Suspension of GST Registration with effect from 1st February, 2019

The insertion of the provisions relating to the suspension of GST registration is a welcome step for the GST registered taxpayer. With the insertion of suspension provisions, all those taxpayers who have applied for cancellation of GST registration would be relieved from the continuous compliance burden under the GST law during the period when the cancellation proceedings are in process.

Following are the two amendment which is being done in the Act and the rules with regard to the suspension of GST registration –

1. Proviso inserted in section 29 of the CGST Act, 2017; and

2. New rule 21Aintroduced in the CGST Rules, 2017.

Both the above amendments are being briefly explained in the below mentioned paras.

EFFECTIVE AMENDMENT IN THE CGST ACT, 2017 WITH REGARD TO THE SUSPENSION OF GST REGISTRATION – 

Section 29 of the CGST Act, 2017 deals with provisions of the cancellation of GST registration. Vide the Central Goods and Service Tax (Amendment) Act, 2018, effective from 1^st February, 2019, section 29 of the CGST Act, 2017 has under gone following amendments –

• The heading of the section has been amended from ‘Cancellation of Registration’ to ‘Cancellation or Suspension of Registration’.
• Entire new proviso has been inserted to section 29 (1) and the same is reproduced hereunder for ready reference –

 ‘Provided that during the pendency of the proceedings relating to the cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed’ 

The above referred proviso simply states that the GST registration during the period of the date of application of cancellation of GST registration and the date of actual cancellation of GST registration would be suspended.

EFFECTIVE AMENDMENT IN THE CGST RULES, 2017 WITH REGARD TO THE SUSPENSION OF GST REGISTRATION – 

In order to give an effect of the suspension of GST registration, entire new rule 21A has been inserted into the CGST Rules, 2017, vide the Central Goods and Service Tax (Amendment) Rules, 2019 effective from 1^st February, 2019 and the gist of the newly inserted rule is being explained hereunder –

DEEMING PROVISION OF SUSPENSION – 

The deeming provision of suspension of GST registration shall be effective when the registered person has applied for the cancellation of GST registration. The effective date of suspension of GST registration would be later of the following –

• Date of submission of registration cancellation application; or
• Date from which the cancellation is sought.

SUSPENSION OF GST REGISTRATION BY THE PROPER OFFICER – 

The proper officer, has been bestowed upon the right to, cancel the GST registration of any registered person, if he has a reason to believe that the registration of the person is liable to be cancelled.

However, the proper officer has to follow the entire procedure laid down under rule 22 of the CGST Rules, 2017 before cancelling such registration and the said procedure requires appropriate time.

Thus in such case, where the proceeding for cancellation of GST registration has been initiated by the proper officer, the proper officer can suspend the registration of such person. However, before the suspension of GST registration, the proper officer is required to give the registered person a reasonable opportunity of being heard. The date of suspension of GST registration would be determined by the proper officer.

EFFECT OF SUSPENSION OF GST REGISTRATION –

On suspension of GST registration –

• Such a person cannot make any taxable supply after suspension of GST registration; and
• Such a person is not required to furnish any returns as required under section 39 of the Central Goods and Service Tax Act, 2017.

The main benefit of the suspension of GST registration, from the point of view of the registered person, is that he would be freed up from the return compliance under GST.

REVOCATION OF SUSPENSION OF GST REGISTRATION –

Once the proceeding of cancellation of GST registration is being completed by the proper officer, the suspension of GST registration shall be revoked.

The revocation of suspension of GST registration shall be effective from the date on which the suspension had come into effect.