Cancellation of GST Registration: Step-by-Step Process
In GST the circumstances may necessitate cancellation of GST registration. Understanding the ins and outs of the cancellation of GST registration is essential for compliance and smooth transition. Whether it is due to the change in business strategy, closure of business, or simply falling below the threshold of GST. Understanding the reasons for cancellation of GST registration is of great importance.
This article aims to simplify the process by highlighting the steps, reasons, and factors for canceling the GST registration in an effective manner.
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Cancellation of GST Registration: An Introduction
Cancellation of GST Registration is a process through which the registered taxpayer either voluntarily opts for the cancellation or the GST department requires the taxpayer to cancel the registration. The cancellation process effectively ends the taxpayer’s obligation under GST law for that particular registration. There are various factors which may result in cancellation of GST registration.
Who can Cancel GST Registration?
The GST registration can be canceled either by the taxpayer themselves or by the GST officer:
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By the Taxpayer: A registered taxpayer can apply for the cancellation of GST registration on a voluntary basis. The taxpayer can do so for various reasons such as: discontinuation of business, transfer of business, changes in the structure of the business requiring new registration, or when the taxpayer’s turnover falls below the threshold limit of the registration.
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By the GST Officer: A GST officer is authorized to cancel the registration of the taxpayer on any of the following grounds:
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Failure by the taxpayer to comply with rules and regulations of the GST law. For example, failure to furnish GST returns for several tax periods.
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If the taxpayer has obtained the registration by wilful misstatement, by means of fraud, or suppression of facts.
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When the taxpayer violates any of the provisions of GST law.
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Reasons for Cancellation of GST Registration
Following are the key reasons for cancellation of GST registration either by taxpayer or by the GST authorities:
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Initiated by the Taxpayer:
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Discontinuation or closure of business: When the business operations are closed permanently or discontinued, the taxpayer may file for cancellation of the GST registration.
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Business transfer: In case the business of the taxpayer is transferred, merged, sold, leased out, or disposed of, the taxpayer may opt for cancellation of the GST registration.
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Change in the business structure: When the business structure changes, such as conversion of a partnership firm into a corporation, the taxpayer must cancel the existing GST registration.
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No longer liable to pay GST: Where the taxpayer’s turnover falls below the threshold limit of GST and is not required to pay GST, the taxpayer must apply for cancellation of GST registration.
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Voluntary cancellation: A taxpayer might decide to cancel the GST registration on a voluntary basis for various reasons whether personal or business reasons.
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Enforced by GST authorities:
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Non-compliance with GST laws: If a regular taxpayer fails to furnish the GST returns consecutively for 6 months or a composition taxpayer for 3 months, the GST authorities may cancel the registration of such a taxpayer.
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When the GST registration is obtained by fraud: When the GST registration is obtained by fraud, willful misstatement, or by suppression of facts, the GST authorities may cancel the registration of such a taxpayer.
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Violation of GST Rules or Act: Any non-compliance or violation of the provisions of GST law of significant nature may lead to cancellation of the GST registration by the GST authorities.
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Unauthorized activities: If the taxpayer is engaged in the activities that are unauthorized under GST laws or are fraudulent in nature, the GST authorities may cancel the GST registration.
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Non-commencement of business: If the registered taxpayer has not started the business within the specified timeframe from the date of registration, the GST authorities may cancel the registration.
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Wrongful claim of Input Tax Credit (ITC): When a taxpayer avails or utilizes ITC without receiving the goods or services or both in actuality, the GST authorities may cancel the registration of such taxpayer.
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Procedure for Cancellation of GST Registration
The procedure for canceling the GST registration is as follows:
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Application: The taxpayer can apply for cancellation of GST registration voluntarily through Form GST REG-16 on the GST portal. If the cancellation of GST registration is made by the GST authorities, a notice to the taxpayer is issued through Form GST REG-17.
