Seeking Cancellation of GST Registration is Not Easy

This article about application for cancellation of registration furnished by the registered person which is not being processed by the GST Authority within provisions of the law. The person is being harassed by issuing the notice for which the Authority has no jurisdiction. I request to publish it in your august site. The readers will be benefitted.

SEEKING CANCELLATION OF GST REGISTRATION IS NOT EASY

This Article is based on personal experience in handling the matter of application furnished for cancellation of registration by the registered person. The GST Authority is too casual to process the application furnished for cancellation of registration. The GST Authority do not bother to follow the provisions contemplated in GST Act and Rules and not following the guidelines issued by the CBEC in processing the application for cancellation registration.

The lapses being happened by the GST Authority are discussed as under on the basis of actual cases handled by me.

Case No.1 – Application not disposed off within a period of thirty days from the date of application submitted and notice issued for clarification after about two years.

The application furnished on 01-04-2022 for cancelled the registration from 31-03-2022 because of close of the business. The notice in form Reg-03 was issued on 05-01-2024 seeking clarification such as Reconciliation between GSTR 3B Vs GSTR 1 and GSTR 3B ITC Vs GSTR 2A and Submit Payment proof i.e. bank statement and copies of Sale Purchase Invoices along with copy of Supplier Ledger and KYC documents.

Reply could not be furnished for some reasons. The Application for cancellation of registration was rejected vide order dated 31-01-2024 because the reply was not furnished.

Case No.2 – Application furnished on 16-08-2023 for cancellation of registration because close of business. The notice in form Reg-03 was issued on 12-09-2023 for following queries.

“Cancellation Details – Others (Please specify) – Make your firm Aadhar Authenticated; file updated returns till date of cancellation. Provide reconciliation between GSTR 3B and 1R and between GSTR 3B and 2A from the date of registration till date of cancellation. Pay GST on stock in hand on furnished Goods/semi furnished. Upload proof of permanent future address. Undertaking regarding disbursement of future GST Liability and intimate that no inquiry is being conducted against your firm by any agency. Comply with Rule 86B, if any.”

Reply filed on 20-09-2023. Till date the application was not disposed off even reminder given in writing and personal visit made before the Authority.

The purpose of this Article is to highlights the lethargies of the GST Authority in processing the application for cancellation of registration furnished by the tax payer after close of the business.

Such lethargies are

1. The Application is not disposed off within 30 days.

2. Seeking clarification in form Reg-03 is without jurisdiction.

3. The GST Authority rejects the application for cancellation of registration means that the Authority says to the dead person to keep continue his business or the Authority says to the person who had closed his business, keep continue his business.

Provisions Under the GST Law For the Registered Person Seeks Cancelled His GST Registration

1. Under the following circumstances the registered person may furnish application for cancellation of registration (Section 29(1) CGST Act)

a. In case death of the person;

b. the business has been discontinued;

c. the person is no longer liable to be registered under GST;

d. transferred fully of the business;

e. amalgamated with other legal entity;

f. there is any change in the constitution of the business and

g. any other reason (to be specified in the application).

2. Application is to be furnished within a period of thirty days of the occurrence of the event warranting the cancellation. (Rule 20)

3. The application requires 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. (Rule 20)

Processing Provisions in Regard to Application for Cancellation

4. 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 ………………….. 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.

CIRCULAR 69 DATED 26-10-2018 – Processing of Applications for Cancellation of Registration Submitted in Form GST REG-16

5. Para 4 of the circular stating mandatory fields to be filled in cancellation application i.e. GST REG-16. These fields are reproduced as under:

a) Address for future correspondence with mobile number and email address;

b) Reason for cancellation;

c) Date from which cancellation is sought;

d) Details of the value and the input tax/tax payable on the stock of inputs, inputs contained in semi-finished goods, inputs contained in finished goods, stock of capital goods/plant and machinery;

e) In case of transfer, merger of business, etc., particulars of registration of the entity in which the existing unit has been merged, amalgamated, or transferred (including the copy of the order of the High Court / transfer deed);

f) Details of the last return filed by the taxpayer along with the ARN of such return filed.

