Suspension of GST Registration: GSTN Communicates Data Mismatches to Taxpayers

The GSTN has been sending out SMSes to taxpayers informing them about discrepancies between the GST returns filed by them. A sub-rule 2A was inserted in Rule 21A of the Central Goods and Services Tax (CGST) Rules. Any significant differences or anomalies observed between the GSTR-3B and the GSTR-1/2B could lead to suspension of GST registration. Further, if these differences remain unexplained, the taxpayer's GSTIN could be cancelled.

Besides, if the taxpayer has applied for cancellation, the tax officer can suspend the registration until cancellation proceedings are completed as per the provisions of Rule 21A as introduced by notification 94/2020.

What is meant by suspension of GST registration?

The government introduced the concept of suspension of GST registration. Accordingly, Rule 21A was inserted into the CGST Rules, 2019. With the introduction of this rule, a taxpayer who has applied for cancellation of GST registration will not be required to comply with GST return filing provisions during the suspension period.

Whose GST registration or GSTIN can get suspended?

The GSTIN of a registered person can be cancelled only by a proper officer if he has a reason to believe that the registration needs to be cancelled. The proper officer must give the registered person a reasonable opportunity of being heard and then follow the appropriate procedure for cancellation as mentioned under Rule 22 of the CGST Rules 2017.

During the period in which such cancellation proceedings are being carried out, the proper officer can suspend the registration.

Reasons for suspension of GST registration

There are several reasons for which a GST registration might be suspended:

1. When a taxpayer files an application for cancellation of their GST registration, their registration will be deemed to be suspended from the date the application was submitted, or the date from which the cancellation is sought, whichever is later;
2.  Where a GST officer has reasons to believe that the registration of a person is liable to be cancelled for any of the following reasons, they may suspend the taxpayer's GST registration until the proceedings are completed-
   1. The taxpayer does not conduct business from the declared place of business.
   2. The taxpayer has violated the provisions of the Goods and Services Tax Act, 2017 or rules.
   3. If a composition taxpayer has not filed their returns for 3 consecutive tax periods.
   4. If a regular taxpayer has not filed their returns for 6 months.
   5. If the taxpayer has furnished details of sales in their GSTR-1 in excess of the sales declared by them in their GSTR-3B for the same tax period. 
   6. If a taxpayer has taken voluntary registration but not commenced business within 6 months of registration.
   7. If the registration has been obtained by means of fraud, wilful misstatement or suppression of facts

Other reasons for suspension/cancellation of GST registration include-

1. Death of the business owner
2. If the business has been discontinued, completely transferred, or disposed of
3. If the business has undergone an amalgamation, merger or demerger
4. If there is a change in the constitution of business
5. If the business is no longer liable to be registered under the GST law
6. If a business owner intends to opt out of registration that was taken voluntarily

Suspension of registration due to differences between GST returns

Rule 21A(2A): A new sub-rule 2A has been inserted via notification 94/2020 which states that if a proper officer finds any discrepancies:

1. On comparing details of outward supplies furnished under Form GSTR-1 and Form GSTR 3B
2. On comparing details of inward supplies reflecting in the Form .GSTR-2B with the Form GSTR-3B
3. Any other analysis

He can issue form GST REG-31 for intimating such discrepancies to the taxpayer. He will also mention that if a proper explanation is not provided on these discrepancies, the registration may get cancelled.

He can also suspend the registration as per Rule 21A(2A) with effect from the date of this communication to the taxpayer. Further, the proper officer can lift the suspension on receiving a satisfactory reply from the taxpayer.

This provision related to the suspension of GST registration till cancellation was welcomed by the taxpayers as it reduced the compliance burden of the taxpayers till the completion of cancellation proceedings.

What is the period of suspension of GST registration?

The suspension of GST registration will be effective from the date the registered person has applied for the cancellation of GST registration. The effective date of suspension is the later of the following:

• Date of submission of registration cancellation application
• Date from which the cancellation is sought

Effect of suspension of GST registration

A person whose registration has been suspended:

1. Cannot make any taxable supply after suspension.
2. Is not required to file any returns as required under section 39 of the Central Goods and Service Tax Act, 2017. Reduction in compliance burden is the main benefit enjoyed by the taxpayer until the suspension of GST registration.

How to revoke the suspension of GST registration?

The suspension of GST registration can be revoked after the completion of GST registration cancellation proceedings. The revocation of suspension of GST registration will be effective from the date the suspension has come into effect.

How can ClearTax help?

ClearTax GST will help you-

1. Get the GSTR-3B auto-populated from the GSTR-1 and 2B, with an option to edit the values
2. Check the eligible ITC as per Rule 36(4) in seconds
3. Access insightful reports between GSTR-3B and 1, GSTR-3B and 2B, and much more, with a click of a button
4. Get access to 50+ in-built validations to help the accurate ingestion of data, and help you file your GST returns without a single error.
5. Claim 100% accurate ITC with our Advanced Reconciliation Tool, without missing out on a single invoice. You can also get-
   • A single-click import of the purchase data from Tally software
   • In-built validations for accurate upload of the purchase data
   • Advanced filters and excel report summary to take actions and maximise ITC claims
   • Supplier-level invoice mismatches can be identified for taking corrective actions
   • Comparison report GSTR-2B versus GSTR-3B

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