1. The registration granted under GST can be cancelled for specified reasons. The cancellation can either be initiated by the department on their own motion or the registered person can apply for cancellation of their registration. The provisions of cancellation cover under Section 29 of the CGST Act and CGST Rule 20 to 22.
2. Statutory Provisions:
|Section 29(1)||The proper officer may, either on his own motion or on an application filed by a registered person or his legal heir (in case of death of such person) cancel the registration.|
3. Circumstances when a person can apply for cancellation: A registered person can file an application for cancellation in the following circumstances:-
(a) The business has been discontinued, amalgamated with another entity, disposed of, and transferred fully due to the death of the proprietor or for any other reason.
(b) Change in constitution of business
(c) A taxable person ceases to become liable for registration under Sec 22 (aggregate turnover is below threshold limit), Sec 24(mandatory registration) or intends to opt-out of the voluntary registration.
3.1 Persons cannot apply for cancellation under this provision – (a) The persons registered for TDS or TCS under rule 12 (b) person who has obtained a unique identification number (UIN) cannot apply for cancellation under this provision.
3.2 Voluntary registration can be cancelled any time: Till 23-1-2018, application for cancellation of voluntary registration could not be considered before the expiry of one year from the effective date of registration as per proviso to Rule 20 . The said proviso has been omitted w.e.f. 23-1-2018 and now voluntary registration can be cancelled any time.
4. Application for Cancellation :
|Rule 20||Application for cancellation of registration shall be filed electronically in form GST REG-16.
The details required to be given are (a) the details of input held in stock (b)the details of Capital goods held in Stock (c) the liability against input and capital in stock and details of payment against such liability.
The application should be submitted thirty days of the occurrence of the event warranting cancellation.
5. Registration liable to be cancelled
|Rule 21||The registration granted to a person is liable to be cancelled if the said person –
(a) does not conduct any business from the declared place of business
(b) issues invoice or bill without supply of goods or services
(c) violates provisions relating to Anti Profiteering.
(d) violates provisions of rule 10A in respect of furnishing details of the bank account.
6. Suspension of registration when application filed by the registered person
|proviso to section 29(1)||During the pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.- inserted vide CGST (Amendment) Act, 2018 w.e.f. 1-2-2019.|
|Rule 21(A1)||Where a registered person has applied for cancellation of registration, 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 of registration.|
7. Procedure for Cancellation when application filed by the registered person
|Rule 22(3)||If 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 thirty days from the date of submission of the application submitted by the registered person or the date of reply to the show-cause notice issued to him and cancel the registration, with effect from a date to be determined by him.
He will notify the taxable person, directing to pay arrears of any tax, interest or penalty including the amount liable to be paid under section 29(5)
|Rule 22(5)||The provisions of rule 22(3) shall, mutatis mutandis, apply to the legal heirs of a deceased proprietor, as if the application had been submitted by the proprietor himself.|
8. Cancellation procedure in case of death of Sole Proprietor: CBI&C vide circular No. 96/15/2019-GST dated 28-3-2019 clarified the following relevant points:-
8.1 In case of death of the sole proprietor, application for cancellation of registration shall be made by legal heir/successor in form GST REG-16. The legal heir shall file a tax return up to the date of surrender of registration before filing an application for cancellation.
8.2 If legal heirs continue the business, it will be considered as the transfer of business. Input Tax Credit shall be allowed to be transferred as per section 18(3) of the CGST Act, read with rule 41 of CGST Rules. The transferee/successor shall file ITC 02 in respect of registration which is required to be cancelled. On acceptance by transferee/successor, unutilized ITC as specified in form GST ITC-02 shall be credited to electronic credit ledger of the transferee
8.3 The Transferee is liable to pay tax, interest and penalties of the deceased person, as per sections 85(1) and 93(1) of the CGST Act.
8.4 The transferee shall apply for registration in form GST REG-01 before submission of application for cancellation of registration which is in name of deceased sole proprietor. He should state reason to obtain registration as ‘death of proprietor’.
8.5 An undertaking should be furnished to the effect that no taxable supplies have been made from the date of new registration to the date of application for cancellation of registration.
