GST Registration Cancellation

If a business ceases all operations after obtaining GST registration, it is crucial to initiate the GST cancellation process promptly. Failure to do so, especially if GST returns are not filed and the registration lapses, prevents the taxpayer from securing a new GST registration under the same PAN.

Moreover, if the government decides to cancel a GST registration, the taxpayer must act swiftly to have the cancellation reversed by settling any outstanding late fees. After reinstatement, the taxpayer should either complete the GST cancellation process correctly or continue submitting GST returns as required.

In summary, once GST registration is acquired, it is essential for the taxpayer to remain vigilant about compliance. Therefore, if there is no ongoing business activity, apply for GST cancellation at the earliest opportunity.

Initiation by GST Officer A GST officer may initiate the cancellation of a GST registration if there are valid grounds for such action. The process begins with the issuance of a show-cause notice using Form GST REG-17. This notice will detail the reasons for potential cancellation and grant the taxpayer an opportunity to present their case before any final decision is made.

Procedure for Cancellation by GST Officer When a GST officer considers canceling a registration, they will first issue a Form GST REG-17 notice to the taxpayer. This notice will outline the specific reasons for the proposed cancellation and provide details for a scheduled hearing, if applicable. The taxpayer has the right to respond to this notice and address the concerns raised.

If the officer finds the taxpayer's response satisfactory, they may choose to dismiss the cancellation proceedings and issue an order in Form GST REG-20. However, if the response does not meet the required criteria, the officer may proceed with the cancellation by issuing an order in Form GST REG-19.

Cancellation by Legal Heirs In the event of a sole proprietor's death, their legal heirs have the authority to request the cancellation of the business's GST registration. This responsibility falls to the heirs as part of managing the deceased’s estate.

Entities Not Eligible for GST Cancellation Certain entities are not permitted to request GST registration cancellation:

• Tax Deductors/Collectors: Entities or individuals registered specifically for tax deduction or collection cannot apply for cancellation.
• Unique Identity Number (UIN) Holders: Entities such as foreign diplomatic missions or UN organizations that possess a UIN, which is primarily issued for tax refund claims, are ineligible for GST cancellation.

GST registration can be terminated by either the taxpayer or the GST authorities for a range of reasons. Here's a comprehensive look at why cancellations might occur:

Initiated by the Taxpayer:

1. Business Closure or Discontinuation: If a business ceases its operations or is permanently shut down, the taxpayer should apply for GST registration cancellation.
2. Business Transfer or Restructuring: In cases of business transfer, sale, merger, lease, or disposal, the GST registration may need to be canceled.
3. Change in Business Structure: When there is a structural change, such as converting from a partnership to a corporation, the existing GST registration must be canceled.
4. Threshold Limit Not Met: If a taxpayer's turnover falls below the GST threshold limit and they are no longer required to be registered, they should apply for cancellation.
5. Voluntary Cancellation: Taxpayers may choose to cancel their GST registration for personal or business reasons.

Enforced by GST Authorities:

1. Non-Compliance: Failure to file GST returns for six consecutive months (or three months for composition taxpayers) can lead to cancellation by the authorities.
2. Fraudulent Registration: GST registrations obtained through fraud or misrepresentation may be canceled.
3. Violation of GST Regulations: Significant breaches of GST laws or rules can result in the cancellation of registration.
4. Unauthorized Activities: Engaging in activities that are not permitted under GST laws or that are deemed fraudulent can lead to cancellation.
5. Non-Commencement of Business: If a registered entity does not start its business operations within the specified period after registration, the authorities may cancel the registration.
6. Improper Input Tax Credit Claims: Claiming Input Tax Credit (ITC) without actual receipt of goods or services can result in cancellation.

Cancellation Timeframe

The timeframe for canceling GST registration depends on the reason for cancellation:

• Voluntary Cancellations: Taxpayers can request cancellation at any time if they believe they no longer need to be registered under GST.
• Authority-Initiated Cancellations: For cases of non-compliance, such as failure to file returns, the cancellation process begins automatically after the stipulated non-compliance period.

Cancelling GST registration can have multiple effects on a business. Here’s a breakdown of the primary consequences:

Stop Collecting GST

Upon GST registration cancellation, a business must immediately stop collecting GST from its customers. Ensure that all billing and invoicing systems are updated to prevent GST charges beyond the cancellation date.

No Eligibility for Input Tax Credit (ITC)

Post-cancellation, any purchases made will not qualify for ITC. Additionally, businesses are required to pay an amount equivalent to the ITC on existing stock, semi-finished or finished goods, and capital goods as of the day before the cancellation.

Final Return Filing

A final return must be submitted using Form GSTR-10 within 3 months from the cancellation date or the date of the cancellation order, whichever is later.

Compliance and Record Maintenance

Businesses need to maintain their financial records, accounts, and documentation for 6 years from the cancellation date. This is crucial for any future audits or investigations by tax authorities.

Legal Ramifications

Non-compliance with GST regulations post-cancellation, such as failing to file the final return or settle ITC reversal amounts, may result in penalties and legal actions by GST authorities.

