Suo Moto Cancellation of GST Registration: Procedure, Preconditions, and Reinstatement
Goods and Services Tax has redefined the tax landscape in India and introduced uniformity by taking away from the businesses the hassle of individualized tax complications. Having a GST registration is essential for businesses to function legally about complying with the law obligations. However, what happens when a business defaults on its GST obligations? The authorities might take it upon themselves to cancel a business's GST registration. This is known as Suo Moto Cancellation. This can have very serious aftereffects but can equally highlight errors that need to be corrected for compliance.
This article will encompass the major aspects of Suo Moto Cancellation including the reasons, the process involved, the consequences, and the measures taken to restore GST registration once canceled.
Table of Contents
What are the Pre-conditions for Suo Moto Cancellation of GST Registration?
Before discussing the procedural steps of the process of cancellation, it is important to know what conditions exist under which authorities can initiate Suo Moto cancellation. The GST law permits tax authorities to cancel GST registration in given situations where a business goes into default on its tax dues. These are not arbitrary decisions but based on specific preconditions. These include:
Non-filing of Returns: If a registered taxpayer does not file GST returns for some period, then authorities are empowered to cancel the same under Suo Moto cancellation. Currently, cancellation is possible in case of a regular taxpayer who fails to furnish returns for 6 consecutive months or if a composition dealer fails to furnish returns for 3 consecutive quarters.
Failure to Commence Business: After obtaining GST registration, if a taxpayer does not commence business activities within 6 months from the date of registration, this could lead to Suo Moto cancellation of GST registration. Thus, the GST registration is held only by those businesses that have actively started performing the activities involved in the business.
Misleading Information in Application: If the authorities find any discrepancies or false details in the registration application, it may Suo Moto cancel the GST registration. For instance, if any business gives a false address or an invalid identity proof, then it is a valid reason for cancellation under Suo Moto.
Violation of GST Laws: In general, any violation of provisions in the GST laws can result in the cancellation process. This includes tax evasion and fraudulent invoices along with various illegal activities. Where the authorities suspect fraudulent intention, they can proceed and cancel registration.
Business Closing or Changes: The authorities might cancel the registration in cases where a business ceases operations or is transferred to another entity without informing the GST department. Therefore, it is in the best interest of businesses to inform the authorities in such situations so that automatic cancellations do not take place.
These preconditions stipulate that the cancellation process should only be carried on in cases of major non-compliance or misinformation. This process safeguards the interest of the genuine taxpayer while penalizing the defaulters.
What is the Procedure for Suo Moto Cancellation of GST Registration?
The Suo Moto cancellation process is very structured. In this process, the taxpayer and the authority undergo a very structured approach. When such a default by the taxpayer is detected by the tax authority, the cancellation is not initiated there and then. There are various stages involved in the process, such as:
Issue of SCN: Before canceling the registration of GST, the authorities have to issue a notice SCN to the taxpayer. The notice generally is sent through e-mail and through SMS requiring the taxpayer to respond to why the default has occurred. Generally, the taxpayer responds to the SCN within 15 days.
Response to the Notice: The taxpayer can respond to the show-cause notice either by giving justification for non-compliance or by rectification. For instance, if there is an accounting mistake and some returns are missed, then the taxpayer can rectify the error and file all those pending returns within the notice period.
Review by Authorities: If the response is satisfactory, the authorities may drop the cancellation proceedings and allow the business to continue operations under the same GST number. If the explanation is unsatisfactory or no response is received, the authorities proceed with cancellation.
Issuance of Cancellation Order: Unsatisfactory or no response from the concerned authorities would be a ground for issuing a cancellation order. This order of cancellation would carry the reason for cancellation and shall explicitly mention from which date the cancellation is effective. It must also be noted that sometimes, the GST cancellation may be retrospective in nature.
Communication of the Cancellation: The final cancellation order is transmitted to the taxpayer through the GST portal, email, and SMS. The taxpayer can no longer legally operate under the canceled GST number unless the registration is reinstated or restored.
A taxpayer may appeal against the cancellation order in case they feel that cancellation was unjustified, a better approach would be to take an action within the prescribed time frame to avoid permanent loss of registration.
How to Activate Canceled Suo Moto GST Registration?
