GST Laws stipulates that any supplier of goods, services or both must register as a GST Act if their aggregate turnover of more than Rs. 20 lakhs in a year (Rs.10 lakhs in Special Category States) have to obtain GST registration. If the supplier is only supplying goods, then threshold limit is Rs. 40 lakhs in a year (Rs.20 lakhs in Special Category States) subject to the condition that State has opted for this higher threshold limit.

MANDATORY GST REGISTRATION

Notwithstanding anything contained in sub-section (1) of section 22 of CGST Act’2017, the following categories of persons shall be required to be registered under this Act irrespective of the aggregate turnover like:

  • Person making any inter-State taxable supply
  • Casual taxable persons making taxable supply
  • Persons who are required to pay tax under reverse charge
  • Electronic Commerce Operator
  • Non-resident taxable persons making taxable supply
  • Persons who are required to deduct tax under section 51, whether or not separately registered under this Act
  • Persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise
  • Input Service Distributor, whether or not separately registered under this Act
  • OIDAR services from a place outside India to an unregistered person in India

SUSPENSION OF GST REGISTRATION

Section 29 of CGST Act’2017 was amended vide the Central Goods and Services Tax (Amendment) Act, 2018, w.e.f. 1-2-2019. This was done to add provisions with respect to “Suspension” of Registrations. Extract of new proviso was inserted to section 29 (1) is as follows–

“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”

A new Rule 21A “Suspension of Registration” was inserted by the Central Goods and Services Tax (Amendment) Rules, 2019, w.e.f. 1-2-2019. Extract of Rule 21A (2) is as follows:

“(2) Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29 or under rule 21, he may , suspend the registration of such person with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration under rule 22.”

Standard Operating Procedure (SOP) for implementation of the provision of suspension of registrations under sub-rule (2A) of rule 21A of CGST Rules, 2017 was issued vide circular No 145/01/2021-GST dated 11.01.2021.

SUSPENSION OF GST REGISTRATION IS A MENACE TO SIMPLIFICATION

Initial GST Laws did not had provisions for Suspension of GST Registration but was introduced later. The problem in today’s scenario is that Departmental Officers have started suspending GST Registrations on minor lapses. Suspension of a registration of Registered Person has its own consequences. It brings entire business to a stand-still. “1,63,000 GST registrations cancelled in Oct & Nov ’20”. This was like paradigm shifts in approach of Department from 2017 to 2020 when in 2017 they sometimes granted GST Registration without proper checking of documents and in 2020 they went on a sort of killing spree by cancelling more than lakh of GST Registrations. The action of cancelling huge numbers of GST Registrations, was claimed as part of the ongoing crusade against the menace of fake registrations, fly-by-night operators circular trading entities. But some genuine Registered Persons also suffered the blow. One more problem sometime is that while cancelling or Suspending the Registration Principles of Natural Justice is not followed.

SUSPENSION & CANCELLATION OF GST REGISTRATIONS FOR WORK FROM HOME DUE TO COVID

There is a surge of cases where Department is cancelling GST Registrations when the party is not available on the working place but working from home due to corona/covid pandemic. Such approach of the Department is against the spirit of “Ease of doing Business.”

CAN BE CARRIED FROM RESIDENTIAL UNIT?

Whether business can be carried from Residential Unit was matter before West Bengal Tax Tribunal in case of Puspa Lohia vs Sales Tax Officer, Durgapur Range [(2009) 21 VST (Tri.) (WB) / (2007) 9 TMI 588 (WBTT)] / (2009) 12 STM 702 (WBTT)] ?

Department made a visit to the registered premises of the assessee and cancelled the Registration on the ground that assessee had no office room to carry on her business and had no godown or warehouse and her declared place of business was a residential premises. Aggrieved by this Cancellation assessee contested and matter went to West Bengal Tax Tribunal.

Assessee asserted that she carried on business at the premises recorded in the registration certificate, maintained records in the office which was also maintained at the said premises, and that she also kept goods imported by her at the said premises. She contended that section 24 of the WB VAT Act, 2003 does not require her to have godown or warehouse and that no restrictions are imposed by the WB VAT Act, 2003 for carrying on business from residents.

