Today we are discussing, Cancellation of GST registration.

Cancellation of GSR registration implies that taxpayer will no longer be a GST registered person any more. He will not have to pay or be able to collect GST or claim input tax credit and accordingly, doesn’t need to file GST returns.

The relevant provisions pertaining to cancellation / suspension of GST Registration are Section 29 of CGST Act, 2017 read with Rule 20, 21, 21A, 22 of CGST Rules, 2017.

Section 29: Cancellation/Suspension of GST Registration

Section 29: Cancellation/ Suspension of Registration

Section 29(1) 

APPLICATION FOR CANCELLATION

The proper officer may,

either Suo moto or on application filed by the registered person/ by his legal heirs (in case of death of such person)

cancel the registration, in manner and within such period as may be prescribed in the rules, where,–

(a) the business has been discontinued, transferred fully for reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or

(b) there is any change in the constitution of the business; or

(c) the taxable person is no longer liable to be registered u/s 22 or 24 or intends to optout of the registration voluntarily made u/s 25(3)

Provided, during 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.

Section 29(2) 

CANCELLATION BY PROPER OFFICER

The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where,–

(a) a registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or

(b) a person paying tax under section 10 has not furnished returns for three consecutive tax periods; or

(c) any registered person, other than a person specified in clause (b), has not furnished returns for a continuous period of six months; or

(d) any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or

(e) registration has been obtained by means of fraud, wilful misstatement or suppression of facts:

Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard:

Provided further that during pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration

Section 29(3) 

CANCELLLATION DOESN’T AFFECTS LIABILITY 

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) 

CANCELLATION FOR BOTH AT ONCE

The cancellation of registration under the SGST Act/ UTGST Act, as the case may be, shall be deemed to be a cancellation of registration under the CGST Act.
Section 29(5) 

PAYOFF  OF DEBTS

Every registered person whose registration is canceled,

u shall pay an amount, by way of debit in the E-credit ledger/ E-cash ledger,

u equivalent to the ITC w.r.t. inputs held in stock and ITC contained in semi-finished or finished goods held in stock or capital goods or plant and machinery

u 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 may be prescribed

Provided that in case of capital goods or plant and machinery, the taxable person shall pay an amount equal to

Amount Payable = ITC  taken on the said capital goods or plant and machinery LESS Percentage points/tax on the transaction value of such capital goods or plant and machinery under section 15 of CGST Act,2017, whichever is higher.

Section 29(6)  The amount payable under sub-section (5) shall be calculated in such manner as may be prescribed

Rule 20 Application for cancellation of registration

A registered person,

  • other than a person to whom a registration has been granted under rule 12 (persons required to deduct tax at source or to collect tax at source)
  • or a person to whom a Unique Identity Number has been granted under rule 17

seeking cancellation of his registration u/s 29(1) shall electronically submit an application in FORM GST REG16,

  • including therein the details of inputs held in stock /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,
  •  the details of the payment, if any, made against such liability and may furnish, along with the application, relevant documents etc., at the common portal within 30 days of the occurrence of the event warranting the cancellation

Rule 21 : Registration to be canceled in certain cases

The registration granted to a person is liable to be canceled, if the said person,-

(a) does not conduct any business from the declared place of business; or

(b) issues invoice or bill without supply of goods &/or services in violation of the provisions of this Act, or the rules made thereunder; or

(c) violates the provisions of section 171 of the Act or the rules made thereunder

(d) violates the provision of rule 10A

(e) avails input tax credit in violation of the provisions of section 16 of the Act or the rules made thereunder; or

(f) furnishes the details of outward supplies in FORM GSTR-1 under section 37 for one or more tax periods which is in excess of the outward supplies declared by him in his valid return under section 39 for the said tax periods; or

(g) violates the provision of rule 86B.

RULE 21A : SUSPENSION OF REGISTRATION

Rule 21A(1)

Deemed Suspension

Where a registered person has applied for cancellation of registration under rule 20,

l the registration shall be deemed to be suspended from the date of submission of the application OR

l the date from which the cancellation is sought,

l whichever is later,

pending the completion of proceedings for cancellation of registration under rule 22.

Rule 21A(2)

Suspension by Proper officer

Where the proper officer has reasons to believe that

l the registration of a person is liable to be canceled u/s 29 or u/r 21,

l Then he may, suspend the registration of such person with effect from a date to be determined by him

l [after affording the said person a reasonable opportunity of being heard,]

pending the completion of proceedings for cancellation of registration under rule 22

Rule 21A (2A) Where, a comparison of the returns furnished by a registered person under section 39 with

(a) the details of outward supplies furnished in FORM GSTR-1; or

(b) the details of inward supplies derived based on the details of outward supplies furnished by his suppliers in their FORM GSTR-1,

or such other analysis, as may be carried out on the recommendations of the Council, show that there are significant differences or anomalies indicating contravention of the provisions of the Act or the rules made thereunder, leading to cancellation of registration of the said person, his registration shall be suspended and the said person shall be intimated in FORM GST REG-31, electronically, on the common portal, or by sending a communication to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said differences and anomalies and asking him to explain, within a period of thirty days, as to why his registration shall not be canceled

Rule 21A(3) 

NO TAXABLE SUPPLIES, NO RETURN

A registered person, whose registration has been suspended under Rule 21A(1)/(2)/(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.-For the purposes of this sub-rule, 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) The suspension of registration under rule 21A (1)/(2)/(2A) 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.

Provided that the suspension of registration under this rule may be revoked by the proper officer, anytime during the pendency of the proceedings for cancellation, if he deems fit.

Rule 21A (5)  Where any order having the effect of revocation of suspension of registration has been passed, the provisions of clause (a) of sub-section (3) of section 31 and section 40 in respect of the supplies made during the period of suspension and the procedure specified therein shall apply

RULE 22 : CANCELLATION OF REGISTRATION

Rule 22(1)  Where the proper officer has reasons to believe that the registration of a person is liable to be canceled under section 29, he shall issue a notice to such person in FORM GST REG-17,requiring him to show cause, within a period of seven working days from the date of the service of such notice, as to why his registration shall not be canceled.
Rule 22(2)  The reply to the show cause notice issued under sub-rule (1) shall be furnished in FORM REG–18 within the period specified in the said sub-rule
Rule 22(3)  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 canceled, 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 [sub-rule (1) of] 42 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
Rule 22(4)  Where the reply furnished under sub-rule (2) [or in response to the notice issued under sub-rule (2A) of rule 21A] is found to be satisfactory, the proper officer shall drop the proceedings and pass an order in FORM GST REG –20:

Provided that where the person instead of replying to the notice served under sub-rule (1) for contravention of the provisions contained in clause (b) or clause (c) of sub-section (2) of section 29, furnishes all the pending returns and makes full payment of the tax dues along with applicable interest and late fee, the proper officer shall drop the proceedings and pass an order in FORM GST-REG 20

Rule 22(5)  The provisions of sub-rule (3) shall, mutatis mutandis, apply to the legal heirs of a deceased proprietor, as if the application had been submitted by the proprietor himself.

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