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Shaaransh Sharma

November 7, 2024

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Basics of GST

Cancellation of GST Registration: Section 29 of CGST

The Goods and Services Tax ( GST ) is an excellent step of the Govt to ease all VAT, CST & Service tax imposed in stages with a simple single payment pattern introduced only in the Indian Economy. Any business that carries out the taxable supply of goods or services and has a turnover exceeding the specified threshold limits must register under GST. In another case, the registration of companies for GST will inevitably end. This can happen either through voluntary cancellation at the business's request or simply as ordered by government officials. Section 29 of the Central Goods and Services Tax (CGST) Act informs us about the circumstances wherein a GST registration may be canceled.

Section 29 of CGST Act: An Overview

GST Registration Cancellation Provisions under Section 29 of the CGST Act. The grounds for cancellation under this section include discontinuation of business, non-compliance with GST provisions or return defaults.

Section 29 is divided into two key subsections:

Section 29(1): Voluntary Cancellation of Registration

This subsection allows for voluntary cancellation of GST registration by the registered person.

Section 29(2): Cancellation by Authorities

This subsection deals with cancellations initiated by the proper officer (tax authorities) under specific conditions.

Cancellation of Registration Under GST: Voluntary and Compulsory

1. Voluntary Cancellation of GST Registration

Section 29(1) of the CGST Act, a registered person to whom registration has been granted voluntarily may cancel their GST registration. When can this be the case?

The business has stopped operating or is not required to be registered under GST as per changes in turnover/business structure.
A structure has been transferred due to takeover, merger/demerger or other reasons.
A change over of business type, that is changing from normal registration to the composition scheme and vice versa clearly subject to certain conditions.

Application for cancellation of registration in the form GST REG-16 & also details to be filled online would take place at the Common Portal with (EVC) or Digital Signature Certificate.

2. Compulsory Cancellation by Authorities

If the conditions are complied with, then a taxpayer GST registration can be cancelled by tax authorities under Section 29(2) two reasons compel cancellation of didSet hence:

Non-filing of Returns: If a taxpayer is not filing their GST returns for a consecutive period, the authorities may cancel it. For existing regular taxpayers non-filing for 6 months can lead to cancellation, whereas in the case of composition taxpayers if a person does not file a return(s) [consolidated as one single] for the last three consecutive tax periods then that will be the ground for departmental proceedings started against him.
GST Provisions Breach: Cancellation of registration can also take place, in case rules and regulations related to GST are violated like if fake invoices were generated or misuse of ITC constitutes Contravention.
Discontinuation of Business: If the business is closed then, registration can be cancelled by authorization.
Alteration in Business Structure: In case a change is observed in the business structure (For example, conversion of one form to another for example from partnership to a sole proprietorship) thus leading the old entity to discontinue its operations may result in authorities canceling registration.
Failure to Start Business: In case a registered person has not started his business within 6 months from the date of registration, GST Authorities are authorized to cancel such registrations.

How to Cancel GST Registration

The process to cancel GST registration varies depending on whether it is a voluntary cancellation or one initiated by the authorities.

1. Procedure for Voluntary Cancellation

If you are looking to voluntarily cancel your GST registration, follow these steps:

Login to the GST Portal

Visit the official GST portal and log in with your credentials.

Navigate to the Cancellation Section

Go to 'Services' > 'Registration' > 'Application for Cancellation of Registration.'

Provide Reasons for Cancellation

You will need to provide a valid reason for cancellation, such as discontinuation of business, change in constitution, or turnover below the prescribed threshold.

Submit Required Documents

In certain cases, documents like a copy of the business closure certificate, transfer deed, or settlement agreement may be required.

Filing of Final Returns

Before you cancel your GST registration, you need to file all outstanding GST return. When you cancel your registration, you are also required to submit a final return (Form GSTR-10) within three months of the cancellation.

Application Review

The authorities will review your application and may ask for additional information or documents.

Confirmation of Cancellation

Once approved, the cancellation of GST registration will be confirmed, and a cancellation order will be issued.

