.

Summary