Impact on Business Activities

Cancelling GST registration can disrupt regular business operations. Reapplying for GST registration involves a new application process and review by tax authorities.

Refunds

Taxpayers may be eligible for refunds of any excess GST paid after cancellation, provided they apply within the specified timeframe.

Cancellation of Registrations Associated with PAN

If a business operates across multiple states or has multiple business verticals in one state, cancelling GST registration in one state or for one vertical might lead to the cancellation of all GST registrations linked to the same PAN throughout India.

Procedure for Cancelling GST Registration

Whether initiated by the taxpayer or enforced by GST authorities, the cancellation process involves several steps:

1. Form GST REG-16: The taxpayer can apply for voluntary GST registration cancellation via Form GST REG-16 on the GST portal.
2. Form GST REG-17: If the GST authorities initiate the cancellation, they will issue a notice using Form GST REG-17.
3. Final Return Filing: After cancellation, the taxpayer must file a final return using Form GSTR-10 and settle any outstanding tax liabilities, including GST dues, up to the cancellation date.

Steps for Cancelling GST Registration

1. Login to the GST Portal: Access the GST Portal and log in with your credentials.
2. Apply for Cancellation:
   • Navigate to the ‘Services’ tab.
   • Select ‘Registration’ and then ‘Application for Cancellation of Registration.’
3. Fill in the Details:
   • Provide required information such as cancellation reason, date, and ITC details related to inventory on the cancellation date.
   • If multiple businesses are registered, specify which business is applying for cancellation.
4. Pay Liabilities and File Returns:
   • Clear any pending dues, including taxes, interest, or penalties.
   • File all overdue returns up to the cancellation date.
5. Verification and Submission:
   • Verify the submitted information using a Digital Signature Certificate (DSC) or Electronic Verification Code (EVC).
   • Submit the application.
6. ARN Generation:
   • An Acknowledgement Reference Number (ARN) will be generated post-submission. Use this ARN to track your application status.
7. Officer’s Review:
   • A GST officer will review your application. They may request additional information via the GST portal. Respond promptly to any queries.
8. Issuance of Cancellation Order:
   • Upon satisfaction, the officer will issue a cancellation order using Form GST REG-19, indicating the effective cancellation date.

Filing the Final Return Post-Cancellation

Once the GST cancellation process is complete, the entity must file a final GST return on Form GSTR-10 within three months of the cancellation date or the cancellation order date, whichever is earlier.

Failure to file the final GST return in Form GSTR-10 will result in a notice (Form GSTR-3A) requiring compliance within 15 days of the notice issuance.

Cancelling your GST registration can seem daunting, but with Corpadda's support, it becomes a straightforward and efficient process. Here's a comprehensive guide on how Corpadda helps you manage the closure of your GST account:

Pre-Cancellation Evaluation

Before initiating the GST cancellation, it is crucial to ensure that all GST returns are up-to-date. Address any outstanding compliance issues related to GSTR-3B, GSTR-1, or the annual GST return. Corpadda’s team will help you verify your GST return status and complete any pending filings.

Filing the Cancellation Application

The first step in the cancellation process involves submitting the GST cancellation application via Form GST REG-16 on the official GST portal. This form requires detailed information including:

• Current contact details such as mobile number and email.
• The reason for cancelling the registration.
• The desired cancellation date.
• A detailed account of stock inputs, semi-finished goods, finished products, and capital assets like machinery.
• Details of the latest GST return filed, including the ARN (Application Reference Number).

Following Official Procedures

After submission, a GST Officer will review your application. Within 30 days, the Officer will issue a cancellation order in Form GST REG-19. The effective cancellation date is at the Officer’s discretion, who will then notify you of the decision. This marks the conclusion of the GST account closure process.

Handling Rejection of Application

If the application is rejected, it may be due to reasons such as:

• Incomplete application.
• Business transfer, merger, or amalgamation without prior registration by the new entity.

In such cases, the Officer will notify you of the discrepancies. You must address these issues within seven days of receiving the notification. Failure to respond may result in the rejection of your application after giving you a chance to be heard.

Revoking GST Registration Cancellation

Revocation of GST registration cancellation is possible under certain conditions:

• Conditions for Revocation: Revocation can only occur if the GST authorities cancel the registration, not if the cancellation is voluntary.
• Application for Revocation: You can apply for revocation within 30 days from the cancellation order date issued by GST authorities.

Steps to Apply for Revocation

1. Log in to the GST Portal: Use your credentials to access the GST portal.
2. Navigate to Revocation Application: Go to the ‘Services’ tab, select ‘Registration,’ and choose ‘Application for Revocation of Cancelled Registration.’
3. Provide Revocation Reasons: Enter reasons for seeking revocation and upload supporting documents, if applicable.
4. Verification and Submission: Confirm the information using a Digital Signature Certificate (DSC) or Electronic Verification Code (EVC) and submit the application.
5. Acknowledgement: An Acknowledgement Reference Number (ARN) will be generated for tracking your application status.
6. Officer’s Review: The GST Officer will review your application and may request additional details if needed.
7. Decision: If the Officer is satisfied with the submission, they will revoke the cancellation and restore your GST registration.