Brief background: As per GST law, every person is required to get registered under this law if his activity falls within the ambit as provided under chapter VI ‘Registration’ of the CGST Act, 2017. Now, if such registered person is now no longer required to be registered under GST law, same may (optional/voluntarily) apply for cancellation of GST registration and if approved by the proper officer, shall cease to exist as a registered person and resultantly not be required to comply with the obligations of GST law, while at the same time shall not be eligible to avail any of the benefits as are entrusted to any registered person under this law.
Such cancellation can either be of entire business or of one or more registrations obtained by such registered person. In this regard, below is the gist of relevant provisions and step action plan moving an application for cancellation of GST registration:
Legal Provisions:
- Filing of application for cancellation:
Section 29(1)(a) of CGST act provides for cancellation of registration:
‘The proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where:
- the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of;
- the taxable person is no longer liable to be registered under section 22 or section 24 or intends to optout of the registration voluntarily made under sub-section (3) of section 25.’
Sub-section 5 of section 29 provides for reversal of ITC claimed on inputs and capital goods held with taxpayer: ‘Where registration is cancelled basis above provisions, ITC in respect of inputs held in stock and inputs contained in semi finished or finished goods held in stock or capital goods or plant and machinery on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher, calculated in such manner as .. prescribed’.
Rule 20 of CGST Rules, 2017 provides for ‘Application for cancellation of registration’ as: ‘A registered person, seeking cancellation of his registration under subsection (1) of section 29 shall electronically submit an application in FORM GST REG16, including therein the details of inputs held in stock or inputs contained in semi-finished or finished goods held in stock and of capital goods held in stock on the date from which the cancellation of registration is sought, liability thereon, the details of the payment, if any, made against such liability and may furnish, along with the application, relevant documents in support thereof, at the common portal within a period of thirty days of the occurrence of the event warranting the cancellation’.
- Suspension of registration:
It is imperative to mention here rule 21A ‘Suspension of registration’ which provides as follows:
Sub-rule 1: ‘Where a registered person has applied for cancellation of registration under rule 20, the registration shall be deemed to be suspended from the date of submission of the application or the date from which the cancellation is sought, whichever is later, pending the completion of proceedings for cancellation of registration under rule 22A’.
Sub-rule 3: ‘A registered person, whose registration has been suspended under sub-rule (1)or subrule (2) [or sub-rule (2A)], shall not make any taxable supply during the period of suspension and shall not be required to furnish any return under section 39’.
Explanation to sub-rule 3: ‘The expression ―shall not make any taxable supply‖ shall mean that the registered person shall not issue a tax invoice and, accordingly, not charge tax on supplies made by him during the period of suspension’.
Rule 21A(4) provides for ‘Revocation of Suspension’ as: ‘The suspension of registration under sub-rule (1)or sub-rule (2) [or sub-rule (2A)] 38 shall be deemed to be revoked upon completion of the proceedings by the proper officer under rule 22 and such revocation shall be effective from the date on which the suspension had come into effect’.
- Cancellation order:
Rule 22(3) provides that ‘Where a person who has submitted an application for cancellation of his registration is no longer liable to be registered or his registration is liable to be cancelled, the proper officer shall issue an order in FORM GST REG-19, within a period of thirty days from the date of application submitted under rule 20 or, as the case may be, the date of the reply to the show cause issued under sub-rule (1),[or under sub-rule (2A) of rule 21A] cancel the registration, with effect from a date to be determined by him and notify the taxable person, directing him to pay arrears of any tax, interest or penalty including the amount liable to be paid under sub-section (5) of section 29’.
- Final return and reversal of ITC:
Section 45, CGST Act provides that: ‘Every registered person ………. and whose registration has been cancelled shall furnish a final return within three months of the date of cancellation or date of order of cancellation, whichever is later, in such form and manner as may be prescribed’.
Rule 44 provides for ‘Manner of reversal of credit under special circumstances’ as: The amount of input tax credit relating to inputs held in stock, inputs contained in semi-finished and finished goods held in stock, and capital goods held in stock shall, for the purposes of ……….. sub-section (5) of section 29 be determined in the manner as below:
(a) for inputs held in stock and inputs contained in semi-finished and finished goods held in stock, the input tax credit shall be calculated proportionately on the basis of the corresponding invoices on which credit had been availed by the registered taxable person on such inputs;
(b) for capital goods held in stock, the input tax credit involved in the remaining useful life in months shall be computed on pro-rata basis, taking the useful life as five years.
Above amount of reversal shall be determined separately for input tax credit of central tax, State tax, Union territory tax and integrated tax. This shall form part of the output tax liability of the registered person and the details of the amount shall be furnished in FORM GST ITC-03, where such amount relates to any event specified in sub-section (4) of section 18 and in FORM GSTR-10, where such amount relates to the cancellation of registration.
Sub-rule 3 to rule 44 addresses the case where the tax invoices related to the inputs held in stock are not available, the registered person shall estimate the amount under sub-rule (1) based on the prevailing market price of the goods on the effective date of the occurrence of any of the events specified in ………. or, as the case may be, sub-section (5) of section 29. Sub-rule 4 provides that the details furnished in accordance with sub-rule (3) shall be duly certified by a practicing-chartered accountant or cost accountant.
Below is the synopsis with respect to actionable for cancellation of GST registration:
- Taxpayer has to provide a valid reason to discontinue business from this place.
- Taxpayer shall apply for cancellation within 30 days of occurrence of event warranting cancellation’.
- Upon such application, the registration shall be deemed to be suspended from the date of submission of the application or the date from which the cancellation is sought, whichever is later, till the completion of proceedings for cancellation.
- Outward taxable supply cannot be made and consequently cannot charge tax or issue tax invoice during the period of suspension and periodic returns are also not required to be filed by the taxpayer.
- The suspension of registration under sub-rule (1) shall be deemed to be revoked upon completion of the proceedings, from the date on which the suspension had come into effect
- Cancellation order shall be issued within a period of 30 days from the date of application submitted
- Filing of Form GSTR-10 ‘Final return’ of the date of cancellation or date of order of cancellation, whichever is later. Form GSTR-10 shall include any reversal if required as per rule 44
Trust the above helps. Should you require any further clarifications or details, please feel free to revert.
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