Cancellation or Suspension of GST Registration – Section 29 of GST

The GST framework mandates that businesses obtain registration under the CGST Act. However, circumstances may arise where a registered person needs to cancel or suspend their registration. Section 29 of the CGST Act lays down the provisions related to the cancellation or suspension of GST registration by the proper officer or on an application filed by the registered person.

Grounds for Cancellation of Registration

As per Section 29(1), a proper officer may cancel a GST registration under the following conditions:

• Business Discontinuation or Transfer: If a business has been discontinued, transferred due to any reason (including the death of the proprietor), amalgamated with another entity, demerged, or otherwise disposed of.

• Change in Business Constitution: If there is a change in the structure of the business that affects its registration.

• Not Liable for Registration: If the taxable person is no longer liable to be registered under Section 22 of the CGST Act (threshold limit) or Section 24 of the CGST Act (compulsory registration cases) or opts out of voluntary registration under Section 25(3).

Cancellation by the Proper Officer

Under Section 29(2), a proper officer may initiate the cancellation of registration in the following cases:

• Non-Compliance with GST Provisions: If a registered person contravenes the provisions of the CGST Act or related rules.

• Non-Filing of Returns: If a composition taxpayer under Section 10 of the CGST Act does not file returns for a financial year beyond three months from the due date.

• Continuous Default in Filing Returns: If a regular taxpayer fails to furnish returns for six consecutive tax periods.

• Non-Commencement of Business: If a person who has obtained voluntary registration under Section 25(3) fails to commence business within six months from the date of registration.

• Fraudulent Registration: If the registration was obtained through fraud, willful misstatement, or suppression of facts.

Opportunity of Being Heard & Suspension of Registration

Before canceling a registration, the proper officer must provide an opportunity for the registered person to be heard. Additionally, as per the proviso in Section 29, during the pendency of cancellation proceedings, the registration may be suspended as per prescribed rules.

Consequences of Cancellation

The cancellation of GST registration does not absolve the taxpayer from liabilities. Section 29(3) clarifies that cancellation does not affect the liability of the person to pay tax and other dues under the Act for periods before the cancellation date.

Furthermore, cancellation under the State GST Act or Union Territory GST Act will be deemed as cancellation under the CGST Act as per Section 29(4).

Tax Implications on Cancellation

Under Section 29(5), every registered person whose registration is canceled must pay an amount equivalent to:

• ITC on Stock, Finished Goods, and Capital Goods: The input tax credit (ITC) related to inputs, semi-finished goods, finished goods, or capital goods must be reversed.

• Tax on Transaction Value: If the ITC on capital goods is lower than the tax payable on their transaction value, the higher amount is payable.

Procedure for Cancellation of GST Registration

The procedure for cancellation of GST registration is as follows:

1. Application for Cancellation: The registered person or their legal heir (in case of death) can file an application in Form GST REG-16 specifying reasons for cancellation.

2. Verification by Proper Officer: The proper officer will verify the application and issue an order for cancellation using Form GST REG-19 within the prescribed period.

3. Cancellation by Tax Authorities: In case of non-compliance, tax authorities can initiate cancellation by issuing a show cause notice (Form GST REG-17).

4. Response & Order: The taxpayer can reply to the notice, and if the officer is satisfied, they may drop the proceedings or issue a cancellation order.

Conclusion

Section 29 of the CGST Act provides a structured framework for the cancellation and suspension of GST registration. Businesses must ensure compliance with GST provisions to avoid involuntary cancellation. It is crucial for taxpayers to file timely returns and maintain proper records to prevent registration-related issues.

For businesses considering voluntary cancellation, understanding the tax liabilities on cancellation is essential to avoid penalties and compliance burdens. If you require assistance with GST registration cancellation, consult us at +91 9769647582 to ensure a smooth process.