All you need to know about GST Registration Cancellation

Ashish M. Shaji

01 Oct, 2020

GST is known as the Goods and Services Tax. It is an indirect tax that replaces many indirect taxes in India like the excise duty, VAT, services tax etc. The GST Act was passed in the parliament in 2017 in the month of March and it came into effect on July, 2017.GST is levied on the supply of goods and services. This tax law is a comprehensive, multi stage and destination based tax that is levied on every value addition. In this post, we are covering GST Registration Cancellation.

What is meant by cancellation of the GST registration?

Cancellation of GST registration means that the taxpayer will not be a GST registered person. The person would not be required to pay or collect GST.

Who can cancel GST registration?

GST registration Cancellation can be done by any of the following:

• The tax officer can cancel GST, if the taxpayer does not conduct any business from the place of business or issues bills without supply of goods/services or violates the anti profiteering provisions.
• Legal heirs in case of death of taxpayer.
• It can be cancelled if requested by taxpayer.

 When can GST Registration get cancelled?

The registration may be cancelled due to the following reasons:

• The taxable person was registered under any earlier laws but is not is not liable to be registered under the GST Act;
• In case where business has been discontinued or transferred for any reason including death or amalgamated or demerged or disposed of;
• There is any change in the constitution of the business;
• The taxable person, other than the registered person who has taken registration under section 25(3) of the CGST Act 2017^[1] is no longer liable to be registered;
• The registered person has contravened the provisions of the Act or the rules made thereunder;
• The person paying tax under the composition levy hasn’t furnished returns for three consecutive tax period;
• The registered person, other than the person paying tax under the Composition levy hasn’t furnished returns for a continuous six months period;
• The person voluntarily registered hasn’t started the business within six months from registration;
• In case where registration has been obtained through fraud/willful misstatement or by suppression of facts.

Consequences of GST Registration cancellation

The consequences of cancellation of GST registration would be:

• The taxpayer will not pay GST anymore;
• In case of some business, GST registration is necessary. In case GST registration is cancelled and business is still continued, it would be an offence under GST and heavy penalties would be charged.

Procedure for cancellation of GST registration

• In case where the superintendent of Central Tax has reason to believe that a persons’ registration is liable to be cancelled, he shall send a show cause notice to that person in Form GST REG-17;
• The reply to the said notice has to be furnished by the registered person in Form GST REG-18 within 7 working days and must state why his registration should not be cancelled;
• In case where the reply is found to be satisfactory the superintendent of Central Tax will drop the proceedings and would pass an order in Form GST REG-20;
• However, if the reply is not satisfactory and the registration is liable to be cancelled then the superintendent of Central Tax will issue an order in Form GST REG-19 within 30 days period from the date of application or the date of reply to show cause notice received and notify that person, asking him to pay arrears of any tax, interest or penalty;
• The registered person (whose registration has been cancelled) shall pay an amount through debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of input held in semi-finished or finished goods held in stock or capital goods or plant and machinery on the day immediately preceding the date of cancellation or the output tax payable on such goods that which is higher;
• In case of capital goods or plant and machinery, the taxable person will pay an amount equal to the input tax credit taken in the said capital goods or plant and machinery, reduced by percentage points as prescribed or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher;
• The registration cancellation will not affect the liability of the person to pay tax and other dues for any period before the cancellation date whether or not such tax and other dues are determined before or after the cancellation date.

Conclusion

GST is an entirely new tax regime in India, and we believe that GST will control the inflation rate and it will benefit both consumers and manufacturers by bringing transparency in the overall indirect tax of the country.

Read our article: Overview of GST on Advertisement Services and its Taxability