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Final Return: After cancellation of the GST registration, the taxpayer must file a final return in Form GSTR-10.
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Liabilities: The taxpayer will be liable for the payment of any outstanding tax dues including the GST liability pending till the date of cancellation.
Steps for Cancellation of GST Registration
Following is the step-by-step procedure for cancellation of GST registration:
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Apply for the Cancellation:
After logging in, go to the ‘Services’ tab. Choose ‘Registration’ > ‘Application for Cancellation of Registration’.e.
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Fill the Details:
Fill the necessary details such as: reason for cancellation, the date of cancellation, value and details related to the ITC of the inventory on the date of cancellation. Also, the taxpayer should mention as to for which business the cancellation is applied for, if there are multiple businesses registered within the same state.
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Pay the Liability and File Return:
The taxpayer should make the payment of the pending dues whether taxes, interest, or penalties. Also, the taxpayer must file all the pending returns up to the date of cancellation.
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Verification and Submission:
Verify the information submitted in the application form either using a Digital Signature Certificate (DSC) or Electronic Verification Code (EVC). Submit the completed application.
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ARN Generation:
Once the application is submitted, the Acknowledgement Reference Number (ARN) is generated. The ARN is useful for tracking the status of applications in future.
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Officer’s Review:
The GST officer will review the application for cancellation. They may require any additional information, if necessary, through the GST portal. The taxpayer must respond to the queries on time.
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Issue of Cancellation Order:
If the officer is satisfied, a cancellation order will be issued using Form GST REG-19. The order will specify the effective date of cancellation of GST registration.
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Login to the GST portal:
Navigate and login to the GST portal using your credentials at https://www.gst.gov.in/.
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Final Return (Form GSTR-10):
After receiving the cancellation order, the taxpayer should furnish the final return using Form GSTR-10 within 3 months of the date of cancellation or date of order for cancellation whichever is later.
Consequence of Cancellation of GST Registration
The consequences of cancellation of GST registration are as follows:
Cease to Collect GST: Immediately after the cancellation of GST registration, a business is no longer liable for collecting GST from its customers. Therefore, the business must ensure to update all its billing and invoicing systems so that they don’t charge GST after the effective date of cancellation.
No Input Tax Credit (ITC): Purchases made after the cancellation of GST registration, are not eligible for Input Tax Credit (ITC). Moreover, the taxpayer would be liable to pay an amount equivalent to the ITC for goods held in stock, inputs contained in semi-finished goods or finished goods held in stock, and on capital goods under certain conditions, on the day immediately preceding the date of cancellation.
Filing of Final Return: After the GST registration of the taxpayer is canceled, the taxpayer is required to file a final return using Form GSTR-10 within 3 months from the date of cancellation or the date of cancellation order, whichever is later.
Compliance and Record-Keeping: After the GST registration is canceled, businesses must maintain their financial records, accounts, and documents usually for a period of 6 years from the date of cancellation. This is essential in case of future audits, investigations, or compliance checks by tax authorities.
Legal Implications: Non-complying with the provisions of GST law after cancellation, such as failure to file the final return, or non-payment of amount due on ITC reversal, can lead to penal consequences and legal action by the GST authorities.
Impact on Business Operations: The cancellation of GST registration might affect the regular business operations. Reapplication of GST registration after cancellation may require a fresh application and scrutiny by the tax authorities.
Refunds: After cancellation, the excess GST paid may be refunded to the eligible taxpayers, provided an application for refund is filed within the prescribed time.
Cancellation of all Registrations on PAN: Where a business operates in multiple states or has multiple business verticals within a state, cancellation of GST registration in one state or for one vertical may result in the cancellation of all GST registrations with the same PAN across India.
Revocation of GST Registration Cancellation
The cancellation of GST registration can be revoked under the following circumstances:
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Revocation of canceled GST registration can be made only when the GST authorities have canceled the GST registration. In case of cancellation of registration by the taxpayer voluntarily, revocation is not possible.
