What is the Cancellation of GST Registration?
GST registration cancellation denotes the exclusion of a taxpayer from the GST-registered persons list, thereby exempting them from GST payment, collection, input tax credit claims, and return filing duties.
Governed by CGST Act Section 29 and CGST Rules 20-22, this can occur voluntarily, through taxpayer initiation, or compulsorily due to non-compliance, return non-filing, rule breaches, or business cessation. Following cancellation, GST collection from customers or input tax credit claims are prohibited.
Why is Cancellation of Registration Required Under GST?
GST Registration can be cancelled for a variety of reasons including:
- Non-filing of GST returns by a taxable person for six consecutive months.
- Non-commencement of operations within six months from the date of voluntarily registration.
- Closure/ discontinuation of business, name/constitution change, business transfer/sale due to amalgamation or demerger.
- Person/entity registered under the existing tax laws (pre-GST) not meeting mandatory GST registration criteria or no longer liable for registration.
Cancellation of GST registration is necessary under specific circumstances. It can alleviate compliance obligations and linked penalties or late fees for those requesting cancellation.
Suo Moto Cancellation of GST Registration by Tax Officer
The Tax Officer may initiate proceedings for Suo Moto Cancellation of GST registration under specified conditions set forth in the GST law, including:
- Non-filing of GST returns by a taxable person for six consecutive months.
- Goods/services supplying without invoice issue, violating Act/rules to avoid tax.
- Invoice/bill issuance without actual supply, causing false input tax credit or tax refund.
- Tax collection without remitting to the Central/State Government within a quarter from the due date.
- Neglecting to remit tax, interest, or penalty to Central/State Government within a quarter from its due date.
- No longer liable to deduct or collect tax at source as per GST Law provisions.
- No requirement for GST registration.
- Misconduct by a GST during GST Law proceedings.
- Business termination or closure
- Business constitution change leading to PAN alteration.
- Ceased liability to pay tax.
- Business transfer through amalgamation, merger/demerger, sale, lease, or other disposal means.
- Sole Proprietor's demise.
- Composition person's non-submission of returns for three successive tax periods.
- Registration acquired illegitimately through fraud, intentional misstatement, fact suppression, and so on.
Voluntary Cancellation of GST Registration by Taxpayer
There are certain events which can prompt the taxpayers to ask for cancellation of their GST registration. Necessary justification must be provided in Form REG-16 on the GST Portal for cancellation. It's mandatory to apply for cancellation within 30 days, particularly in voluntary cancellation scenarios, from the date of occurring of a cancellation event, including:
- Business cessation or closure.
- The taxable person no longer required to pay taxes or registered under GST.
- Business transfer due to combination, merger, split sale, lease, or other factors.
- Changes in business constitution prompting PAN change.
- Acquired voluntary registration but business wasn't initiated within set timeframe.
- Sole proprietor's death.
Persons Eligible to File Application for Cancellation of GST Registration
Eligible persons for making application for cancellation of GST registration include existing taxpayers, migrated taxpayers with approved enrolment applications, and the proper officer, on his own initiative or on request from the registered person or the legal heirs after death of the sole proprietor.
However, the Tax Deductor/Collectors, and UIN holders can't apply for GST cancellation.
How to Cancel Registration Under GST? Application Procedure
Start by logging into the GST portal with your registered user ID and password.
Go to Services > Registration > Application for Cancellation of Registration
then fill the Form GST REG-16 with required details like cancellation reason, date, and authorized signatory info.
Attach important supporting documents with the application.
Post-submission, a GST officer will check the application. If there's a need for additional documentation or info, they'll reach out.
Responding quickly avoids delays. If the application is approved, you'll get a confirmation of cancellation order, Form GST REG-19, within 30 days from application date.
Details to be submitted with Application for Cancellation of GST Registration
Form GST REG-16 requires a registered person to mandatorily provide certain information for initiating cancellation of registration:
- Cancellation Reason: Pick from options like business closure or proprietor's death.
- Cancellation Date: Date of event causing cancellation.
- Stock Information: Include values of goods, tax credit/payable, tax payment method.
- Future Contact Address: Update contact details.
- Last Return Filing: Submit ARN and filing date of last return.
- Business Transfer/Merger: Submit details of transferee's registration and documents, if relevant.
Procedure for Cancellation of GST Registration due to Sole Proprietor's death
The sole proprietor's death prompts cancellation of registration. The legal heir should visit the Jurisdictional Officer and submit the Death Certificate and Succession Certificate. The officer will add the legal heir as an authorized signatory on the GST Portal, however for minor successors, a legal/natural/testamentary guardian can be appointed by a competent authority, often the District Judge. The legal heir applies for new registration and after approval, they request for Input Tax Credit (ITC) transfer to the new entity using Form GST ITC–02, before or after cancellation. The new signatory gets a username and temporary password sent to their email.
