A Comprehensive Guide on Cancelling GST Registration

Every business owner must stay aware of the process for cancelling their GST registration in case they need to discontinue their operations or for any other reason. The Goods and Services Tax (GST) system was introduced in India in 2017, and GST registration is mandatory for businesses with an annual turnover above a certain threshold. GST registration can be cancelled for reasons such as the closure of the business or profession or if the tax officer decides to cancel it.

This article aims to provide a comprehensive guide on cancelling GST registration, including the requirements, procedures, and necessary documentation to ensure compliance with GST laws and regulations. By following this guide, business owners can efficiently and effectively navigate the process of cancelling their GST registration.

What is Meant by the Cancellation of GST Registration?

When a taxpayer’s GST registration is cancelled, they will no longer be considered registered under GST. As a result, they will not be allowed to pay, collect, or claim GST, nor will they be able to make an input tax credit claim. Consequently, they will not be required to file GST returns.

What will be the Consequence of Cancelling GST Registration?

Cancelling GST registration will lead to the following consequences for a taxpayer:

1. They will no longer be required to pay GST.
2. For businesses that are mandated to register under GST, continuing to operate after cancelling their registration will be considered a violation of GST law, which may result in severe penalties.

Who can Cancel GST Registration?

GST registration can be cancelled by the following:

1. If the taxpayer requests it. This is valid under two cases –
   1. The turnover is less than the threshold.
   2. Other cases.
2. Under the tax officer’s order.
3. Requested by legal heirs in the event of the taxpayer’s demise. 

Cancelling the GSTIN for Migrated Taxpayers

After the GST implementation, all taxpayers registered under the previous tax law were required to switch to the GST regime. However, many of them were not liable to be registered under GST. For example, most states’ service tax and VAT threshold was Rs. 10 lakh, whereas the threshold for GST is Rs. 20 lakh. (For the supply of goods in some states, the threshold amount is Rs. 40 lakh, or Rs. 10 lakhs in some special category states and union territories.) Such taxpayers were required to submit an electronic application in the form GST REG-29 on the GST portal to cancel their registration.

However, it was important to ensure they were not making interstate supplies because, except for service providers, taxpayers who make interstate supplies must register under GST. After conducting the necessary assessment, the authorised officer will cancel the registration.

Here are the steps to cancel GSTIN that migrated taxpayers must follow:

Step 1: Log in to the GST portal and select “Cancellation of Provisional Registration”.

Step 2: You will be taken to the Cancellation Page, where your GSTIN and business name will be automatically displayed. You will need to provide a reason for the cancellation and indicate if any tax invoices have been issued during the month.

Step 3: Provide details of authorised signatories. If you are a sole proprietor or a partnership firm, you can submit with EVC. Companies and LLPs should click on “Submit with DSC”.

Please note that if you have already issued any tax invoices, you will need to complete Form GST REG-16. This service is only available for taxpayers who still need to issue tax invoices.

Cancellation of GSTIN by Taxpayers other than Migrated

Possible circumstances under which the Taxpayers might want to cancel their GSTIN:

1. Their business is discontinued.
2. The transferee (or the new company from the amalgamation or demerger) must register if the business has been fully transferred, amalgamated, demerged, or otherwise disposed of. If the transferor no longer exists, it will have its registration cancelled.
3. The constitution of the business is changed. 

Forms Required for Cancellation

If you are unable to use the method mentioned above, you can submit a cancellation request by filling out Form GST REG-16.

For legal heirs of a deceased taxpayer, the following steps must be taken to cancel the registration:

1. Fill out Form GST REG-16 to submit a cancellation request.
2. The form must include details of inputs, semi-finished goods, and finished goods in stock on the date of registration cancellation, along with the liability and payment details.
3. Within 30 days from the date of application, the proper authority will issue an order for cancellation in Form GST REG-19. The officer will also inform the taxable person that the cancellation is effective as of the chosen date.

Cancellation of GSTIN by a Tax Officer

A tax officer may cancel a taxpayer’s registration under the following circumstances:

1. The taxpayer does not operate a business at the stated place of business.
2. The taxpayer issues a bill or invoice without providing the requested goods or services.
3. The taxpayer violates anti-profiteering rules, such as failing to pass on Input Tax Credit (ITC) benefits to customers.
4. The taxpayer uses ITC from an electronic credit ledger to relieve more than 99% of the tax liability for specific taxpayers who violate Rule 86B, with few exceptions, where the total taxable value of their supplies exceeds Rs. 50 lakh in a month.
5. The taxpayer cannot submit GSTR-1 because GSTR-3B was not submitted for more than two consecutive months (or one quarter for those who choose to participate in the QRMP scheme).
6. The taxpayer avails input tax credit in defiance of the rules or the restrictions of Section 16 of the Act.

Procedure

1. If a tax officer decides to cancel an individual’s registration, they will be sent a show-cause notice in Form GST REG-17.
2. Within seven days of receiving the notice, the individual must respond in Form REG-18, explaining why their registration should not be cancelled.
3. If the response is deemed sufficient, the relevant authority will dismiss the case and issue an order in Form GST REG-20.
4. However, if the registration needs to be cancelled, the relevant official will issue an order in Form GST REG-19. The order will be sent within 30 days of the date of the response to the show-cause notice.

Revocation of Cancelling the Registration

The term “revocation” refers to the official cancellation of a decision or commitment. In the context of GST registration, revocation of cancellation refers to the reversal of a cancellation decision, thereby maintaining the registration’s validity.

This applies only when a tax official voluntarily cancels the registration of a taxable person. Within thirty days of the cancellation order’s date, the taxable person may request the officer to revoke the cancellation decision.

Process of Revoking the Cancellation of Registration

1. If the appropriate authorities have officially revoked a registered person’s GST registration, they may file an application for reversal of cancellation using GST REG-21. This application must be submitted through the Common Portal within 30 days of the date the cancellation order was served.
2. If the authorised officer is satisfied with the application, within 30 days after its receipt date, they may revoke the cancellation of registration by order in form GST REG-22. The reasons for revoking or cancelling registration must be documented in writing.
3. If the proper authority is unable to revoke the cancellation, they may issue an order in form GST REG-05 rejecting the revocation request and informing the applicant. However, before rejecting the application, the proper authority must issue a show-cause notice in form GST REG-23, allowing the applicant to defend their claim. Within seven working days of the date of service of the notice, the applicant must respond in form GST REG-24.
4. The authorised officer will decide within 30 days of receiving an explanation from the applicant in form GST REG-24.
5. It is important to note that if the registration has been cancelled due to the inability to file returns, an application for revocation cannot be submitted. Instead, the necessary returns must be filed along with payment of all outstanding tax, interest, and penalty balances.

Conclusion 

When businesses cease operations or no longer meet the eligibility criteria for GST registration, cancelling GST registration becomes a crucial process. This process can be initiated online through the GST portal but requires the submission of several documents. Businesses must carefully follow the guidelines and procedures for GST cancellation to prevent legal or financial consequences. Seeking professional advice and assistance can also help ensure a smooth and trouble-free cancellation process.