GST Cancellation​
If you want to close business then you need to surrender or cancel your GST number and settle all dues with GST department
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GST Cancellation: An Overview
Under the GST regime, registered taxpayers have the option to cancel their GST registration for various reasons such as business closure, merger, acquisition, etc. GST cancellation is a crucial step in maintaining compliance with the GST laws and avoiding any penalties or legal actions. In this article, we will discuss the process of GST cancellation and its implications.
Who can apply for GST cancellation?
The following are eligible to apply for GST cancellation:
- Taxpayers who are no longer liable to pay GST – this includes taxpayers who have ceased their business operations, taxpayers who have sold their business, or taxpayers who have merged with another entity.
- Taxpayers who are exempted from GST registration – small taxpayers whose turnover is less than the threshold limit of INR 20 lakhs (INR 10 lakhs for North-Eastern and hilly states) and certain other categories of taxpayers who are exempted from GST registration.
Reasons for GST Cancellation
There are several reasons why a registered person under GST may need to cancel their registration. These reasons can broadly be classified as voluntary and involuntary cancellations.
1. Voluntary Cancellation:
A registered person may voluntarily cancel their GST registration for various reasons, including:
- Closure of Business: The registered person may have closed down their business, and there is no longer any requirement for GST registration.
- Change in Business Activity: The nature of the business may have changed, and the new business activity may not fall under the GST ambit.
- Annual Turnover Below Threshold: If the annual turnover of the registered person falls below the threshold limit, they may choose to cancel their registration.
2. Involuntary Cancellation:
The tax authorities may cancel the GST registration of a person in the following circumstances:
- Non-filing of Returns: If a registered person does not file GST returns for a continuous period of six months, their registration may be cancelled.
- Non-Compliance: If a registered person does not comply with the GST laws and regulations, their registration may be cancelled.
- Obtaining Registration Fraudulently: If it is found that a registered person has obtained registration by fraudulent means, their registration may be cancelled.
It is essential for businesses to comply with GST laws and regulations and ensure timely filing of returns to avoid any involuntary cancellation of their registration.
Procedure for GST Cancellation
The procedure for GST cancellation may differ based on whether it is a voluntary or involuntary cancellation. Below is a brief outline of the steps involved in each case:
1. Voluntary Cancellation Procedure:
- Login to GST Portal: The registered person needs to login to the GST portal using their credentials.
- Fill Cancellation Form: The registered person needs to fill Form GST REG-16 to apply for cancellation of registration.
- Submit Documents: The registered person needs to upload relevant documents supporting the cancellation application, such as proof of closure of business or change in business activity.
- Await Approval: The GST officer will review the application and approve it if satisfied with the reasons provided. Once approved, the registration will be cancelled, and a notice will be sent to the registered person.
2. Involuntary Cancellation Procedure:
- Issue of Show Cause Notice: The GST officer will issue a show cause notice to the registered person stating the reasons for the proposed cancellation.
- Response to Show Cause Notice: The registered person needs to respond to the show cause notice within the stipulated time, providing a valid reason for non-compliance or non-filing of returns.
- Personal Hearing: If the GST officer is not satisfied with the response, they may call for a personal hearing to ascertain the reasons for non-compliance.
- Cancellation Order: Based on the response and personal hearing, the GST officer will pass an order for cancellation of registration if deemed necessary.
It is essential to note that GST cancellation may have certain implications on businesses, such as the reversal of input tax credit and the requirement to file final returns. Therefore, it is crucial to follow the correct procedure while applying for cancellation and ensure compliance with GST laws and regulations.
Consequences of GST Cancellation
Cancellation of GST registration can have several consequences for businesses, depending on the circumstances leading to the cancellation. Some of the potential consequences of GST cancellation are:
1. Impact on Business:
- Inability to Collect Tax: Once the registration is cancelled, the business cannot charge or collect GST on any supplies made by them, which can impact their revenue and profitability.
- Loss of Business Opportunities: Some businesses may require GST registration to participate in tenders or obtain contracts. Cancellation of registration may lead to the loss of such opportunities.
- Difficulty in Reinstating Registration: Once cancelled, it may be challenging to reinstate the GST registration, and the business may need to undergo a new registration process.
2. Impact on Compliance:
- Final Returns: A registered person whose registration has been cancelled is required to file final returns within a specific time frame. Failure to do so may attract penalties.
- Reversal of Input Tax Credit: Any input tax credit claimed by the registered person needs to be reversed if the registration is cancelled, leading to additional costs for the business.
3. Impact on Refunds:
- Inability to Claim Refunds: If a registered person has any unutilized input tax credit or excess tax paid, they can claim refunds. However, once the registration is cancelled, the person cannot claim any further refunds.
- Delay in Refund Processing: In some cases, the cancellation of registration may lead to a delay in processing of pending refunds, causing liquidity issues for the business.
In conclusion, it is crucial for businesses to ensure compliance with GST laws and regulations to avoid any involuntary cancellation of registration. If a registered person needs to cancel their registration voluntarily, they must follow the correct procedure and be aware of the potential consequences of such cancellation.
Conclusion
In conclusion, GST cancellation can be a complex process, and it is essential for businesses to understand the reasons, procedures, and consequences of such cancellation. While voluntary cancellation may be initiated by the registered person, involuntary cancellation can have severe implications on the business’s operations, compliance, and finances. It is, therefore, imperative for businesses to ensure timely filing of returns, comply with GST laws and regulations, and seek professional advice if required, to avoid any involuntary cancellation of their registration. By following the correct procedures and being aware of the potential consequences, businesses can mitigate the risks associated with GST cancellation and ensure a smooth transition in case of cancellation.
