The Goods and Services Tax Network (GSTN) has recently alerted taxpayers about discrepancies identified in their filed GST returns through SMS notifications. The introduction of Sub-rule 2A within Rule 21A of the Central Goods and Services Tax (CGST) Rules allows for the suspension of GST registration if significant inconsistencies are found between GSTR-3B and GSTR-1/2B filings. Should these discrepancies remain unaddressed, a taxpayer's GSTIN may face cancellation. Furthermore, a tax officer can suspend a registration during ongoing cancellation proceedings, as stipulated by Rule 21A, which was established through notification 94/2020.

Defining GST Registration Suspension

The government formalized the suspension of GST registration through the integration of Rule 21A into the CGST Rules, 2019. This provision means that taxpayers who have requested GST registration cancellation are temporarily exempt from filing GST returns during the period their registration is suspended.

Eligibility for GSTIN Suspension

A registered individual's GSTIN can only be cancelled by a designated officer if there is a valid belief that the registration should be revoked. The officer must grant the registered person a fair chance to present their case and then adhere to the cancellation process outlined in Rule 22 of the CGST Rules 2017. While these cancellation proceedings are underway, the designated officer has the authority to suspend the registration.

Grounds for GST Registration Suspension

Several factors can lead to the suspension of a GST registration:

• When a taxpayer submits an application for GST registration cancellation, their registration is considered suspended from the application date or the requested cancellation date, whichever is later.
• If a GST officer has reasons to believe that a person's registration is subject to cancellation due to any of the following, they may suspend the taxpayer's GST registration until the proceedings conclude:
  • The taxpayer is not operating their business from the officially declared place of business.
  • The taxpayer has violated the provisions of the Goods and Services Tax Act, 2017, or its accompanying rules.
  • A composition taxpayer has failed to file returns for three consecutive tax periods.
  • A regular taxpayer has failed to file returns for six months.
  • The taxpayer has reported sales details in their GSTR-1 that exceed the sales declared in their GSTR-3B for the same tax period.
  • A taxpayer who voluntarily registered has not started business operations within six months of registration.
  • The registration was obtained through fraudulent means, wilful misstatement, or suppression of facts.

Other reasons for potential suspension or cancellation of GST registration include:

• The death of the business owner.
• The discontinuation, complete transfer, or disposal of the business.
• The business undergoing an amalgamation, merger, or demerger.
• A change in the fundamental constitution of the business.
• The business no longer meeting the requirements for GST registration under current law.
• A business owner choosing to opt out of a voluntarily acquired registration.

Suspension Triggered by Discrepancies in GST Returns

Rule 21A(2A): A newly added sub-rule, 2A, introduced by notification 94/2020, outlines that if a proper officer identifies any discrepancies based on:

• A comparison of outward supply details provided in Form GSTR-1 and Form GSTR-3B.
• A comparison of inward supply details reflected in Form GSTR-2B with Form GSTR-3B.
• Any other analytical findings.

The officer can issue Form GST REG-31 to inform the taxpayer of such inconsistencies. This communication will also specify that if a satisfactory explanation for these discrepancies is not provided, the registration may be cancelled. The officer can also suspend the registration under Rule 21A(2A) effective from the date of this notification to the taxpayer. Subsequently, the proper officer can lift the suspension upon receiving a satisfactory response from the taxpayer. This provision for suspending GST registration until cancellation proceedings are finalized has been favorably received by taxpayers, as it eases their compliance obligations during this interim period.

Duration of GST Registration Suspension

GST registration suspension becomes active from the date the registered person applied for its cancellation. The effective start date of the suspension is the later of these two dates:

• The date the registration cancellation application was submitted.
• The date from which the cancellation is sought.

Consequences of GST Registration Suspension

An individual whose registration has been suspended will face the following restrictions:

• They are prohibited from making any taxable supply after the suspension takes effect.
• They are not required to file any returns as mandated by section 39 of the Central Goods and Service Tax Act, 2017. This reduction in compliance burden is a key advantage for taxpayers during the suspension period.

Process to Revoke GST Registration Suspension

The suspension of a GST registration can be lifted once the cancellation proceedings are concluded. The revocation of the GST registration suspension will be retroactive, taking effect from the original date the suspension commenced.