The cancellation of Goods and Services Tax (GST) registration is a significant step within the GST framework, and it`s crucial for both businesses and tax authorities to understand the intricacies surrounding this process. Under the GST regime, the power to cancel GST registration is vested in the hands of the "Proper officer," a Designated authority responsible for administering and enforcing the GST laws. This authority is equipped with the responsibility to ensure compliance and prevent misuse of the GST system. In this article, we will explore the various aspects of GST registration cancellation, diving into the powers and procedures of the Proper officer AND the reasons that can lead to registration cancellations. Understanding these aspects is essential for businesses to operate within the legal framework and for the tax authorities to maintain the integrity of the GST system.
Circumstances under which both the taxpayers and the proper office are empowered to proceed towards cancelation of GST registration-
(a) the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or
(b) there is any change in the constitution of the business; or
(c) the Taxable person is no longer liable to be registered under section 22 or section 24 or intends to optout of the registration voluntarily made under sub-section (3) of section 25.
Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.
Circumstances under which the proper office is empowered to proceed towards cancelation of GST registration-
(a) a Registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or (Rule 21).
(b) a person paying tax under section 10 has not furnished the return for a financial year beyond three months from the due date of furnishing the said return; or
(c) any Registered person, other than a person specified in clause (b), has not furnished returns for such continuous Tax period as may be prescribed; or (Rule 21)
(d) any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or
(e) registration has been obtained by means of fraud, wilful misstatement or suppression of facts:
Provided that the Proper officer shall not cancel the registration without giving the person an opportunity of being heard.
Provided further that during pendency of the proceedings relating to cancellation of registration, the Proper officer may suspend the registration for such period and in such manner as may be prescribed.
The registration granted to a person is liable to be cancelled, if the said person,-
(a) does not conduct any business from the declared Place of business; or
(b) issues invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or the rules made thereunder; or
(c) violates the provisions of section 171 (Antiprofiteering) of the Act or the rules made thereunder.
(d) violates the provision of rule 10A. (i.e., failes to furnish Bank account details within 30 days).
(e) avails Input tax credit in violation of the provisions of section 16 of the Act or the rules made thereunder; or
(f) furnishes the details of outward supplies in FORM GSTR-1 under section 37 for one or more Tax periods which is in excess of the outward supplies declared by him in his Valid return under section 39 for the said Tax periods; or
(g) violates the provision of rule 86B. (Restrictions on use of amount available in Electronic credit ledger)
(h) being a Registered person required to file return under subsection (1) of section 39 for each month or part thereof, has not furnished returns for a continuous period of six months;
(i) being a Registered person required to file return under proviso to subsection (1) of section 39 for each quarter or part thereof, has not furnished returns for a continuous period of two Tax periods.
Now with respect to suspension of regarrison one needs to refer to Rule 21A of the CGST Rules-
"Rule 21A. Suspension of registration. -
(1) Where a Registered person has applied for cancellation of registration under rule 20, the registration shall be deemed to be suspended from the date of submission of the application or the date from which the cancellation is sought, whichever is later, pending the completion of proceedings for cancellation of registration under rule 22.
(2) Where the Proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29 or under rule 21, he may, suspend the registration of such person with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration under rule 22.
(2A) Where, a comparison of the returns furnished by a Registered person under section 39 with
(a) the details of outward supplies furnished in FORM GSTR-1; or
(b) the details of inward supplies derived based on the details of outward supplies furnished by his suppliers in their FORM GSTR-1,
or such other analysis, as may be carried out on the recommendations of the Council, show that there are significant differences or anomalies indicating contravention of the provisions of the Act or the rules made thereunder, leading to cancellation of registration of the said person, his registration shall be suspended and the said person shall be intimated in FORM GST REG-31, electronically, on the Common portal, or by sending a communication to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said differences and anomalies and asking him to explain, within a period of thirty days, as to why his registration shall not be cancelled.
(3) A Registered person, whose registration has been suspended under sub-rule (1) or sub-rule (2) or sub-rule (2A), shall not make any taxable supply during the period of suspension and shall not be required to furnish any return under section 39.
Explanation.—For the purposes of this sub-rule, the expression "shall not make any Taxable supply" shall mean that the Registered person shall not issue a tax invoice and, accordingly, not charge tax on supplies made by him during the period of suspension.
(3A) A Registered person, whose registration has been suspended under sub-rule (2) or sub-rule (2A), shall not be granted any refund under section 54, during the period of suspension of his registration.
(4) The suspension of registration under sub-rule (1) or sub-rule (2) or sub-rule (2A) shall be deemed to be revoked upon completion of the proceedings by the Proper officer under rule 22 and such revocation shall be effective from the date on which the suspension had come into effect.
Provided that the suspension of registration under this rule may be revoked by the Proper officer, anytime during the pendency of the proceedings for cancellation, if he deems fit.
Provided further that where the registration has been suspended under sub-rule (2A) for contravention of the provisions contained in clause (b) or clause (c) of sub-section (2) of section 29 and the registration has not already been cancelled by the Proper officer under rule 22, the suspension of registration shall be deemed to be revoked upon furnishing of all the pending returns.
(5) Where any order having the effect of revocation of suspension of registration has been passed, the provisions of clause (a) of sub-section (3) of section 31 and section 40 in respect of the supplies made during the period of suspension and the procedure specified therein shall apply."
CA Pranay Jain is a young and aspiring Chartered accountant. He qualified Chartered Accountancy Course in 2021 and has a well-established practice in various fields of taxation and auditing, with his core area of practice being in the field of litigation i.e., handling assessment and appeal-related matters and representing assesses before various tax departments.
He is also socially active on LinkedIn at linkedin.com/in/capranayjain
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