GST has helped bring several indirect taxes and service charges under one bracket. Registration under the GST regime is crucial for the smooth functioning of business operations. However, there is scope for the cancellation of GST registration; keep reading to know more.

Introduced back in 2017, the GST regime brings together several service charges and indirect taxes under one roof. Any business in India, whether it deals with goods, services, or both, has goods and service tax termination if its annual turnover exceeds the threshold limit prescribed by the regime.  Know more about the process on how to Close GST Registration.

Certain industries must comply with the GST rules regardless of their gross annual turnover. However, whether or not registration is mandatory, one can choose to cancel their registration if they have valid grounds. 

GST Registration can be cancelled for a variety of reasons. Termination can be initiated by the GST department of its own volition or by registered persons themselves. In the event of a registered person’s death, their legal heirs may petition for termination on their behalf. Once a GST registration is cancelled, a taxpayer is required to file a return known as the final return. 

GST Termination Forms

Forms required for Goods and Service Tax Termination:

• For cancellation by a registered individual – Form GST REG 16
• For the issue of show cause notice for cancellation – Form GST REG 17
• For replying to a show-cause notice – Form GST REG 18
• For the purpose of an order for dissolution – Form GST REG 19
• To stop the cancellation proceedings – Form GST REG 20  
• To stay proceedings – Form GST REG 18
• To apply for revoking cancellation – Form GST REG 21
• For an order revoking the cancellation – Form GST REG 22

Common Reasons for GST Termination

Section 29 of the CGST Act of 2017 lays down the rules and documents necessary to cancel your registration under the GST law. According to Section 29(1), the proper officer may cancel the registration at his discretion or based on an application filed by the registered person or his legal heirs in the following circumstances:

• If the business is being discontinued
• If there are significant changes in the PAN card
• If there is a change in the company’s constitution
• If the business was amalgamated with another legal entity, demerged, or otherwise disposed of
• If the company was transferred fully to someone else, including on the death of the proprietor
• If the annual turnover is less than the prescribed threshold

Please do keep in mind that, after amendment, even taxpayers who have voluntarily registered for GST, even if their turnover is less than the prescribed threshold, can cancel their registration within one year from registration.

Moreover, if you are a tax deductor, tax collector, or taxpayer with an assigned UIN (Unique Identity Number), you cannot seek cancellation.

Cancellation By The Tax Officer

GST registration can be canceled by the GST tax officer if the taxpayer 

• Does not operate any business in the declared location of the business 
• Even without the supply of goods/services, issues an invoice or a bill, in violation of the GST provisions
• Violates the anti-profiteering regulations, for instance, not passing on the benefit of ITC to customers

With effect from January 2021, GST registration can be cancelled under CGST Rule 21 at the discretion of the GST tax officer in the following cases:

• With few exceptions, when the taxpayer makes use of the ITC from the electronic credit ledger to discharge more than 99 % of the tax liability for specified taxpayers – where the total taxable value of supply exceeds over ₹50 lakh in a month.
• When a taxpayer has not filed GSTR-1 because GSTR-3B has not been filed for more than two consecutive months (one quarter for those who opt into the QRMP scheme)
• When the taxpayer avails Input Tax Credit in contravention to the provisions of section 16 of the GST Act or any of the GST rules.

Who is Eligible for GST Cancellation?

The people listed below are eligible to apply for GST cancellation: 

GST Cancellation Requested by the Taxpayer

Taxpayers with a GST registration may choose to initiate the cancellation process on their own. This could be the case because they think there’s no need for registration or because they meet certain requirements for cancellation.

GST Cancellation Requested by Legal Heirs

Should a lone proprietor die, the legal heirs will be the ones with the duty and power to ask that the business’s GST registration be cancelled.

GST Cancellation Requested By Tax Authorities 

Tax authorities have the authority to terminate a taxpayer’s GST registration if they discover any irregularities in the taxpayer’s operations or records or noncompliance with the regulations. They can use the GST REG-17 form to release a show-cause notice in order to start this process.

Who Cannot File for Cancellation of Registration Under GST?

Tax Deductors/Collectors 

The right to request the cancellation of a GST registration is not available to people or organisations that are specifically registered to collect or deduct taxes 

Owners of Unique Identity Numbers (UINs)

Those with UINs, such as foreign diplomatic missions or United Nations agencies, are not eligible to apply for the cancellation of their GST registration. Their primary use for this UIN is to file tax refund claims for the supplies they have received.

Consequence of Cancellation of GST registration

• The taxpayer will no longer have to pay GST 
• In the event that the GST registration is cancelled but business is carried on, there will be severe fines and an offence under the GST laws.

Required Information for Cancellation Of GST Registration

• Email address and mobile number are included in the contact address 
• Reasons for cancelling  
• The preferred cancellation date 
• Specifics regarding the cost and taxes due on the capital goods/plant and machinery stock, the inputs available in semi-finished goods, the inputs available in finished goods, and the inputs available in stock 
• Information about entity registration in the event that the current unit was transferred, merged, or amalgamated 
• Details from the taxpayer’s most recent return, together with the ARN for that specific return.