A Suo Moto cancellation is not always the end of the road for a business. In case a taxpayer feels that its registration has been wrongly canceled or the reasons and grounds for cancellation have been sufficiently met, then the said taxpayer may make an application for the restoration of his/her GST registration. Here's how the reactivation process works:
Filing an Application for Revocation: The taxpayer must file an application for revocation of cancellation through the GST portal within 30 days of the cancellation order. This application should include the reasons for requesting the revocation along with the rectification of defaults that led to the cancellation.
Rectifying Compliance Issues: For the revocation to be successful, the taxpayer must fix any compliance issues that triggered the cancellation. This could include filing pending returns, paying overdue taxes, or updating registration details. For example, if the cancellation was due to non-filing of returns, the taxpayer must submit all overdue returns.
Review by GST Officer: Once the application is submitted, the GST officer will review it along with any supporting documents. If the application is found valid and the taxpayer has corrected the defaults, the officer may pass an order to restore the GST registration.
Approval or Rejection of Application: The GST officer may accept or deny the revocation request. If the revocation request is accepted then the taxpayer's GST registration would be restored, and normal business would get resumed. If the decision is declined then appeal would be filed with the higher authority or even at the tribunal level against the decision of rejection.
Post-Restoration Compliance: Post-restoration, there should also be a continued compliance by the taxpayer to GST laws so that there is no cancellation again, and the restoration procedure may become even more complicated.
By following this structured approach, businesses can rectify their mistakes and ensure they remain compliant under GST law.
What will be the Effect of Suo Moto GST Registration Cancellation?
The cancellation of GST registration has wide implications for a business. After such cancellation is made effective, a business would no longer be legally permitted to carry forward operations regarding the collection and remittance of GST. Some of the impacts are summarized as mentioned below:
Inability to Collect GST: When a GST registration gets canceled, the business cannot collect GST from its customers. Any further collection after cancellation is considered illegal; also, imposable penalties can be claimed.
Discontinuation of Input Tax Credit (ITC): Without a valid GST registration, a business cannot claim Input Tax Credit on purchases. This can significantly increase the cost of procurement, as the GST paid on inputs becomes an additional expense for the business.
Penalty for Non-compliance: Continuing to operate without reinstating the registration, will attract heavy fines and penalties. A business may also face litigation if it continues to operate without registration or does not adhere to GST laws after its cancellation.
Impact on Suppliers and Buyers: Businesses dealing with suppliers or customers who are GST-compliant may face difficulties. Most entities prefer to deal with registered businesses to maintain their own compliance records and ensure that input tax credits flow smoothly.
Legal Consequences: Once deregistered, a company's legal status regarding taxation is dramatically changed. Filing return or paying taxes without proper registration may mean one's prosecution or further financial penalties.
Therefore, it’s vital for businesses to ensure that they remain compliant with GST regulations or take immediate action if their registration is canceled to mitigate the risks involved.
FAQ
Q1. When a Tax Official may cancel GST registration?
A tax official may initiate Suo Moto cancellation of GST registration for various reasons as per the provisions of GST law. Key scenarios include:
Failure of a taxpayer (other than composition taxpayers) to file returns for a continuous period of 6 months.
Supplying goods or services without issuing an invoice in violation of the GST Act, especially with intent to evade tax.
Issuing invoices or bills without actual supply of goods or services, leading to wrongful availment of Input Tax Credit (ITC) or refunds.
Collecting taxes but failing to remit the amount to the Central or State Government within 3 months of the due date.
Failing to pay any tax, interest, or penalties to the government within 3 months of the due date.
No longer being liable to deduct or collect tax at source as per GST provisions.
No longer required to be registered under GST law.
A GST Practitioner being found guilty of misconduct in connection with any GST proceeding.
Discontinuation or closure of a business.
A change in the constitution of the business leading to a change in PAN.
Business being transferred due to amalgamation, merger, demerger, sale, lease, or otherwise.
Death of the sole proprietor.
A composition taxpayer failing to file returns for three consecutive tax periods.
Registration obtained by means of fraud, misstatement, or suppression of facts.
Q2. Will I be intimated before the Suo Moto Cancellation of Registration?
Yes, you would be given advance notice before any Suo Moto cancellation of registration. The tax authorities issue a SCN and give you an opportunity to present the case and clarify the issues within the stipulated time frame. The cancellation will only proceed if the taxpayer does not respond to the SCN or fails to resolve the issues within the given time.
Q3. What is the precondition for Suo Moto Cancellation of Registration?
A Suo Moto cancellation can only be initiated if there is a valid reason as specified under Section 29(2) of the CGST or SGST Act. Therefore, arbitrary cancellation of registration by tax officials cannot be done without proper grounds.
