Cancellation of registration under GST- Why & How?

cancellation of gst registration

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?cancellation of gst registration

  1. The business has been discontinued,
  1. The business has been transferred fully, amalgamated, demerged or otherwise disposed —The transferee (or the new company from amalgamation/ demerger) has to get registered
  1. There is any change in the constitution of the business   (For example- Private limited company has changed to a public limited company)
  1. 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)
  1. The registered taxable person has contravened provisions of GST
  1. A person paying tax under composition levy has not furnished returns for three consecutive quarters
  1. Any taxable person who has not furnished returns for a continuous period of six months
  1. 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]
  1. 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
  •          OR
  • 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)
  •          OR
  • 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.

 

Thus, GST is a completely new tax regime already taking India by storm. Businesses will face challenges in transition and application of GST. To know more about GST, feel free to read more of our articles in our blog.

We at ClearTax are keeping everyone up to date with GST articles, webinars, forums, discussions. Register with us today to be ready when GST gets implemented.

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