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, have GST registration if its annual turnover exceeds the threshold limit prescribed by the regime.
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. Cancellation 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 cancellation on their behalf. Once a GST registration is cancelled, a taxpayer is required to file a return known as the final return.
GST Cancellation Forms
Forms required for GST cancellation:
- 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 Cancellation
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 cancelled 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.
Procedure for Cancellation of GST Registration
Visit the official GST website and login into the portal
Under the service option on your dashboard, a drop-down will appear. Choose Registration and then select ‘Application for Cancellation of Registration.
Once you select ‘Application for Cancellation of Registration’ three sub-headings will appear:
- Basic details
- Cancellation details
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.
Fill in the reason for the cancellation of GST registration. The following options will be presented to you while filling in the reason for seeking cancellation of GST registration.
- Change in the constitution of business leading to change in PAN
- Ceased to be liable to pay tax
- Discontinuance of business/closure of business
- 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 cancellation of GST registration and the most desired date to effect cancellation
- 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.
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 cancellation of GST registration within 30 days.
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:
- The input credit in the form of finished or raw goods stocked one day before the cancellation
- 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:
- A reduced percentage of the input credit of capital goods.
- Tax filed on the transaction value of the above-mentioned products.
Revocation of GST Cancellation
If filed on time, revocation of GST cancellation 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 revocation, you must clear all defaults and ensure that the application is error-free. Moreover, for GST cancellation revocation, 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 revocation or cancellation of GST Registration.
Every individual whose registration has been revoked must file a final GST return 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. 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.