Department countered that the place of business is residential place. No office room nor any godown are found there. The place of business is a dwelling house.

Assessee submitted that the taxation law does not require maintenance of godown for obtaining registration certificate and no restrictions have been imposed by sales tax law for maintenance of office and for carrying on business at residential premises.

Section 2(29) of the WB VAT Act, 2003 provides,place of business means any place “where a dealer has set up a business of selling or purchasing goods or a place from where a dealer sells any goods or where he keeps accounts, registers or documents, including those in the form of electronic records relating to sales or purchases of goods or execution of works contract and digital signature certificate granted under sub-section (4) of section 35 of the Information Technology Act, 2000 (21 of 2000), relating to his business, and includes any place where the dealer processes, produces or manufactures goods or executes works contract and any warehouse of such dealer”.

West Bengal Tax Tribunal held that, “Where business is carried from Residential Unit and the dealer had not declared any godown, warehouse or separate office, cancellation of certificate of registration on that ground alone not justified.”

Work From Home Has “GST Registration” Challenge

CAN GST REGISTRATION BE CANCELLED ON HYPER-TECHNICAL GROUND?

Whether GST Registration can be cancelled on Hyper-Technical ground or not this was matter before Calcutta High Court in case of M/s. CIGFIL Retail Pvt. Ltd. vs Union of India, [2021-VIL-800-CAL] / [2021 (11) TMI 438] ?

There was minor defect in the sub-let agreement. Department alleged non-existence of the petitioner at the registered place. GST Registration of the assessee was cancelled. Aggrieved against this cancellation order Assessee filed an appeal and claimed that the impugned order of cancellation of registration was “purely on technical ground” of minor defect in the sub-let agreement. So far as allegation of non-existence of the petitioner at the registered place is concerned, it is the case of the petitioner that during Covid-19, to avoid the violation of Covid-19 protocol, it was carrying on business from some other places and during this period it had paid tax to the State respondents from time to time and the State respondents/GST Authority concerned have received taxes under the GST for carrying on business at the relevant period, which are all parts of record.

Calcutta High Court held that, “it is not a case of tax evasion or causing revenue loss to the Government rather petitioner’s activity of carrying on the business which cannot be called illegal is creating revenue for the State as well as in helping the State to solve the problem of unemployment a little bit and such type of drastic action in the facts and circumstances of the case by cancelling the registration of the petitioner on such hyper technical ground will not help the State rather it will cause revenue loss to the State as well as aggravate unemployment problem in the State which will be a social problem in the society.” The cancellation order was set aside. It further held that, “the Respondent (Department) concerned will make a physical inspection of the premises in question upon notice to the petitioner and give opportunity to the petitioner to place all the documents to satisfy the respondent concerned about the actual physical possession of the petitioner at the premises in question and the respondent concerned may verify the existence of the petitioner at the premises in question as well as carrying on business activity of the petitioner from the premises in question from the local people and take a final decision by not taking a hyper technical view and pass a reasoned and speaking order after giving opportunity of hearing to the petitioner or its authorized representatives.”

CAN GST REGISTRATION BE CANCELLED ON THE GROUND THAT BUSINESS ACTIVITY WAS NOT CARRIED OUT FROM PRINCIPAL PLACE OF BUSINESS?

Work from Home. Cancellation of GST registration on the ground that business activity was not carried out from principal place of business, whether justified? This was before Calcutta High Court in case of International Value Retail Private Limited vs UOI, [2021-VIL-743-CAL] / [2021 (10) TMI 312].

In this case petitioner was not carrying his business from the premises in question from officially registered premises and they were carrying business in question from home due to prevailing covid-19 situation. Department cancelled the GST registration, petitioner applied for revocation of gst registration which was cancelled. Petitioner approached Calcutta High Court against the impugned order. Assessee urged that only due to extra-ordinary compelling circumstances of Covid-19 and in following the protocol temporarily they were not carrying his business from the from officially registered premises and were carrying business in question from home.

Calcutta High Court directed the respondents (Department) concerned to consider afresh and dispose of the petitioner’s application for revocation of cancellation of its registration of the petitioner under GST Act in accordance with law and by passing a reasoned and speaking order after giving opportunity of hearing to the petitioner or its authorized representative.