9. Suo Motu cancellation of registration by Proper officer
|Section 29(2)||The proper officer may cancel the registration of a taxable person from such date, including any retrospective date in the following cases :
(a) the registered taxable person has contravened provisions of the Act or the rules made there under.
(b) a person paying tax under composition scheme has not furnished returns for three consecutive tax periods.
(c) any taxable person, other than composition dealer, has not furnished returns for a continuous period of six months.
(d) any person who has taken voluntary registration has not commenced business within six months from the date of registration.
(e) registration has been obtained by means of fraud, willful misstatement, or suppression of facts.
|first proviso to section 29(2)||The proper officer shall not cancel the registration without giving the person an opportunity of being heard- renumbered vide CGST (Amendment) Act, 2018 w.e.f. 1-2-2019|
|second proviso to section 29(2)||
During the pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner, as may be prescribed- inserted vide CGST (Amendment) Act, 2018, w.e.f. 1-2-2019.
10. Suspension of Registration ( Suo Moto Cancellation ):The GST registration would be suspended from the period of the date of application of cancellation till the date of the actual cancellation of GST registration.
|Rule 21A(2)||Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled, he may, after affording the said person a reasonable opportunity of being heard, suspend the registration of such person with effect from a date to be determined by him, till the completion of the proceedings for cancellation of registration.|
|Rule 21A(3)||A registered person, whose registration has been suspended under rule 21A(1) or rule 21A(2) of CGST Rules, shall not make any taxable supply during the period of suspension and shall not be required to furnish any return under section 39 of CGST Act.|
|Rule 21A(4)||The suspension of registration under rule 21A(1) or rule 21A(2) of CGST Rules shall be deemed to be revoked upon completion of the proceedings by the proper officer and such revocation shall be effective from the date on which the suspension had come into effect – inserted w.e.f. 1-2-2019|
11. Procedure for Suo Motu cancellation of registration:
|Rule 22(1)||If the proper officer has reasons to believe that the registration of a person is liable to be cancelled, he shall issue a notice to such person in form GST REG-17, requiring him to show cause within seven working days from the date of service of such notice as to why his registration should not be cancelled|
|Rule 22(2)||The reply to the show-cause notice issued shall be furnished in form GST REG-18 within seven days.|
|Rule 22(4)||If the reply furnished by the taxable person is found to be satisfactory, the proper officer shall drop the proceedings and pass an order in form GST REG -20|
|Proviso to rule 22(4)||If a taxable person files earlier returns with a late fee, pay taxes and other dues, the proper officer shall drop the proceedings of cancellation of registration and pass an order in form GST-REG 20– inserted w.e.f. 4-9-2018.|
12. Other relevant provisions relating to cancellation
|Section 29(3)||Liability to pay tax & other dues – The cancellation of registration under this section shall not affect the liability of the person to pay tax and other dues under this Act or to discharge any obligation under this Act or the rules made thereunder for any period prior to the date of cancellation whether or not such tax and other dues are determined before or after the date of cancellation.|
|Section 29(4)||The cancellation of registration under the CGST Act shall be deemed to be a cancellation of registration under the SGST Act.|
|Section 29(5)||Payment of tax on stock and capital goods at the time of cancellation Every registered person whose registration is cancelled shall pay an amount, by way of debit in the electronic credit register or electronic cash ledger, equivalent to the credit of input tax in respect of inputs 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.|
|proviso to Section 29(5)||In case of capital goods or plant and machinery, the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by the percentage points as may be prescribed ( 5% per quarter) in this behalf or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher|
|Section 29(6)||The amount payable under section 29(5) shall be calculated in such manner as may be prescribed.|
13. Standard Operating Procedure for cancellation of registration: The registration should be cancelled within 30 days from the date of application. The cancellation should be effective from the date of application and not earlier. The registration can be cancelled even if the tax amount is pending as cancellation of registration under section 29 does not affect the liability of the person to pay tax and other dues under the GST Act. – CBI&C Circular No. 69/43/2018-GST dated 26-10-2018
Once an application for cancellation is filed, it is not necessary to file any return, except final return in form GSTR-10 – CBI&C Circular No. 88/07/2019-GST dated 1-2-2019
The author can be approached at [email protected]
Part 20 of the series will cover the topic “Revocation of Cancellation under Sec 30 of CGST Act 2017