Procedure for Termination of GST Registration

Step 1

Visit the official GST website and login into the portal

Step 2

Under the service option on your dashboard, a drop-down will appear. Choose Registration and then select  ‘Application for Termination of Registration.

Once you select ‘Application for Termination of Registration’ three sub-headings will appear:

1. Basic details
2. Cancellation details
3. Verification

Step 3

Fill in the details that are required and then click on the ‘Save and Continue’ Button. If the address of your business and the address for future correspondence is the same then click on the ‘Same as the above’ option.

Step 4

Fill in the reason for the termination of GST registration. The following options will be presented to you while filling in the reason for seeking of GST registration termination.

• Change in the constitution of business leading to change in PAN Card.
• Ceased to be liable to pay tax
• Discontinuance of business/closure of business
• Others
• Transfer of business on account of amalgamation, de-merger, sale, leased, or otherwise
• Death of sole proprietor

Information Required to Fill the Cancellation Form

• Address, email ID, and registered mobile number
• Reason for termination of GST registration and the most desired date to effect termination
• Details of the last return filed by the taxpayer
• When the existing unit is merged/de-merged/transferred, etc., the GST registration details of the new entity
• Particulars on which tax is payable: namely 
  • The stock of input and capital
  • Input available on semi-finished and finished goods

Please note that you will be required to manually fill in the value of your tax liability. You would also be required to fill in either an electronic cash ledger or an electronic credit ledger to set off tax liability.

Step 5

On furnishing the reasons for cancellation and the required details, a ‘Verification’ option will appear.

Fill in the name of the authorised signatory and the place of making the declaration.  An OTP will also be generated in this step.

Choose the relevant option to submit depending upon the signatory. For instance, in the case of a company or LLP, a DSC is mandatory for verification.

Note – The above step is valid only when an invoice has not been issued. In case a taxpayer has issued an invoice, he/she would be required to fill out GST REG-16 instead. When GST REG-16 is filed by a taxpayer, the tax officer must issue the order of termination of GST registration within 30 days.

Use our GST calculator to determine the exact amount of GST to be paid before registering for GST.

Pending Tax Liability

Pending tax liabilities and obligations have no bearing on the cancellation of your registration in any way. Such obligations can still be easily discharged. When you cancel your registration, you must pay a fee that is greater than:

1. The input credit in the form of finished or raw goods stocked one day before the cancellation
2. The output tax for the products, as mentioned above.

In terms of capital and machinery costs, an amount is to be paid that is higher than:

1. A reduced percentage of the input credit of capital goods.
2. Tax filed on the transaction value of the above-mentioned products.

GST Cancellation

If filed on time, Revocation of GST registration is possible. If a proper officer has issued a cancellation order, you can use Form GST REG 21 to request that it be revoked. Furthermore, this form must be submitted within 30 days of requesting cancellation.

Before applying for cancellation, you must clear all defaults and ensure that the application is error-free. Moreover, for GST cancellation, all pending returns must be filed and all outstanding debts must be paid in full. When an officer is satisfied that all the above-mentioned conditions are met he or she may issue Form GST REG 22 for the termination of GST Registration.

Final Return

Every individual whose registration has been revoked must file a final GST Return Filings on Form GSTR-10 within three months of the date of cancellation or the date of cancellation order, whichever is later. This is mandated to ensure that the taxpayer is discharged of any liabilities that might have arisen. It is also worth mentioning that this provision does not apply to input service distributors and non-resident taxpayers who are required to pay tax under sections 10, 51, or 52.

No GST matter should be dealt with lightly. The utmost care and diligence should be exercised while cancelling your GST registration: https://reg.gst.gov.in/registration/. Hence, it is recommended that you get a hold of one of our GST specialists today! Enjoy a hassle-free and trouble-free GST cancellation experience, only with Vakilsearch.

FAQs

Can I cancel my GST registration if I have multiple registrations in different states?

You can cancel your GST registration in one state while maintaining others if you have multiple registrations. Each state’s registration is treated separately, so cancellation in one does not affect the others.

What if my application for GST cancellation is rejected?

If your GST cancellation application is rejected, you must address the issues raised and resubmit or rectify the application as needed.

How long does it take for GST cancellation to be processed?

The GST cancellation process typically takes around 30 days, but it can vary based on the complexity of your case and the state’s processing times.

How does GST cancellation affect my input tax credit?

Upon GST cancellation, your input tax credit is not automatically lost; however, you must properly account for and utilise it as per GST regulations before cancellation is finalised.

Will I face any penalties if I continue business without GST registration post-cancellation?

Continuing business without a valid GST registration post-cancellation can lead to penalties and legal consequences. Ensure you either reinstate your registration or properly wind up your business to avoid issues.