Goods and service tax or GST will be one tax to subsume all taxes. It will bring in “One nation one tax” regime. All taxable persons (threshold: turnover over Rs.20 lakhs) will have to get registered under GST. Such taxable persons may cancel their own registration or have their registration cancelled by the authorities due to violations.
Who can cancel GST registration?
Cancellation of GST registration can be done by-
- a proper officer OR
- requested by the concerned person himself *** OR
- on an application filed by his legal heirs, in case of death of such person
***However, application for cancellation of registration by the concerned person who has registered voluntarily will be only after one year from the date of registration.
When can GST get cancelled?
- The business has been discontinued,
- The business has been transferred fully, amalgamated, demerged or otherwise disposed —The transferee (or the new company from amalgamation/ demerger) has to get registered
- There is any change in the constitution of the business (For example- Private limited company has changed to a public limited company)
- The taxable person is no longer liable to be registered (For example- later laws may increase threshold of registration which is above the tax payer’s turnover)
- The registered taxable person has contravened provisions of GST
- A person paying tax under composition levy has not furnished returns for three consecutive quarters
- Any taxable person who has not furnished returns for a continuous period of six months
- Any person who has taken voluntary registration and has not commenced business within six months from the date of registration. [For more on voluntary registration please read our article]
- Any registration has been obtained by fraud the proper officer may cancel the registration with retrospective effect.
Note: Registration certificate can even be cancelled retrospectively
If this power is exercised by the authorities then it may lead to denial of credits to the bonafide buyers who have bought in good faith from the cancelled sellers.
The taxable person will receive a notice to show cause and a reasonable opportunity of being heard before cancellation (except in cases of cancellation by legal heirs).
What will happen after cancellation?
All dues and tax liabilities prior to cancellation will still have to be paid. Such dues will not get waived off on cancellation.
On cancellation, the taxable person will have to pay tax either by-
- Reversing the input tax credit in raw materials in stock and inputs in semi-finished/finished goods held in stock on the day immediately preceding the date of cancellation
- Paying the output tax payable on such goods,
-whichever is higher
For capital goods, the taxable person shall pay-
- The input tax credit taken on the said capital goods reduced by a certain percentage (will be notified later)
- The tax on the transaction value of such capital goods
– whichever is higher.
Revocation of cancellation order
This is applicable only when the tax officer has cancelled the registration of a taxable person on his own motion. It does not apply to cases where there has been an application for cancellation. Such taxable person can apply to the officer for revocation of cancellation within thirty days from the date of the cancellation order.
The officer may accept the application to allow the person to continue with his registration. If he rejects it, then he must present a show cause notice and give the taxable person a reasonable opportunity of being heard.
Cancellation/revocation orders will cover both CGST and SGST, i.e., both the acts will be covered in the same order.
Forms for Cancellation
Application for cancellation has to be made in form GST REG 16.
If the proper officer has reasons to cancel the registration of a person then he will send a show cause notice to such person in FORM GST REG-17.
The person must reply in FORM REG–18 within 7 days from date of service of notice why his registration should not be cancelled. If the reply is found to be satisfactory, the proper officer will drop the proceedings and pass an order in FORM GST REG –20.
If a person, who had applied for cancelling registration, is no
longer liable to be registered or his registration is liable to be cancelled, the proper officer will issue an order in FORM GST REG-19. The order will be sent within 30 days from the date of application submitted or the date of reply to the show cause.
These provisions will also apply to the legal heirs of a deceased proprietor.
Revocation of cancellation of registration
A registered person, can submit an application for revocation of cancellation of registration, in FORM GST REG-21, whose registration has cancelled suo moto by the proper officer. He must submit it within 30 days from the date of service of the order of cancellation of registration at the Common Portal, either directly or through a Facilitation Centre notified by the Commissioner.
Application for revocation cannot be filed if the registration has been cancelled because of the failure of the registered person to file returns.furnish returns, unless such returns are furnished and
any amount due as tax.
If the proper officer is satisfied he can revoke the cancellation of registration by an order in FORM GST REG-22 within thirty days from the
date of receipt of the application. Reasons for revocation of cancellation of registration must be recorded in writing.
The proper officer can by an order in FORM GST REG-05, reject the
application for revocation of cancellation of registration and communicate the same to the applicant.
The proper officer shall issue a notice in FORM GST REG–23 requiring the applicant to show cause as to why the application submitted for revocation should not be rejected. The applicant must reply within 7 working days from the date of the service of notice in FORM GST REG-24.
The proper officer will dispose of the application within thirty days from the date of receipt of clarification from the applicant in FORM GST REG-24.
Persons Registered under VAT/Service Tax Laws Not liable to Register Under GST
Any person registered under any of the existing laws, who is not liable to be registered under the Act can opt to cancel the registration granted to him. He must submit an application electronically in FORM GST REG-29 at the Common Portal within 30 days from the GST implementation date. The proper officer will, after conducting enquiry, cancel the said registration.
Thus, GST is a completely new tax regime already taking India by storm. Businesses will face challenges in transition and application of GST.