Using the "First time login" link on the GST Portal, the signatory uses the temporary credentials to change the username and password. To cancel the registration, the legal heir or their signatory submits a cancellation application, selecting "Death of Proprietor" as the reason and attaching sufficient proof of the proprietor's death. These procedures cancel registration and transfer ITC after a sole proprietor's death.
Effects of Cancellation of GST Registration
Cancellation of GST Registration effects include:
Tax Implications on Stock due to Cancellation of GST registration
The GST registration cancellation process requires taxpayers to declare their stock's value and the associated tax liability. The latter is adjusted with funds from the Electronic Cash Ledger or Electronic Credit Ledger, based on the input tax credit related to the stock's input, including semi-finished or finished goods, capital goods, and machinery. The adjustment considers the higher of either the input tax credit or the output tax payable.
For tax liability on capital goods and machinery, taxpayers must either repay the input tax credit, reduced by a specific proportion, or settle the tax based on the transaction value, opting for the larger figure.
Cancellations are still possible even when taxpayers have nothing to declare. Information regarding the stock is mandatory during application for cancellation (REG-16) and in the final return (GSTR-10). Any remaining tax related to the stock can be paid during the GSTR-10 filing, and payment isn't required to be debited from the electronic ledgers upon cancellation application. However, all liabilities must be cleared by the GSTR-10 deadline, with any shortfall made up in cash.After applying for registration cancellation, remaining balances in the electronic ledgers can only be utilized for fulfilling liabilities under the GST law up to the date of filing of final return in Form GSTR-10.
GSTIN status displays as "Suspended" until Cancellation
When applying for registration cancellation or when tax officials initiate cancellation procedures, the status of taxpayer changes to "Suspended" until the application is processed/rejected or the proceedings are dropped post-hearing.
Specific activities on the GST Portal can continue during suspension, including filing appeals, making payments, requesting refunds, responding to assessment, and altering non-core fields/details. However, filing returns and uploading invoices for post-suspension periods is restricted. Also core fields alterations cannot occur until outstanding issues are resolved, except for updation of email and mobile number.
The effective date of the suspension in the case of voluntary cancellation, aligns with the application date or a subsequent date as specified. For cases initiated by taxation authorities, the suspension becomes effective on the GST REG-17 issuance date. The status remains "Suspended" until the application is processed/rejected or the proceeding is dropped after a hearing.
Filing of Pending GST Returns
The GST law requires registered persons to file all pending returns, including nil returns for periods with no supplies, before initiating cancellation process. However, Instructions for Form REG-16 have relaxed the need for filing returns in absence of taxable supply.
Those seeking registration cancellation can give an undertaking that no taxable supplies were made from the date of registration to the date of cancellation application. CBIC has clarified that no assessment notice in Form GSTR-3A shall be issued for non-filing of returns, upon submission of such undertakings.
Filing Final Return after Cancellation of GST Registration
Filing a Final Return in Form GSTR-10 is mandated after a registered person's registration cancellation. The filing should be completed within 3 months from the date of cancellation order or the effective date of cancellation, whichever is later.
Lack of filing within the timeframe can lead to a notice in Form GSTR-3A, mandating final return submission in 15 days. Non-compliance can trigger issuance of a Best Judgement Assessment order, without further notices.
Effective Date of Cancellation of GST registration
The cancellation date for GST registration is set based on established criteria. The cancellation order (Form GST REG-19) is issued within one month from the date of filing cancellation request. This order specifies the effective date of cancellation, matching the requested cancellation date put forth in Form GST REG-16 by the applicant, which however can't precede the cancellation application date.
The order may further instruct subject of cancellation to pay outstanding taxes, penalties, interests, or amounts related to stock inputs or capital goods.
Cancelling GST Registration-FAQs
It's the removal of a taxpayer from the GST registered list, liberating them from GST duties like payment, collection, input tax credit claims, and return filing.
Cancellation happens when returns aren't filed for six months, business operations haven't begun after six months of voluntary registration, business closure, or failure to fulfil GST criteria.
Tax Officer initiated cancellations for reasons like non-filing returns or wrongful credit usage and voluntary cancellations by taxpayers due to business closure or registration no longer needed.
Existing taxpayers, migrated taxpayers, and Proper Officer can initiate cancellation. Tax Deductors, Tax Collectors, and UIN holders can't.
Access the GST Portal, navigate to Services > Registration > Cancellation of Registration Application, complete Form GST REG-16, attach documents, provide extra information if necessary, and receive GST REG-19 within 30 days.
Mainly the cancellation reason, date, stock details, future communication address, last filed return data, and transfer or merger details if relevant.
The legal heir must give the Death and Succession Certificates to the Proper Officer, get added as an authorized signatory, apply for new registration, transfer ITC, and then apply for cancellation.
Registration status becomes "Inactive", restricting returns filing or invoices uploading. Post-cancellation details modifications are restricted apart from email and mobile updates.
The stock value and tax obligation must be declared. Adjustment is based on input tax credit or output tax payable, whichever is higher. The same adjustments apply to capital goods and machinery.
It aligns with the cancellation request date but can't be before the application date. The cancellation order comes within 30 days of application.
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