In recent times, we have witnessed a lot of cancellation of GST registrations by the Department due to taxpayers not complying with law by not filing the GST returns and payment of liability. GST being a new tax regime, small taxpayers are still trying to understand the law and importance of complying with law. The cost of non-compliance is huge under GST regime which is understood by small taxpayers only after cancellation of registration in some of the instances. Taxpayers are facing enormous difficulties with these cancellations. But recent 39th GST council meeting outcome that application for revocation of cancellation of registration has been extended till 30th June 2020 has been a great relief.
As per section 29(2) of CGST Act 2017, a Proper Officer may cancel the registration Suo motu after giving an opportunity to be heard in below cases
(a) registered taxable person has contravened the provisions of Act or Rules
(b) a Composition dealer registered under Section 10 has not furnished returns for three consecutive periods
(c) any taxable person other than composition dealer has not furnished the returns for a consecutive period of six months
(d) a person who has taken voluntary registration has not commenced the business within six months from date of registration
(e) registration taken by means of fraud, willful misstatement or suppression of facts
CBEC has also issued an SOP to be followed in case of non-filers of returns vide circular No 129/48/2019-GST dated 24th December 2019 detailing the process to be followed by the officers in case of returns not filed as per the due dates.
The process of revocation of registration is possible only after filing the pending returns and amount due as tax, interest and late fee has been paid. The process is explained below
a) file the pending returns after payment of liability
b) application for revocation of cancellation of registration in GST REG-21 within 30 days from the date of order of cancellation
c) Proper officer can revoke cancellation if he is satisfied by an order in form GST REG-22 within 30 days from date of receipt of application
d) Proper office may issue show cause notice in form GST REG-23 requiring applicant to show cause if he is not satisfied with the application for revocation
e) The applicant shall furnish reply in form GST REG-24 within 7 days from receipt of show cause notice
f) Proper officer may grant the revocation if satisfied or reject within 30 days from date of receipt of reply
Further, if the 30 days time limit for application for revocation expired then the process to revoke the cancellation is to file pending returns, apply for appeal with Appellate authority as per section 107(1). Authority if found satisfied may accept appeal and revoke registration cancellation.
The cancellation of registration has impacted the business of small taxpayers however they are not able to revoke the cancellation mainly in many instances not able to file the pending returns due to late filing fee being more than the tax liability. This has led to chaos and difficulty for taxpayers.
The extension for filing revocation was given upto 31st March 2019 against Order-5/2019 but the cases of cancellation by department is continuing. It is also observed that many of the taxpayers are still not used to the e-mail notices and not considering the same seriously and therefore have not utilised the revocation time limit.
Recently in 39th GST council meeting it was announced that where registrations have been cancelled till 14.03.2020, application for revocation of cancellation of registration can be filed up to 30.06.2020 (extension of period of application as one-time measure to facilitate those who want to conduct business). Notification awaited in this regard.
This is a great relief for small tax payers who’s registrations has been cancelled but want to continue their business with GST registration, however one time waiver of late filing fee for such tax payers after analyzing case to case basis by proper officer may be considered to help streamline the process much faster and providing an opportunity for the genuine tax payers who are interested to continue their business with compliance.