You might also be interested in our other blog What are the Differences Between CGST and SGST?

2. Procedure for Compulsory Cancellation

If the tax authorities decide to cancel your GST registration due to non-compliance, the following process is followed:

Notice Issuance

The proper officer will issue a notice to the taxpayer stating the reason for cancellation.

Response to Notice

The taxpayer is required to respond to the notice within a specified period, explaining why their registration should not be canceled. This response is submitted in Form GST REG-18.

Decision by Authorities

Based on the response, the authorities may either withdraw the cancellation notice or proceed with the cancellation.

Final Cancellation Order

If the authorities proceed with the cancellation, they will issue a final cancellation order in Form GST REG-19.

It’s important to note that once the registration is cancelled, the taxpayer cannot continue charging GST on any supplies made after the cancellation date.

GST Cancellation: Important Considerations

Final Return

As mentioned earlier, when a GST registration is canceled, the taxpayer must file a final return in Form GSTR-10 within three months. This form helps in reporting details of any remaining stock or unpaid GST liabilities.

Reactivation of Canceled Registration

Sometimes, the taxpayer would also want to activate their cancelled GST registration. This can be done by applying for revocation in Form GST REG-21 within 30 days of the cancellation order. This application must be approved by the tax authorities.

GST Liability After Cancellation

Upon cancellation of GST registration, the taxpayer is liable to pay any outstanding taxes or interest accrued until the cancellation date. Additionally, the input tax credit (ITC) on closing stock needs to be reversed.

Latest Updates on Cancellation of GST Registration

The GST authorities have been tightening measures to ensure compliance, especially regarding the filing of returns. Recent updates include:

Strict Monitoring of Non-filers

Nevertheless, the primary reason behind such cancellations remains the non-filing of GST returns. Over the past few months, authorities have begun mass cancellation drives against businesses that haven't filed returns for an extended duration.

Facilitation for Small Taxpayers

Under a gazette notification issued by the government, small taxpayers can cancel their registration as soon as taxable turnover falls below the prescribed limit.

Especially after COVID-19 forced businesses to close.

Amnesty Schemes

The government, in a few earlier cases, has also brought about amnesty schemes to waive late fees and provide some respite to defaulting taxpayers however such ad hoc opportunities for compliance will be an exception rather than a rule before cancellation.

Conclusion

Cancellation of GST registration subject to compliance with the list should be an important part that every business needs to comply under GST. This has also financial and legal outcomes either voluntary or involuntary. Section 29 of the CGST Act provides a detailed procedure for cancellation as well as registration both voluntarily and on initiation by authorities. Compliance is mandatory, before filing final returns paying all due amounts cancelling the same.

This in the same way will eventually cause an automatic deregistration at more and more dispersed revision of laws. Understanding the procedure of cancellation of your GST registration and its penalty in terms of law is important to comply with the provision of GST Laws.

FAQs

1. Can I cancel my GST registration voluntarily?

You may cancel GST registration voluntarily however if your business is not in operation or your turnover goes below the specific limits as prescribed under Section 29(1) of the CGST Act. You can file and get GST cancellation done from the GST portal by providing all relevant details along with documents.

2. What happens if I don’t file GST returns?

If a regular taxpayer does not file GST returns for 6 months in succession (or 3 tax periods, if you are a composition taxpayer), your jurisdictional authorities will cancel this under Section 29(2).

3. How do I cancel my GST registration online?

Login to GST Portal Go to Services>Registration>Application for Cancellation of Registration. Fill up the details and submit it. You will have to cancel with a reason for such and also file any pending returns including the final return.

4. What is the final return after GST cancellation?

The final return (Form GSTR-10) must be filed within three months of cancellation. It reports details of any remaining stock and outstanding tax liabilities at the time of cancellation.

5. Can I reactivate a cancelled GST registration?

If your GST registration has been cancelled then you can apply for revocation within 30 days via Form GST REG-21. The reactivation will be analyzed by the authorities, who may choose to approve it.

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