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The application for revocation of registration can be made within 30 days from the order of cancellation of GST registration issued by the GST authorities.
Steps for revocation of GST registration cancellation:
Following is the difference between GSTR-3 and GSTR-3B:
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Access the GST portal and login using your credentials.
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Go to the ‘Services’ tab, select ‘Registration’, and then select ‘Application for Revocation of Canceled Registration’.
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Fill the application form by providing the required information, including the reason for revocation and add the supporting documents.
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After filling the application form, verify it using the Digital Signature Certificate (DSC) or Electronic Verification Code (EVC) and submit it.
Documents and information required for revocation of GST registration cancellation:
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Specify the reasons for non-compliance or reasons leading to the cancellation of GST registration.
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If the cancellation was due to non-filing of returns, the proof of returns filed should be provided, while applying for revocation of registration.
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Any other documents if required by the GST authorities relevant to the revocation application.
After submission of the application:
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After submitting the application, the GST officer will review the application for revocation. The officer may ask for additional documents, if need be.
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If the officer is satisfied with the application and the provided information, the revocation request will be accepted. The GST registration will be reinstated after this.
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If the application is rejected, the officer will provide the reasons for rejection, and an appeal may be filed against the decision of the officer.
Frequently asked questions
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Explain cancellation of GST registration.
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Cancellation of GST registration means ending or revoking the GST registration. After cancellation, the taxpayer will not be required to pay or collect GST and file returns.
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Who can initiate the cancellation of GST registration?
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The cancellation of GST registration can either be initiated by the taxpayer or by the GST authorities under certain circumstances.
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What are the reasons for voluntary cancellation of GST registration?
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The reasons for cancellation of GST registration voluntarily includes: discontinuation or transfer of business, merger, change in the structure of the business, or turnover falling below the threshold limit of GST registration.
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Can the GST authority cancel the registration of a registered person without notice?
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No. The GST authority must send a show-cause notice to the registered taxpayer before cancellation of registration, giving an opportunity to respond.
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What is the consequence of not responding to the show-cause notice for cancellation?
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Failure to respond to the show-cause notice within the stipulated time may result in the cancellation of GST registration by the GST authority.
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How to cancel the GST registration online?
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Through Form GST REG-16, the GST registration can be canceled online. The said form can be filled on the GST portal online and can be submitted by providing the required information and reasons for cancellation.
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State the consequence of cancellation of GST registration.
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After cancellation of GST registration, the taxpayer is relieved from the duty of filing GST returns, collecting and paying GST.
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What are the liabilities after cancellation of GST registration?
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After cancellation of GST registration, the taxpayer must pay all the outstanding dues, that is, GST liabilities, fines, or penalties.
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What is the effective date of cancellation in case of voluntary cancellation of GST registration?
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The effective date of cancellation is the date of application or a later date as deemed appropriate by the GST officer.
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Can the cancellation of GST registration be revoked?
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Yes. Based on certain conditions, an application for revocation of cancellation can be filed. This application must be furnished using Form GST REG-21, within 30 days from the date of the cancellation order.
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How long does the cancellation process take?
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The cancellation process must be completed within 30 days from the date of application by the taxpayer. Though an extension may be granted.
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What is the consequence of not canceling the GST registration when required?
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Continuing without cancellation can lead to unnecessary compliance, penal consequences, and other legal issues.
Prachi Jain
Chartered Accountant
Prachi Jain is a Chartered Accountant with a passion for simplifying finance and tax-related matters through her insightful and informative blogs. With a background in finance and a deep understanding of tax regulations, Prachi has established herself as a trusted source of financial wisdom. Prachi is committed to empowering her readers with the knowledge they need to make informed financial decisions. Her expertise and dedication shine through in every blog post, helping her audience navigate the intricacies of finance and taxes with confidence. Follow Prachi Jain's blog for practical insights and guidance on managing your finances effectively.
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