6. Para 5 of the circular is guiding that the application of cancellation of registration should be accepted within a period of 30 days from the date of filing the application if where all particulars mentioned in sub-paras a) to d) of the para 4 are correct and complete in the application. The order for cancellation should be issued in FORM GST REG-19 with the effective date of cancellation being the same as the date from which the applicant has sought cancellation in FORM GST REG-16.

7. The para 5 further informs and guides that the cancellation of registration has no effect on the liability of the taxpayer for any acts of commission/omission committed before or after the date of cancellation.

8. The para 6 of the circular says that if the particulars are incomplete in the application and it is the case transfer, merger or amalgamation of business then the proper officer shall inform the applicant in writing about the nature of the discrepancy and give a time period of seven working days to the taxpayer, from the date of receipt of the said letter, to reply. If no reply is received within the specified period of seven working days or if reply to the query is found to be not satisfactory, the proper officer may reject the application on the system, after giving the applicant an opportunity to be heard, recording reasons for rejection in the dialog box that opens once the „Reject‟ button is chosen.

On perusal of the provisions of the GST Law and guidelines as given in the above stated Circular it is ample clear that

1. That the GST Authority must cancel the registration if it is sought by the registered person and application for cancellation of registration is complete and correct.

2. That the GST Authority has no jurisdiction to issue notice for any clarification other than in regard to particulars in the application or if the application for cancellation has been furnished due to the case of transfer, merger or amalgamation of business.

3. That the pre assessment proceedings or proceedings of assessment can not be merged with processing proceedings for application for cancellation of registration.

Inordinate Delay in Passing Order for Rejection the Application for Cancellation of Registration

As we have come across the facts that applications for cancellation of registration are being rejected after passing of the years.

Such orders of rejection should not be sustained under the law on the principles that such orders shall be treated absolutely arbitrary, unreasonable and contrary to the provisions of law and in violation of the principle of natural justice.

In the case of M/s NILAMADHABA PATRA, MAYURBHANJ (W.P.(C) No.13013 of 2024) held by the Orissa High Court – The appeal had been rejected by the Appellate Authority after around 11 months on the ground that the certified copy of the order was not filed with the petition of appeal. The relevant para 6 of the judgement is reproduced as under:

“If the authority found some defect, the obligation casts on the appellate authority to intimate the appellant with regard to the defect in the appeal itself. But as it appears nothing has been placed on record nor any argument has been advanced by the Revenue Department with regard to intimation of any defect, but rejected the same after long lapse of around 11 months only on 20.05.2022. Even if that will also be taken into consideration, the action of the opposite parties is absolutely arbitrary, unreasonable and contrary to the provisions of law and in violation of the principle of natural justice, reason being, if the party files an appeal in ignorance of the position that he has to file the certified copies of the order and the filing of appeal is defective one, then the appellate authority has to intimate the applicant with regard to the defect in the appeal by giving him opportunity to rectify the defect, so that the appellant can remove the same within the time stipulated. If that would have been adhered to after grant of such opportunity, then certainly right accrues in favour of the appellate authority to reject the same since the Principle of Natural Justice has been complied with. Nothing has been placed on record to that extent and mechanically the same has been rejected showing non-supply of the certified copies, which this Court does not accept.”

Conclusion

1. The GST Authority must reject the application for cancellation furnished by the Tax Payer within 30 days.

2. There is no such provision under the GST Law which empowers the GST Authority to issue notice for clarifications for such issues which are not relating to the application for cancellation of registration.

3. The assessment proceedings or pre-assessment enquiries can not be merged with proceedings relating to the application for cancellation of registration.

4. While considering the above stated judgement the rejection order passed after stipulated time i.e. 30 days shall be treated as arbitrary, unreasonable and contrary to the provisions of law and in violation of the principle of natural justice and is not sustainable under the law.

To reach to me for any suggestion, rectification, amendment and/or further clarification in regard of this article my email address is pkmgstupdate@gmail.com.