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Understanding GST Registration Suspension and Termination

This article clarifies the process and implications of cancelling GST registration in India. It covers various scenarios, including taxpayer-initiated cancellation, officer-initiated cancellation, and the procedures for migrated taxpayers. Key sections explain the consequences of cancellation, the forms required, and the steps for revoking a cancelled registration. The guide emphasizes the importance of understanding these rules for GST compliance.

📖 3 min read read🏷️ GST Registration

Businesses operating under the Goods and Services Tax (GST) framework in India may, under certain circumstances, need to cancel their GST registration. This can occur if the business activity changes, if the entity ceases operations, or if the tax authorities initiate the cancellation process. This article details the various grounds for registration cancellation and the associated procedures.

Recent Amendments on GST Registration Cancellation

July 23, 2024 The Union Budget 2024 proposed an amendment to Section 30 of the CGST Act. This change aims to grant the government authority to specify conditions and restrictions for reinstating cancelled GST registrations. This provision will become effective once formally notified by the Central Board of Indirect Taxes and Customs (CBIC).

What Does GST Registration Cancellation Mean?

Cancellation of GST registration signifies that the registered entity is no longer considered a GST-compliant taxpayer. Consequently, the entity is relieved from obligations such as collecting or paying GST, claiming input tax credit, and filing GST returns.

Implications of Cancelling GST Registration

Authority to Initiate GST Registration Cancellation

GST registration cancellation can be initiated by the taxpayer, a migrated taxpayer, or the tax officer themselves. Previously, voluntary GST registrations could only be cancelled after one year from the registration date; however, this restriction has since been removed.

Cancellation of GSTIN for Taxpayers Migrating from Previous Regimes

Individuals and entities previously registered under older indirect tax laws were required to migrate to GST. Many of these might not have met the GST registration criteria. For instance, the VAT threshold was often Rs.5 lakh and Service Tax Rs.10 lakh, while under GST, it is generally Rs.20 lakh (or Rs.40 lakh for certain goods suppliers in some states, or Rs.10 lakh in specific special category states/Union Territories). However, inter-state suppliers were still required to register, with exceptions for service providers.

Such taxpayers had to electronically submit an application in Form GST REG-29 on the GST portal. After the proper officer conducts a necessary inquiry, the registration would be cancelled.

The process for migrated taxpayers to cancel their GSTIN on the GST Portal involves these steps:

  1. Step 1: Access the GST Portal and select the option for Cancellation of Provisional Registration.
  2. Step 2: The cancellation page will display the GSTIN and business name automatically. The applicant must specify a reason for the cancellation.

The system will inquire if any tax invoices were issued during the current month. The authorized signatories' details and place must be provided, followed by signing off with an EVC for proprietorships or partnership firms. Limited Liability Partnerships (LLPs) and Companies must use a Digital Signature Certificate (DSC).

Note: Taxpayers who have not issued any tax invoices can use this simplified service. If tax invoices have been issued, then FORM GST REG-16 must be filed. Refer to the details below.

Taxpayer-Initiated Cancellation (Non-Migrated Entities)

Taxpayers may seek to cancel their registration for several reasons:

  • The business operations have ceased.
  • The business has undergone a complete transfer, amalgamation, demerger, or other form of disposal. In such cases, the new entity (transferee or resulting company) must register, and the original entity (transferor) will cancel its registration if it ceases to exist.
  • There is a change in the legal constitution of the business (e.g., a private limited company converting to a public limited company).
  • As of January 1, 2022, the Central Board of Indirect Taxes and Customs (CBIC) mandated Aadhaar authentication for applying to revoke a cancelled GST registration under CGST Rule 23 in Form REG-21.

Required Forms for Cancellation

All taxpayers unable to follow the simplified method mentioned previously must file an application for cancellation using Form GST REG 16. The legal heirs of a deceased taxpayer will follow this same procedure.

  • The application must be made in Form GST REG 16.
  • Form GST REG 16 must include:
    • Details of inputs, semi-finished goods, and finished goods held in stock on the date the cancellation application is submitted.
    • Any associated liabilities.
    • Payment details.
  • The proper officer is required to issue a cancellation order in Form GST REG-19 within 30 days of receiving the application. The cancellation will be effective from a date determined by the officer, who will then notify the taxable person.