Q4. How long do I have to reply to the Show Cause Notice regarding Suo Moto Cancellation of Registration?
You are required to file a reply to SCN within 7 working days. You can file an application in Services > Registration > Application for Filing Clarifications on the GST portal. In case no reply is submitted to the tax authority within the aforesaid period, they have the right to cancel your GST registration.
Q5. What will happen once the Show Cause Notice is dropped?
If the tax authority is satisfied with your response to the SCN, the cancellation proceedings will be dropped. The taxpayer will be notified via SMS and email. Additionally:
The order dropping the SCN will be available on your GST dashboard.
The status of your GSTIN will change from "Suspended" to "Active."
Q6. What shall be the effective date of cancellation of registration?
The effective date of the cancellation will be clearly mentioned in the cancellation order issued by the tax authority. It is important to take note of this date as it marks the official end of your registration.
Q7. Will the cancellation of registration mean that I have no liabilities?
No, even if your registration is canceled, you are still responsible for any tax liabilities that arose before the date of cancellation. All outstanding taxes, interest, and penalties must be paid, and these liabilities can be recovered even after the cancellation of the GSTIN.
Q8. Will the Suo Moto Cancellation of registration be proceeded separately for each act?
No, the cancellation of registration under one act (CGST, SGST/UTGST, or IGST) is deemed to be a cancellation under the other corresponding GST Acts. This means that cancellation under CGST automatically implies cancellation under SGST/UTGST or vice versa.
Q9. What will happen once Registration is canceled?
Once the registration is canceled:
You will be informed via SMS and email about the cancellation order.
The order will be available on the taxpayer's dashboard for viewing, printing, or downloading.
The GSTIN will change from "Proceeding for Cancellation initiated" to "Inactive."
You will not be allowed to file returns or upload invoices for the period after the cancellation date.
You will not be able to amend registration details, except for updating your email and mobile number until dues are cleared.
You can apply for revocation of the cancellation if eligible.
Q10. Will I be able to login after the Suo Moto cancellation of registration?
Yes, even after Suo Moto cancellation of registration, you can log into the GST portal. You will have limited access, and functionalities such as return filing will be restricted for periods after the cancellation date.
Q11. Can I update my email and mobile after Suo Moto cancellation of registration?
Yes, even after the cancellation of your GST registration, you can update your email address and mobile number until any pending dues or refunds are cleared.
Q12. Can I submit returns for the earlier period after Suo Moto cancellation of registration?
Yes, you can still submit returns for periods before the date of cancellation. However, you will not be able to file returns or upload invoices for periods after the cancellation date.
Q13. Where can I view the Show Cause Notice regarding Suo Moto Cancellation of Registration?
You can view the Show Cause Notice related to Suo Moto cancellation by navigating to Services > User Services > View Notices and Orders on the GST portal.
Q14. How can I reply to the Show Cause Notice regarding Suo Moto Cancellation of Registration?
To reply to the SCN, go to Services > Registration > Application for Filing Clarifications. The form will display the reasons for the cancellation, and you can submit your response accordingly. Ensure that each reason mentioned in the notice is addressed in your clarification.
Q15. Where can I view the date for the personal hearing regarding Suo Moto Cancellation of Registration?
You can view the details of the personal hearing by accessing the Show Cause Notice under Services > User Services > View Notices and Orders. Download the notice to check the hearing date.
Q16. Where can I view the order regarding Suo Moto Cancellation of Registration?
You can view the cancellation order in the same View Notices and Orders section under User Services on the GST portal.
Q17. Can I submit an application for cancellation of registration if a Tax Official has already initiated Suo Moto cancellation?
No, once the tax official has initiated Suo Moto cancellation proceedings, you cannot submit an application for voluntary cancellation of registration.
Q18. Why does my GSTIN status show as “Suspended” in my profile?
Your GSTIN may show as "Suspended" when an application for cancellation has been filed or Suo Moto cancellation proceedings have been initiated. The status will change back to "Active" if the application for cancellation is rejected or if the Suo Moto cancellation is dropped.
Q19. What happens if I have filed all due returns after the SCN is issued for non-filing of returns?
If all pending returns are filed after the SCN is issued, the cancellation proceedings will be automatically dropped, and your GST registration status will be restored to "Active" without the need for further response.
Related Posts
See AllEvaluating the legitimacy of a Goods and Services Tax Identification Number (GSTIN) , a distinct alphanumeric code given to each...
Komentar