GST Cancellation and Revocation

1. What is GST Cancellation?

GST cancellation refers to the process by which the Goods and Services Tax registration of a business is revoked by the tax authorities. Cancellation can occur either voluntarily by the taxpayer or by the tax authorities due to non-compliance.

Types of GST Cancellation:

1.     Voluntary Cancellation:

o    A taxpayer may apply for GST registration cancellation if the business is no longer in operation, or if the taxable person no longer meets the criteria for GST registration (e.g., turnover falls below the threshold limit).

2.     Mandatory Cancellation by Authorities:

o    The tax authorities can cancel GST registration if the taxpayer has violated certain provisions, such as:

§  Non-filing of GST returns for a prolonged period (e.g., 6 months or more).

§  Failure to pay taxes.

§  Providing false or incorrect information in the GST return.

§  Non-compliance with GST laws.

§  Death or insolvency of the business owner, and no legal representative is appointed.

2. Reasons for GST Cancellation

Several reasons can lead to the cancellation of GST registration:

• Failure to File Returns: If a taxpayer fails to file GST returns for a specified period (typically 6 months or more), the GST authorities may initiate the cancellation process.
• Non-Payment of Taxes: If the taxpayer fails to pay the due GST amount or does not discharge their tax liability on time, the authorities can cancel the registration.
• No Business Activity: If a registered taxpayer is no longer carrying on business, they must apply for voluntary cancellation of registration.
• Incorrect or False Information: Providing inaccurate or false information during registration or on GST returns can result in cancellation.
• Involuntary Closure of Business: In cases such as business closure, death, or insolvency without appointing a legal successor, the authorities may cancel the registration.
• Non-Compliance with GST Laws: Failing to maintain proper books of accounts, issuing incorrect invoices, or violating other provisions of GST can lead to cancellation.

1     Process of GST Cancellation

Voluntary Cancellation by the Taxpayer:

If a taxpayer wishes to voluntarily cancel their GST registration, they must follow these steps:

1.     Application Submission: The taxpayer needs to log in to the GST portal and submit an application for cancellation of registration.

2.     Reason for Cancellation: The applicant must specify the reason for the cancellation, such as closure of the business or turnover falling below the threshold limit.

3.     GST Returns Filing: All pending returns (GSTR-1, GSTR-3B, and any other applicable returns) must be filed before submitting the cancellation request. Any pending tax liabilities should also be cleared.

4.     Confirmation of Cancellation: The application will be processed by the GST authorities, who may issue a show-cause notice if required. If no objections are raised, the GST registration will be canceled, and the taxpayer will receive a cancellation order.

Cancellation by GST Authorities:

The cancellation process by the authorities is initiated under the following circumstances:

1.     Show-Cause Notice: The authorities send a show-cause notice to the taxpayer if there are reasons to cancel the registration. The taxpayer must respond to the notice within the given time frame.

2.     Deficiency in Response: If the taxpayer fails to respond to the notice or provide satisfactory justification, the GST registration may be canceled.

3.     Cancellation Order: Once the process is complete and if the authorities find sufficient reason for cancellation, they issue a cancellation order.

4. Consequences of GST Cancellation

Once GST registration is canceled, the taxpayer faces several consequences:

• Tax Liabilities: Any tax dues, including interest and penalties, must be cleared before or after cancellation, as the business will still be liable for any outstanding tax payments.
• Loss of Input Tax Credit (ITC): After cancellation, the taxpayer will no longer be eligible to claim Input Tax Credit on purchases made after the cancellation date.
• GST Returns Filing: The taxpayer is still required to file final GST returns (GSTR-10) even after the cancellation of registration. This includes reporting sales, purchases, and tax liabilities until the date of cancellation.
• Closure of Business: If the cancellation is due to business closure, all assets and liabilities related to the business should be settled, and the closure should be reported to the authorities.

5. GST Revocation: How to Reinstate Canceled GST Registration

In certain cases, the taxpayer may apply for revocation (restoration) of GST registration after it has been canceled. GST revocation is applicable when a registration is canceled by the authorities for non-compliance, but the taxpayer wishes to reinstate the registration.

Conditions for GST Revocation:

• The GST registration was canceled due to non-filing of returns or tax payments, and the taxpayer has rectified the issues.
• The taxpayer must apply for revocation within 30 days from the date of the cancellation order.

6. Conclusion

GST cancellation and revocation are crucial aspects of the GST compliance process. It is essential for businesses to maintain accurate records, file returns on time, and ensure tax payments are made promptly to avoid cancellation. If cancellation happens, businesses must carefully follow the process for cancellation and revocation to ensure they are compliant with the law.

If your GST registration has been canceled or is under threat of cancellation, it’s important to act quickly and, if needed, consult with a tax professional to navigate the process effectively.