Officer-Initiated Registration Cancellation

Tax officers may cancel a registration if the taxpayer:

(a) Fails to conduct any business from the declared principal place of business, OR (b) Issues invoices or bills without supplying goods or services, in violation of GST provisions, OR (c) Breaches anti-profiteering rules (e.g., by not passing on input tax credit benefits to customers), OR Effective January 1, 2021: (d) Utilizes Input Tax Credit (ITC) from the electronic credit ledger to cover more than 99% of their tax liability, for specific taxpayers violating Rule 86B, where the total taxable value of supplies exceeds Rs.50 lakh in a month, with certain exceptions, OR (e) Cannot file GSTR-1 because GSTR-3B has not been filed for more than two consecutive months (or one quarter for those under the QRMP scheme), OR (f) Wrongfully avails input tax credit in contravention of Section 16 of the Act or its associated rules.

Officer-Initiated Procedure

  • If the proper officer intends to cancel a person's registration, they will issue a show-cause notice in Form GST REG-17 to that individual.
  • The person must respond in Form REG–18 within 7 days from the date of the notice, explaining why their registration should not be cancelled.
  • If the response is satisfactory, the proper officer will terminate the proceedings and issue an order in Form GST REG–20.
  • If the registration is deemed eligible for cancellation, the proper officer will issue an order in Form GST REG-19. This order will be dispatched within 30 days from the date of receiving the reply to the show-cause notice.

Reinstatement of Cancelled Registration

What is Revocation of Cancellation?

Revocation of cancellation signifies the reversal of a decision to cancel a registration, thereby validating the registration once more.

When is Revocation of Cancellation Applicable?

This process applies exclusively when the tax officer has initiated the cancellation of a taxable person's registration suo moto (on their own motion). Such a taxable person can apply to the officer for revocation within thirty days from the date of the cancellation order.

Revocation Procedure

  • A registered person whose registration was suo moto cancelled by the proper officer can submit an application for revocation of cancellation using Form GST REG-21.
  • This application must be submitted within 30 days from the date the cancellation order was served at the Common Portal.
  • If the proper officer is satisfied, they can revoke the cancellation of registration by issuing an order in Form GST REG-22 within 30 days from the date of receiving the application. The reasons for revoking the cancellation must be documented in writing.
  • Conversely, the proper officer may reject the application for revocation by issuing an order in Form GST REG-05 and communicating this to the applicant.
  • Before rejecting, the proper officer must issue a show-cause notice in Form GST REG–23, allowing the applicant to demonstrate why the application should not be rejected. The applicant must respond in Form GST REG-24 within 7 working days from the date of the notice's service.
  • The proper officer will make a decision within 30 days from the date of receiving clarification from the applicant in Form GST REG-24.

Note: An application for revocation cannot be filed if the registration was cancelled due to a failure to file returns. In such cases, all pending returns must first be furnished, along with the payment of all due amounts of tax, interest, and penalties.

Re-registration for GST After Cancellation

Yes, there are no restrictions on obtaining a new GST registration after a previous one has been cancelled, unless the cancellation was initiated by the tax officer and remains unresolved.

Further Information

Further Reading

Frequently Asked Questions

What are the primary reasons for GST registration cancellation?
GST registration can be cancelled if a business ceases operations, changes its legal structure, no longer meets the turnover threshold, or if the tax authorities discover non-compliance with GST regulations.
Can a business continue operations after its GST registration is cancelled?
If GST registration is cancelled and the business continues taxable activities for which registration is mandatory, it could be considered an offense under GST law, leading to penalties and legal consequences.
What is the process for a taxpayer to voluntarily cancel their GST registration?
A taxpayer typically applies for cancellation using Form GST REG-16, providing details about their stock, liabilities, and payments. The proper officer then reviews the application and issues a cancellation order.
Under what circumstances can a tax officer cancel a GST registration?
Tax officers can cancel registration for reasons such as not conducting business from the declared premises, issuing fake invoices, violating anti-profiteering rules, misusing input tax credit, or failing to file consecutive GST returns.
Is it possible to revoke a GST registration cancellation?
Yes, if the cancellation was initiated by the tax officer suo moto, the taxpayer can apply for revocation within 30 days of the cancellation order. The tax officer will review the application and may reinstate the registration.