EFFECT OF SUSPENSION OF GST REGISTRATION ON SUSPENSION OF GST REGISTRATION:

There are various problems if GST Registration is suspended:

  • Such a person cannot make any taxable supply after suspension of GST Registration
  • Such a person is not required to furnish any returns as required under section 39 of the Central Goods and Service Tax Act, 2017; and
  • Such a person will not be granted any refund under Section 54, during the suspension of the registration.

GST REGISTRATION IS ONLY A REGULATORY MEASURE & DENIAL IS AGAINST ARTICLE 19 OF CONSTITUTION OF INDIA

Sales Tax Registration (now GST Registration) is a regulatory measure and denial of registration, in almost all cases, will lead to a situation that a person is prevented from attending a Profession or Trade. – Kerala High Court in case of P.Y. Mustaffa, Kanokom Traders, Erattupetta vs Addl. Sales Tax Officer, Pala & Anr., [(2002) 10 KTR 192 (Ker.)]

ARTICLE 19 IN THE CONSTITUTION OF INDIA 1949

Protection of certain rights regarding freedom of speech etc

(1) All citizens shall have the right

(a) to freedom of speech and expression;(b) to assemble peaceably and without arms;

(c) to form associations or unions;

(d) to move freely throughout the territory of India;

(e) to reside and settle in any part of the territory of India; and

(f) omitted

(g) to practise any profession, or to carry on any occupation, trade or business.

The right to carry on a business includes a right to close it anytime the owner likes. Supreme Court in Hathising Mfg. Co. vs Union of India, AIR 1960 SC 923. So, the State cannot compel a citizen to carry on a business against his will. Similarly, the States have no right to compel someone to close his business against his will but that’s exactly what’s happening with cancellation of GST Registrations.

Founding Father’s of Constitution have considered right to practice and carry any occupation, trade or business as Fundamental Right but GST Department current actions are not in sync with this. Right to Trade is a Fundamental Right and cancellation of GST Registration may even go to violate this fundamental right of a person guaranteed under Article 19 of the Constitution.

CONCLUSION

GST Department have sufficient powers under GST Laws to monitor the activities of a Registered Dealer. If there appear any suspicious circumstances or improper functioning they can use stringent provisions but cancelling the Registration should be used only in extreme situations. Honourable Rajasthan High Court is also same view, “In COVID times, authorities ought to have made efforts to consider revocation of cancellation of registration.”Alankar Engineers vs. Union of India [2020] 117 taxmann.com 467 (Rajasthan). “Suspension of registration under GST is worse than cancellation. Suspension brings the entire business to standstill and is worse than cancellation. Against cancellation, an assessee can take legal remedies but against suspension pending an enquiry, even if the assessee chooses to take remedies, the authorities or the Court(s) the authorities and Courts would normally show reluctance.” – Rajasthan High Court in Avon Udhyog vs. State of Rajasthan [2021] 128 taxmann.com 122 (Rajasthan)

Though the number of people working partially or fully remote has been on the rise for years now, the COVID-19 pandemic may have pressed the fast-forward button on this trend. COVID-19 has lead to more and more employees working from home (WFH). COVID-19 also created many entrepreneurs or small businesses to start work from home. People are loving Work from Home because of flexible schedule, the ability to work from any location, and no more commuting to name a few.

Due to Corona pandemic small business owners work from home at least part of the time. Therefore, considering this fact GST Department should take lenient view while suspending or cancelling GST Registration and should consider that a person might be working from home due to Covid-19 problem. I also urge CBIC to issue Guideline for “Work from Home” cases.

Author Bio

Qualification: CA in Practice
Company: Abhishek Raja and Associates
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Member Since: 18 Aug 2018 | Total Posts: 17
Abhishek Raja Ram - Popularly known as "Revolutionary Raja" is FCA, DISA, Certificate Courses on – Valuation, Indirect Taxes , GST etc, M. Com (F&T) Mr. Abhishek Raja “Ram” is a Fellow member of ICAI, qualified in 2006, and holds Master’s-Degree in Commerce. He has more than a 15 ye View Full Profile

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