Indian Taxation System has consistently evolved ever since Goods and Service Tax rolled out in India. Due to the peculiar nature of GST, its applicability is still obscure to many...
The Indian Government has introduced Goods and Services Tax in 2017, which is popularly known as GST. It is a tax implemented to bring all the indirect taxes and service charges under one shed. Every supplier with earnings of more than INR 20 lakhs per annum has to register under GST. Once an individual obtains GST Registration Certificate, it can be cancelled, which means that the taxpayer shall not have to pay or collect GST anymore. The cancellation of GST Registration is applicable while winding up of a business or if the Tax Officer issues a Notice regarding it. This write-up will enlighten you about reasons, consequences and procedure of GST Registration.
Key reasons for cancellation of GST Registration
Section 29 of CGST Act prescribes the conditions under which the taxpayer can apply for GST Registration cancellation, which are as follows:
- Discontinuance of the business– If a person willingly shuts down his business due to insolvency or any other reason.
- Less annual turnover- In case the annual turnover of the taxpayer goes lower than INR 20 lakhs.
- Business transfer- Whenthere is a transfer of business because of the merger, amalgamation or other pertinent reasons.
- Sale of business– If a person sells his business to another person; he needs to cancel GST Registration, whereas the new owner shall have to apply for new GST Registration.
A person, who has registered under GST inadvertently or wrongfully can also opt for GST cancellation.
Who holds the authority to cancel GST Registration in India?
In India, the Tax Officer either on his own accord or the taxpayer who has applied online for cancellation or the legal heir of the taxpayer (in case of taxpayer’s death) can cancel GST Registration.
The Tax Officer shall cancel GST Registration for the reasons mentioned below:
- If the taxpayer does not conduct any operations from the place of business; or
- If the taxpayer issue bills or invoices without supplying goods or services which is in violation of GST Rules or GST Act.
Consequences of GST Registration cancellation
Here are some possible consequences after GST Registration gets cancelled:
- The taxpayer will not pay Goods and Services Tax anymore and
- In case the taxpayer has cancelled GST Registration, but he is still operating the business then he might have to pay a hefty penalty of at least INR 10,000 or is subject to an imprisonment of 1 year depending upon the type of an offence he has committed.
Checklist of GST cancellation Forms
There are different forms that are filed for Goods and Service Tax cancellation:
- Form GST REG-16- It is needed when cancellation by a registered taxpayer/individualis required
- Form GST REG-17- It is required to issue show cause notice for cancellation
- Form GST REG-18– When reply to Show Cause Notice is required
- Form GST REG-19– This form is required for order for dissolution
- Form GST REG-20– Form GST REG-20 necessitates order for dropping the cancellation proceedings
- Form GST REG-21- Form GST REG-21 is required at the time ofan Application to revoke the cancellation
- Form GST REG-22- Form GST REG-22 is needed at the time of Order revoking the cancellation of GST Registration
Information to be fulfilled in the Cancellation Form
The applicant must provide the set of information mentioned below in Form GST REG-16 while applying for cancellation of GST Registration Certificate:
- Contact details entailing e-mail address & mobile number;
- Grounds of GST cancellation;
- A desired date of cancellation;
- Details of the entity if the existing unit got amalgamated, transferred or merged;
- Specifications of the tax payable on the stock of inputs like the inputs available in finished goods or semi-finished goods, stock of plant and machinery;
- Particulars of the latest Returns filed along with the Acquirer Reference Number of the particular return.
Procedure for GST Registration cancellation by the Tax officer
If the Tax Officer has appropriate reasons to cancel GST Registration, he may undertake the following proceedings:
- The Tax Officer shall first issue a Show Cause Notice to the taxpayer under FORM GST REG-17.
- On receiving Show Cause Notice, the taxpayer will get 7 days to reply and state his reasons as to why his/her registration should not be cancelled under FORM GST REG-18.
- If the Tax Officer feels satisfied from the taxpayer’s reply, he shall drop the proceedings of cancellation by passing an order under FORM GST REG-20.
- However, if the reply is unsatisfactory, then the Registration shall be deemed to get cancelled by the Tax Officer under FORM GST REG- 19. Such an order will be passed within 30 days from the date on which the Officer received the reply.
Steps for cancellation of GST Registration by the taxpayer
Whether it is winding up of a business or for any other pertinent reasons, a taxpayer can apply for GST cancellation by taking the steps mentioned below:
- The first step that the taxpayers need to do is to visit the official portal of Goods and Services Tax and fill in your login credentials.
- Now click on the link “Application for Cancellation of Registration” in Form GST REG-16 under the services tab.
- The portal will display several tabs for the cancellation form such as Basic Details, Verification and Cancellation Details so enter all the essential details.
- Fill the bank details along with the address details manually for future reference or choose same as the above to copy the same address. Click Save and Continue tab.
- The next tab of Cancellation Details shall get active and now you need to fill all the mandatory fields under Basic Details tab.
- Opt for a suitable reason from the drop-down list of Reason for Cancellation mentioned below:
- Change in the Constitution of business which leads to change in PAN;
- Ceased to be liable to pay GST;
- Discontinuance or closure of business;
- Transfer of business on account of merger, amalgamation, sale, leased, de-merger or otherwise;
- Death of Sole Proprietor;
- Fill all the information which is mentioned above that is required for cancelling of GST Registration under Verification tab.
- After verification, the concerned Officer shall pass an order for cancellation in Form GST REG-19 within 30 days from the date of filing the Application.
- The cancellation w.e.f the date determined by the Officer and he will further notify about it to the taxable person.
One of the best financial and legal consultants for you could be Swarit Advisors. We excel in handling the cases of GST Registration, cancellation and migration.
Also, Read: GST for Bloggers & YouTubers.